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NMDC FPO – Company Review

March 5, 2010

NMDC one of the Government’s biggest Asset in Minerals is going for a FPO. Here is an Insight into the company.

NMDC has reserves and resources of 1,360.6 million metric tonnes of iron ore with predominantly greater than 64% Fe content and has been the largest producer by volume in India during the last three fiscal year – the Company’s producing mines are open cast and
primarily fully mechanised. Strong in-house capability to undertake exploration – NMDC is actively involved in exploration and development activities so as to apply for and acquire new iron ore and other mineral leases thereby expanding its reserves and diversifying its production. The research and development center, established in 1970, has competence in undertaking technology development projects in the field of ore beneficiation and mineral processing e.g. to convert waste material into products of commercial value.

NMDC Diamonds – NMDC operates one of the largest diamond mines in Asia with the authorisation to produce 100,000 carats of gem and industrial diamonds per annum.

In FY2009, NMDC contributed to 13% of India’s total iron ore production and produced 28.5 million tonnes of iron ore. NMDC has access to large reserves of high grade iron ore, predominantly greater than 64% Fe content.

Low-cost producer of iron ore – Highly mechanised mines leading to lower wastage. NMDC recorded an EBITDA of $51.3 / tonne of Iron Ore produced and has a very low expense of $7.6 / tonne.

Scope of Business – 2010 production of iron ore in India is expected to increase while exports are expected to decline on increased consumption by Indian steel producers.

NMDC recorded sales of $1.86 bn and a PAT of $946 mn [Very Impressive, in our view] and has a CASH balance of $2.11 bn on hand.

With this background, we will review the pricing and recommendation on Follow On Public Offer as soon as it is announced to us.

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