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Thursday, January 5, 2012

NMDC May Pay $300 Million for Mozambique, Russian Coal Mines

Thu, January 05, 2012

NMDC Ltd., India’s largest iron ore producer, plans to acquire two coking coal mines in Mozambique and Russia for about $300 million to feed its planned steel plants in India.

Talks are on to acquire a mine with 360 million metric tons of deposits in Mozambique’s Tete province and an 80 million-ton mine in Russia’s Kemorovo region, Chairman Narendra Kumar Nanda said today in a phone interview. The company is also considering buying an iron ore and manganese mine in Brazil’s Amapa province, he said, without elaborating.

Lack of access to local mines and rising global prices of coking coal are eroding profits at Indian steelmakers, spurring them to look for acquisitions overseas. NMDC, which has 210 billion rupees ($4 billion) of cash in hand, is building a 3 million ton steel plant in central India and a similar-sized plant jointly with Russia’s OAO Severstal in southern India.

“Considering its cash reserves, such acquisitions are like baby steps for NMDC,” said Rahul Jain, a Mumbai-based analyst with RBS Equities India Ltd. “The global slowdown has lowered asset prices and this is a time when the company should approach bigger targets.”

The shares fell as much as 1.5 percent to 169 rupees and traded at 170.05 rupees as of 12:34 p.m. in Mumbai. The stock has declined 39 percent in the past year, compared with a 21 percent drop in the benchmark Sensitive Index.

“We want to be prepared when our steel mills start operating,” said Nanda, who took charge on Jan. 1. “We can bring some coal from these mines to our plants and sell the rest for hedging purposes.”

NMDC expects to appoint advisers by the end of this month to carry out the due diligence for the assets, he said. The company recently ended acquisition talks for Greystone Mineracao do Brasil’s iron ore mine in Brazil and a coal mine in Russia, Nanda said.

NMDC said in October it signed an accord to acquire a 50 percent stake in Australia’s Legacy Iron Ore Ltd. for A$18.9 million ($19.5 million), its first acquisition overseas.

(sourced Business Week)

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