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May 24, 2013, 10.48 AM IST | Source: Moneycontrol.com

JSW Steel keen on Category C iron ore mines: Jindal

We are very confident that getting to 85 percent (production capacity) will not be difficult given the situation that at least 20-21 million tonnes of fresh production would be there, Sajjan Jindal said.

Sajjan Jindal, CMD, JSW Steel

JSW Steel  shares were marginally down at Rs 685 Friday, even as the company said it was confident of achieving its 2013-14 guidance of 9-10 percent growth in crude steel output, Chairman and Managing Director Sajjan Jindal told CNBC-TV18. He cited high iron ore availability as the basis for his positive outlook.

The company's fourth quarter net profit shrunk 24 percent year-on-year on higher interest costs and depreciation. Its sales declined around 3 percent YoY to Rs 9,249 crore due to abysmal capacity utilisation at its plants in Karnataka.

Also Read: JSW Steel confident of 9-10% growth in FY14 crude steel

"We are very confident that getting to 85 percent (production capacity) will not be difficult given the situation that at least 20-21 million tonnes of fresh production would be there," Jindal said.

The steelmaker is also keen to lap up Category C iron ore mines whenever they are put up for auction. Jindal expects the auction for these category mines to start in next three-four months.

Right now National Mineral Development Corporation (NMDC) produces 10 million tonnes a year. Going forward Category A mines are seen producing 5 million tonne and recently cleared category B mines will produce around 6 million tonne, Jindal explained.

JSW Steel is also keen on acquiring coal mines for its steelmaking units and also for other group companies like JSW Energy which is in to power production.

Below is the verbatim transcript of the interview

Q. Can you throw some light on iron ore availability, now that both category A and Category B mines have started operating?

A:  The Supreme Court has put a cap on Karnataka mining at 30 million tonnes. What Supreme Court had said in their judgement that Karnataka requires only 30 million tonnes and they would like to preserve the iron ore for a much longer period in the state  Therefore they have put a cap of 30 million tonnes a year.

Right now National Mineral Development Corporation (NMDC) produces 10 million tonnes a year and Category A which is already operating produces 5 million tonnes a year. Category B which has just started operating last week, are producing 1 million tonne and another 4-5 million tones is expected to be produced over next three to four months. So put together 10 million NMDC, 5 million from Category A and 6 million tonnes from Category B, a total of about 20-21 million tonnes of iron ore will be available.

Q: Your target of 10 percent growth for the next year is very bullish considering the fact that there are still challenges. Iron ore availability has been an issue. There has been issue with capacity utilisation. Where is the confidence coming from? Has the challenges around the availability of iron ore lifted at all?

A: We have been through most difficult environment over the last two years when the mining was completely banned and there was no mining in Karnataka and still we operated at about 70 percent in first year and 80 percent in second year.

So we are very confident that getting to 85 percent production capacity will not be difficult given the situation that at least 20-21 million tonnes of fresh production would be there. Also poor quality of iron ore has been lying there for decades. Through our innovation and technology we can put that to use. So therefore we feel that we will be able to manage 85-90 percent capacity utilisation.

Q: Talking about category-C mines, you are looking at bidding for them once the auction does start. Is there some clarity on what the timeline is for the auction and just take us through how many mines? What is the kind of utilisation or what is the kind of capacity these particular mines have?

A: They have put a cap of six million tonnes from the category-C mines. These six million tonnes will come from such mines which have environment, forest and other approvals from Indian Bureau of Mines (IBM). So, therefore, we would be bidding for these six-million-tonne category-C mines. At the moment I don’t have a clear picture of when and which day they will be auctioned.

Q The most important or the most exciting news has been the coalgate scam. Your stance has been very clear on that from the beginning, so I will not repeat that, but when the mines do come up for auction would you look at participating in that?

A: Yes, absolutely. As a group we are in the business of steel production which needs coal and iron ore. We are in the business of energy, power production in JSW Energy which requires coal. We are in cement which requires limestone and coal.

So we are basically in mineral converting industry value-adding to the minerals and probably we are the most eligible company to bid for such auctions. I feel the best way to go forward is through a transparent bidding process rather than through allotment, that would be the best way. It gives more revenue to the government. It brings in the genuine investors who would bid for these because they would then put it to use. So therefore this is the best way forward.

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