NMDC SPICE PUTS ARMENIAN MINE BUYS ON HOLD
Ishita Ayan Dutt

Business Standard
ws/nmdc-spice-puts-armenian-mine-buyshold/00/16/34 2490/
Dec 8 2008
India

In the wake of iron ore price crash, NMDC Spice International has put
on hold its proposed acquisition of two iron ore mines in Armenia. NMDC
Spice International is a proposed joint venture between state-owned
miner NMDC and Spice Minerals and Metals, a part of the Spice Energy
group.

NMDC Chairman and Managing Director Rana Som said the project has
become unviable at current prices even though the price of the assets
has dropped by around 50 per cent.

The two deposits identified for acquisition were of low grade iron
ore magnetite, which needs to undergo benefication and pelletisation.

Industry sources said pellet prices are currently hovering around
$70 a tonne, down from $240 a tonne a few months back. Prices have
crashed across commodities. Recently, NMDC revised iron ore prices
25 per cent downwards mid-term.

Moreover, the benefication and pelletisation would require additional
investment of around 30 per cent since the quality of ore required
value addition. The two iron ore deposits have reserves of 300 million
tonnes and 70 million tonnes. Earlier, the investments worked out
for the development of mines was $500 million. However, even though
the investment could now be lower, prices had made it unviable.

Som said the company is now conducting physical and chemical analysis
but will wait for the markets to recover before they go ahead and
acquire the mines.

NMDC plans to bring the pellets to India through the Poti port in
Georgia on the Black Sea. However, tapping the Iran market through
the road route was also being explored.

India has set a target of building capacity for production of 300
million tonnes of iron by 2020, which would require iron ore reserves
of approximately 14 billion tonnes for over 30 years. India has proven
reserves of 6.311 billion tonnes of total estimated reserves of 23.588
billion tonnes.

NMDC is a major supplier of iron ore to JSW Steel, Essar Steel,
Ispat Industries in the private sector and Rashtriya Ispat Nigam in
the public sector. NMDC produces 30 million tonnes of iron ore from
its Bailadila mines in Chhattisgarh and Donimalai in Karnataka.