NMDC acquires stake in Legacy Iron Ore, eyes Mozambique coal project
23 September 2011
State-owned National Mineral Development Corporation (NMDC), yesterday made its first overseas acquisition by entering into a deal to acquire a 50-per cent stake in Australian exploration company Legacy Iron Ore for Rs92.2 crore (A$18.89 million).
The proposed acquisition of Legacy will give the Hyderabad-based NMDC the exploration rights to Legacy's vast rock phosphate and iron ore deposits.
On 24 May NMDC, India's largest iron ore miner, had signed an MoU with Legacy to acquire a 50-per cent equity stake and in August Legacy had granted NMDC an extension to finalise the necessary internal approvals to enable it to make a formal offer.
On 14 September, NMDC submitted a formal bid for acquiring 50 per cent of Legacy. (See: NMDC submits bid for 50 per cent of Australia's Legacy Iron Ore)
Perth-based Legacy's rock phosphate deposits in Wonarah, is Australia's largest known undeveloped phosphate rocks. India is the world's biggest importer of rock phosphate and ammonium phosphate fertilisers.
Legacy Iron Ore holds prospective iron ore tenements in both the central Yilgarn and Pilbara areas of Western Australia and holds five iron ore and gold exploration licences.
According to Legacy, the stake sale would enable it to unlock and monetise the value inherent at its Mt Bevan iron ore mines and gain large cash infusion. Legacy said in a statement that it would consider spinning off certain assets into a new entity following the cash injection from NMDC.
Eyes stake in Mozambique
In a seperate deal with Nagpur-based Sunflag Iron & Steel, NMDC will also acquire a 26-per cent stake in Sunflag's Mozambique coal project, which has an annual production capacity of about 5 million tons and estimated reserves of 450 million tons of coking and thermal coal.
The state-owned mining giant says it will use the coal from Mozambique at its two steel plants and captive power units and sell the surplus coal in the local spot market. The mine is expected to come into operation in 2014.
According to the agreement, NMDC will acquire an 11-per cent stake in Sunflag Iron & Steel and receive a 15-per cent stake as sweat equity, entitling it to 26 per cent in the Mozambique project.
NMDC is also currently conducting due diligence of several mining assets in Australia, the US and Russia. The miner is in talks to buy coking coal mines from privately held Alabama, US-based Tacoa Minerals and Minemakers Ltd to develop the Wonarah phosphate deposit in Australia.
Tacoa Minerals owns licence for 30 million tonne and the company has a total reserve of 196 million, while the Wonarah Rock Phosphate project is Australia's largest undeveloped, phosphate deposit holding an estimated 1.25 billion tonnes of the key raw material needed by the fertiliser industry. (See: NMDC to develop Minemakers' Wonarah phosphate deposit)
NMDC is also looking to buy a 51-per cent stake in a coking coal mine in Russia's Kolmar's coking coal mine, located in Siberia's Yakutia region, which has reserves of 40 million tonnes.
NMDC currently produces about 30 million tonnes of iron ore from three mines, - Bailadila Deposit-14/11C, Bailadila Deposit-5, 10/11A (Chhattisgarh) and Donimalai Iron Ore Mines (Karnataka).
NMDC has the only mechanised diamond mine in the country with a capacity of 1.00 lakh carats per annum at Panna in Madhya Pradesh.