UPDATE 1-INDIA NMDC SAYS TO SIGN IRON ORE PACT WITH RIO TINTO
By Biman Mukherji

Ninemsn
Aug 13, 2008
Australia

NEW DELHI, Aug 13 (Reuters) – Global miner Rio Tinto (RIO.AX RIO.AX
, 111.600, -2.400, -2.110%) will sign an agreement this month with
Indian mining firm NMDC to prospect for iron ore, the chairman of
the state-run Indian company said on Wednesday.

"We will sign a memorandum of understanding. It is for prospecting
of mainly iron ore. They (Rio Tinto) will look to prospect in India,"
NMDC Chairman Rana Som told Reuters.

NMDC’s shares rose more than 3.3 percent after the news of the
agreement, which Som said would be signed on Aug 18.

The agreement is to prospect outside of India as well as on the
subcontinent and Som said NMDC would help Rio Tinto in prospecting
for iron ore in India.

India exports about 90 million tonnes of iron ore, mainly to
China. Most of the sales are done on spot basis, unlike other big
suppliers who tie up long-term contracts.

Som said company officials were yet to fix a date to go to Japan to
negotiate price agreements with buyers for supply of iron ore.

In early 2007, the government imposed an export duty of 300 rupees
per tonne ($7) on higher grades and 50 rupees on lower grades, to
discourage exports and to conserve future supplies for domestic steel
makers, many of which are planning to expand.

India’s ministry for mines said in June it opposed the tax and it
wanted to encourage local firms to sell ore overseas.

The government, which is trying to calm soaring inflation, has
persuaded steel firms to hold their prices steady since May and is
keen to keep iron ore prices down to help steel makers.

Earlier, the Indian Express daily said NMDC was increasingly looking
at foreign opportunities to boost its mineral reserves.

NMDC, which contributes 15 percent to India’s total iron ore
production, was also in the race to acquire a mine in Canada for 30
billion rupees, the newspaper said.

With no fresh allocation of iron ore mines domestically, NMDC had
signed a joint venture agreement with India’s Spice Energy and was
close to clinching a deal to acquire mines in mineral-rich Eritrea,
Congo and Armenia, it said.

$1 = 42.6 rupees (Reporting by Biman Mukherji; Editing by Mark Williams
and Charlotte Cooper)