State Owned Iron Ore Producer NMDC Needs to Come up with a Specific Strategy

PTI quoted government auditor CAG as saying that state owned iron ore producer NMDC needs to come up with a specific strategy to acquire mines overseas.

CAG in a recent report said that "Company has been making efforts to acquire mines abroad but no specific strategy has been formulated."

NMDC has been scouting for both iron ore mines and coal assets in Brazil and Russia. It sealed its maiden overseas buy by acquiring 50% stake in Australian firm Legacy Iron Ore last year.

It said that "The company needs to work out its strategy on reserve accretion and acquisition of new mining areas in India and abroad to enhance its production while maintaining operations on a longer term."

Acquisitions are a must for the company to maintain its share in the country's iron ore production which has fallen to 11% in 2009-10 from 14% in 2005-06.

The production of the company also fell from 32 million tonnes in 2007-08 to 28.52 million tonnes in 2008-09, to 23.8 million tonnes in 2009-10 and further to 25.16 million tonnes in 2010-11.

CAG, however, said that the decline in production was mainly due to the breakdown of a slurry pipeline by Essar which created evacuation constraints.

Meanwhile, NMDC has 1,565 million tonnes of iron ore reserves that includes reserves in 11B and Kumaraswamy deposits, being developed now, in Chhattisgarh and Karnataka, as on March 31st 2011. The country has 28,526 million tonnes of proven reserves.