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NMDC mining target of 50 million tonne facing infra hurdles

State owned NMDC, which plans to mine 50 million tonne of iron ore by fiscal 2015, may face challenges on the evacuation front. While analysts see the hurdles hard to overcome, the company management is confident of achieving the target.

Mr NK Nanda CMD of NMDC told DNA that “Actually, evacuation is a real challenge. But challenges can always be dealt with. It is not a challenge in Karnataka but only in Chattisgarh because of the remoteness of the area and availability of a single (railway) line.”

Mr Nanda said that “There is sufficient capacity for evacuation. Only the utilization is a constraint.”

Stating that creation of new facilities and increase in done in phases, Mr Nanda said that “The capacity that is available is sufficient to meet the 50 million tonne by fiscal 2015. But, the utilization has to improve. We are also planning certain measures to do that including doubling the railway line from Bailadila to Jagdalpur. The cost of this at about INR 870 crore would be borne by NMDC and we will get a deferred rebate in the freight.”

He added that “We are also working on a slurry pipeline of 8 million tonne to 10 million tonne capacity from Bailadila to Jagdalpur, and Jagdalpur to Vizag. This would cost about INR 2,000 crore. But this is a long-term plan. It would take about two to three years. The doubling of railway line would also take about five years.”

But, Mr Ashish Goenka, Mr Arijay Prasad, Ms Poorva Upadhyaya, Mr Sunny Shah and Mr Nikhil Raina of Espirito Santo Securities in their report on April 10 said that “NMDC targets 50 million tonne of iron ore volume by fiscal 2015 (our estimate is 37 million tonne). NMDC has a blueprint ready to increase its mining output to 50 million tonne via commercializing deposit 11B, 13 (venture with CMDC) and Kumaraswamy mines, where we see little risk. However, we remain concerned over its evacuation strategy as all its proposed plans are still at an early stage (i.e. captive slurry pipeline, rail lines from Donimalai to Krishnapatnam port, Rowghat to Jagdalpur). Successful implementation of its evacuation strategy will be essential if it is to meet its earnings targets.”

NMDC plans to produce 32 million tonne in fiscal 2013. Of this, 7 million tonnes would come from Karnataka and 25 million tonne from Chattisgarh, a growth of 10% over previous fiscal.