NMDC needs to formulate specific plan to buy mines abroad: CAG
New Delhi: State-owned iron ore producer NMDC needs to come up with a specific strategy to acquire mines overseas, according to government auditor CAG.
"Company has been making efforts to acquire mines abroad but no specific strategy (indicating quantum of reserves to be acquired, resources to be earmarked, etc) has been formulated," CAG said in a recent report.
NMDC has been scouting for both iron ore mines and coal assets in Brazil and Russia. It sealed its maiden overseas buy by acquiring 50 percent stake in Australian firm Legacy Iron Ore last year.
"The company needs to work out its strategy on reserve accretion and acquisition of new mining areas in India and abroad to enhance its production while maintaining operations on a longer term," CAG said.
Acquisitions are a must for the company to maintain its share in the country's iron ore production which has fallen to 11 percent in 2009-10 from 14 percent in 2005-06.
The production of the company also fell from 32 million tonnes in 2007-08 to 28.52 million tonnes in 2008-09, to 23.8 million tonnes in 2009-10 and further to 25.16 million tonnes in 2010-11.
CAG, however, said the decline in production was mainly due to the breakdown of a slurry pipeline by Essar which created evacuation constraints.
NMDC has 1,565 million tonnes of iron ore reserves that includes reserves in 11B and Kumaraswamy deposits, being developed now, in Chhattisgarh and Karnataka, as on March 31, 2011. The country has 28,526 million tonnes of proven reserves.
CAG also flayed the miner for making delays in awarding contracts for developing the two -- Kumaraswamy and IIB -- leading to a three-fold cost escalation to Rs 1,506 crore.
NMDC had decided to develop Kumaraswamy deposits in Karnataka and 11B deposit in Chhattisgarh's Dantewada district in 1997 and 2003 respectively.