India's NMDC in talks for iron ore mine abroad

By Biman Mukherji

NEW DELHI (Reuters) - Indian state-run miner NMDC Ltd has begun talks with companies in Canada, Brazil and Australia as it hopes to secure an interest in an overseas iron ore asset, the firm's chairman said on Monday.

Demand from steelmakers and construction projects in China, India and the Middle East has made iron ore a highly-sought commodity, supplies of which are dominated by three big mining companies.

The mismatch between supply and demand has caused prices to spike in the last year and triggered a global race to bring more to the market.

"We have just started the process. The talks are at an initial stage," Rana Som told Reuters in an interview. "We have got some offers from Brazil and Australia, apart from Canada.

"NMDC, being a navaratna company, can invest up to 10 billion rupees abroad ($250 million), if the project is viable, attractive and compatible with long-term strategies," Som said, referring to the maximum amount it can invest overseas without seeking government approval.

Navaratna is a term used to describe a handful of major and profitable state-run firms.

NMDC, which accounts for about 15 percent of iron ore production in India, is setting up a separate unit called the Global Exploration Centre for investing abroad.

"This exploration centre will be used in India and abroad for mining projects. The funds will be decided on the basis of the projects," Soma said.

NMDC is India's leading state-run miner, with three iron ore mines in the country, and is expecting iron ore production in the financial year ending March 2008 of 30 million tonnes.

Som said the company wanted to build up its iron ore reserves with domestic steel consumption expected to rise 10-15 percent annually over the coming years.

"I think iron ore prices will continue on an upward trend over the next three to four years," he added.

Brazilian miner Vale recently said that its big clients have agreed to a 65 percent increase in iron ore prices for 2008.

NMDC sets its contracted iron ore prices based on those of the world's top miners.

Som added the company was also looking to process more of its low-value material called slime and convert it into pig iron.

"We are sending a team to Australia for the technology," he said.  Continued...