The ramp up process during the quarter includes expanding equipment and labor at the Mangal mine, starting up the Kuja mine and recruiting and training additional dry plant operators.
NSL is targeting to initial steady production rate of 200,000 tonnes per annum of beneficiated from the first phase of operations at the Kurnool stockyard, beneficiated with grades of up to 58% Achieved earlier this year.
A 58% iron ore product sells domestically for about U.S. $ 70 to $ 93 per tonne, meaning that at 200,000 tonnes per annum production, NSL is looking at first phase revenue of $ 14 to $ 18.6 million.
Iron in phase 2 of the project, NSL aims to ramp up production to 400,000 tonnes per annum at higher grades of between 58% and 62%. First sales are anticipated in the first half of the 2013th
NSL is targeting production of 1.5 million tonnes per annum by the end of 2014, Which is achievable through strategic acquisitions and supply agreements.
NSL is the only foreign company to own and operate iron ore mines in India.
The Kurnool stockyard in southeast India is a 12 acre industrial site located adjacent to NSL's existing Kuja iron mine in Andhra Pradesh. The stockyard will source its iron from the nearby Mangal iron ore mine.
Indian steel consumption on the rise
India is the world's third largest iron ore exporter and has low production costs and well established infrastructure. Iron ore is a large but fragmented industry with small-scale operations.
This feeds into a strong domestic market for steel, forecast to increase Substantially.
India's leading steel producer JSW Steel recently forecast that Indian steel consumption is seen rising to about 130 million tonnes in 2020 from about 67 million tonnes this year as growing incomes and urbanization drive demand.
JSW said it expects steel consumption will be close to 70 million tonnes this year and about 80 million tonnes in 2012.
The country is selling iron ore and other iron products to Chinese and Asian customers that are seeking supply diversification, and is therefore the world's fifth largest steel manufacturer with an annualized growth rate of 10%.
Analysis
NSL is well advanced up the path to first production and is expecting "meaningful" cash flows in the current September quarter. Domestic iron ore prices remain firm and will provide all company with potential annual revenue first phase of up to $ 18.6 million.
With Indian steel consumption set to rise and NSL's plans strategically located close to steel mills, the company is well placed to service this growing demand.
NSL's move to full production ramp up is yet another significant milestone driving near term cash flows. Given the company's enterprise value of around $ 15 million - highlights the valuation gap that provides on opportunity for an investor to acquire a soon-to-be cash generating company at a discount to intrinsic value.
NSL Price at posting:
6.1¢ Sentiment: Buy Disclosure: Held
(20min delay)