NMDC iron ore price

Hey guys,

Thought I would share with you my thoughts on current negotiations and the falling price of iron ore.
I know there isn't a lot to talk about when it comes to NSL, but thought this would be a worthwhile topic.

I've been looking at the NMDC iron ore price and the location of NMDC mines and it honestly doesn't have me worried about the falling price of iron ore (any more).

If NMDC mines were closer to where we plan to operate, then I would definitely be worried by NMDC reducing the price of their fines and lumps for 2 months in a row, as global iron ore prices continue to slide.

As you can see, the companies main three iron ore mines in Chhatisgarh and Karnataka are quite a distance from Kurnool.

Two Chhatisgarh Mines (approximate region)


Single Karnataka Mine (approximate region)


I am unable to tell what Fe grade the lump and fines are, however I have compared them against the 62% Fe grade used to determine global prices of iron ore and then converted them to AU at the current rate, along with all other prices in Rs.



NSL have advised their cost per tonne (CTP) for 50-55% Fe is around AU$28, so I can only assume the cost per tonne for 58-62% is going to be of a similar price (not sure whether their is additional cost with wet benefication).

When looking at the graph, it would appear as domestic (NMDC) and global prices decline, the price of ore that NSL can negotiate may decline with it. However, when looking at this along side the location of NDMC mines, it's important to acknowledge the distance and that different states have different supply and demand.

As the company have stated several times, steel companies in Andhra Pradesh have been running at 40% capacity and are hungry for more ore which is why I think we have managed to negotiate such a great price for Phase 2.

200,000 tonnes with the "potential for up to A$14,000,000 in sales" indicated a price somewhere up to AU$70 per tonne. If you look at that along side global prices and NMDC Fines, it's pretty great considering.

Unless the global price was to fall to something like AU$40-50, it wouldn't be economical for the region to import any of it's iron ore from overseas and as long as NMDC don't open any mines closer to us, we should find that NSL will get a pretty decent price for Phase 1 ore.

I'm thinking something along the lines of AU$55 per tonne. The company did indicate sometime ago (July 2014) it expected to get AU$56. Given that the global price has fallen so much, you would think it would be much lower, but I get the impression (logic would dictate) the demand is what is allowing such a good price for NSL and we should find it is in the AU$50-$60 range despite the fall.

I'd be interested to hear everyone else's thoughts on the price and whether any of you are concerned about the impact that a falling iron ore price could have on NSL.

Personally I think we are in a prime position which is going to shelter us quite a bit. We may miss out on some of the potential growth as importing ore to the country becomes even cheaper but at the end of the day, being quite inland, NSL have a good opportunity to capitalise on growth that isn't along the coast, of which I am sure there will be plenty.

Cheers,

Tim