A worker holds a handful of iron ore pellets at an iron ore mine. (Photographer: Vincent Mundy/Bloomberg)

NMDC’s Sales Fall The Most In Five Months Due To Mine Closure

Lack of contribution from Donimalai mine in Karnataka dragged down state-run NMDC Ltd.’s production and despatches in December.

The company recorded its worst fall in monthly production since August and steepest decline in despatches since July last year, according to its filings.

That came as its mine in Karnataka, which contributed 17 percent of its total output in the last financial year, remained shut since the first week of November. The shutdown stems from state government’s decision to impose 80 percent premium on the iron ore sales from the mine.

Q3 Expectations

Analysts expect healthy third-quarter earnings for the public sector company despite the Karnataka mine troubles. That’s because ore prices remained buoyant in October and November before a downtrend in December.

The company’s revenue is expected to rise 24 percent and it could register an operating margin of 55 percent for the quarter ended December 2018 on the back of healthy realisations, according to the consensus of estimates tracked by Bloomberg.

The company’s dispatches for the December quarter rose 10 percent year-on-year to 8.8 million tonnes while production increased 13 percent during the period, according to its filings.

NMDC’s lump ore prices were 48 percent higher year-on-year at Rs 3,550 a tonne for the three months ended December. Fine prices were up 45 percent on a yearly basis.

Still, lower output and volume growth may start weighting on its financials.

NMDC has a full-year despatches target of 37 million tonne. Going by nine-month data, that appears steep. Despatches fell 13.6 percent on a yearly basis to 22 million tonnes in the nine months ended November compared with 25.6 million tonnes in the year-ago period.