The Asia Miner

OCT-DEC 2015

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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36 | ASIA Miner | October-December 2015 India NSL Consolidated has entered into a conventional secured funding loan agreement totalling Aus$5 million to allow construction, com- missioning and operation of the phase two wet benefciation plant at its Kurnool iron ore processing stockyard in Andhra Pradesh state. Phase two will be a wet benefciation process, allowing NSL to pro- duce a high grade, premium price iron ore product grading between 58-62% iron at an annual rate of around 200,000 tonnes. The agreement, signed with NSL's current funding partner and in- vestor, New York-based investment frm Magna, means that phase two is fully funded through construction and commissioning. It also enables NSL to immediately recommence operations at the phase one dry benefciation plant. NSL is the only Australian or foreign company to own and operate in India's iron ore market. It has a dry processing plant operation at Kurnool serviced by two of its nearby iron ore mines Kuja and Mangal. The dry plant will immediately recommence with working capital drawn from the new loan facility, while project work for phase two construction will also immediately commence with a view to being fully commissioned within 12 months. This year, NSL has successfully negotiated offtake agreements for phase two's high grade iron ore product with US$9 billion global conglomerate and Indian private sector steel producer JSW Steel, and pellet, power and steel producer BMM Ispat, an existing cus- tomer for NSL's phase one product. Magna has previously provided loan support for NSL's Indian iron ore growth strategy. The new arrangements replace the pre- vious US$4 million converting loan facility entered into between NSL and Magna in January this year, of which US$750,000 had been drawn down. At June 30 this year, Magna had already elected to convert a total of US$225,000 of that drawn loan bal- ance, to shares in NSL. NSL's managing director Cedric Goode says, This further support by Magna for our Indian strategy is a true testament to the partner- ing nature of our relationship with this key New York investor. Both parties have worked closely in recent months to understand the more substantial potential that phase two brings to Kurnool and then to bed down fnancing arrangements allowing construction, commissioning and production and sales activity to recommence. " Magna founder and CEO Joshua Sason says, "Magna is partic- ularly pleased to continue working with NSL as we share a view of the long-term potential of this key market within a global iron sector undergoing some fux." AFTER a shutdown of more than three years Vedanta Resources sub- sidiary Sesa Goa recently received necessary government approvals to resume iron ore mining in the state of Goa. The company was likely to recommence operations at its biggest mine at Codli from August 10. It received relevant consent, licence and approvals to commence mining operations for some of its leases and was the frst company to restart iron ore mining in the state. Vedanta said in a statement it had been granted approval for to- tal extraction of 5.5 million tonnes, of which Codli has 3.1 million tonnes. "To date, fve plans and schemes for company's mines have been cleared by the Indian Bureau of Mines and we are await- ing clearance for further 15 plans. Over the balance of the monsoon period, we anticipate receiving these approvals and expect a full- scale resumption, post monsoon." Despite the restart, the company is likely to fnd it tough to scale- up operations as low iron ore prices, lower demand and loss of market to Australian miners are expected to be major imped- iments to run operations profitably in Goa, where iron ore is generally of lower quality. The Goa iron ore cannot be used in Indian steel mills and is fully exported. The ores also claim less realization on each tonne of iron ore sold due to the quality. In the last three years of a Su- preme Court-imposed ban in Goa, most miners lost their export market to Australian miners and this situation has worsened due to a fall of more than 50% in the cost of iron ore. Vedanta's CEO Tom Albanese acknowledged these issues and said the company would have to work really hard to re- gain market share and maintain margins once operations started in Goa. Vedanta is producing from its mines in Karnataka which con- tributed only 10% to its overall iron ore production in 2012, when mining was banned. In 2014-15, Vedanta produced 600,000 tonnes due to resumption of mining in Karnataka and generated an operating proft of Rs135 crore, just more than 1% of the group's overall operating proft. Vedanta said: "Even as India in general and miners from Goa in particular look to regain lost markets, iron ore markets/prices are weak and the international trade environment remains challenging. We continue to work with the central and state governments to im- prove competitiveness of Indian exports." Funds for NSL Indian growth Vedanta Resources CEO Tom Albanese. Vedanta resumes iron ore mining in Goa

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