India's SAIL and NMDC to Jointly Develop Limestone Mine in Himachal Pradesh

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Researched by Industrial Info Resources (Sugar Land, Texas)--Steel Authority of India Limited (BSE:500113) (SAIL) (New Delhi), India's largest steel-making company, recently signed a memorandum of understanding with the National Mineral Development Corporation Limited (BSE:526371) (NMDC) (Hyderabad, Andhra Pradesh), the nation's largest iron ore-producing company, whereby the two state-owned companies will develop the limestone mines at Arki, in the Solan district of Himachal Pradesh.

The Arki mine has proven deposits of about 90 million tons of low-silica limestone and 8 million tons of dolomite. According to NMDC Chairman Rana Som, the reserves will last for about half a century. The 50:50 SAIL-NMDC joint venture will produce 3 million tons per year of limestone in the form of 1 million tons of lumps, and 2 million tons of fines. Production is scheduled to begin in three years, and the investment required has been estimated at more than $56 million.

The two companies will use the low-silica lumps as flux for steelmaking and sell the fines in the market. Limestone fines are a vital ingredient in the cement manufacturing process and are in great demand in the cement industry. SAIL's low-silica limestone requirements are expected to increase to 3 million tons per year after proposed capacity expansion plans have been implemented during the next few years. The company intends to ramp up production capacity from the existing 14 million tons per year to 23 million tons per year. The company does not own any limestone sources, and all needs are met by external sources. The company currently procures the required 1.6 million tons of low-silica limestone from Jaisalmer in Rajasthan and through imports. In the future, an additional 1 million tons will be procured from the Arki mines.

The development of the limestone mine is another constructive step in SAIL's continuous endeavor to secure its supply of critical raw materials. For NMDC, it is an assurance of a buyer that is critical. The mine development project also will trigger the growth of other subsidiary industries and bring about an overall development in the region.

The central government of India is working out the formalities of changing the status of five or six public sector units (PSU) from "Navratna" to "Maharatna." The companies in the fray include SAIL; oil company Indian Oil Corporation Limited (BSE:530965) (IOC) (Mumbai); power company NTPC Limited (BSE:532555) (New Delhi); Coal India Limited (CIL) (Kolkata, West Bengal); and Oil and Natural Gas Corporation Limited (BSE:500312) (ONGC) (New Delhi). Navratna PSUs can make independent decisions for investments up to $216 million, while Maharatna PSUs can enjoy autonomous powers for up to $1 billion without having to take permission from the concerned ministries. The upgrade is expected to take place over the next two to three months. The change will allow large PSUs play a bigger role in the economy of the nation.

Maharatna companies can invest up to $1 billion in a joint venture, provided such an investment does not exceed its total net worth by more than 50%. Navratna companies such as SAIL and NMDC can invest up to $216 million, provided the amount does not exceed the company's total net worth by more than 30%. The investment required by the Arki mine development project falls well within the approved amounts.

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