By Biman Mukherji / Reuters
New Delhi: Global miner Rio Tinto will sign an agreement this month with Indian mining firm NMDC to prospect for iron ore, the chairman of the state-run Indian company said on Wednesday.
“We will sign a memorandum of understanding. It is for prospecting of mainly iron ore. They (Rio Tinto) will look to prospect in India,” NMDC Chairman Rana Som told Reuters.
NMDC’s shares rose more than 3.3% after the news of the agreement, which Som said would be signed on 18 August.
“The agreement is to prospect outside of India as well as on the subcontinent and NMDC would help Rio Tinto in prospecting for iron ore in India,” he added.
India exports about 90 million tonnes of iron ore, mainly to China. Most of the sales are done on spot basis, unlike other big suppliers who tie up long-term contracts.
Som said company officials were yet to fix a date to go to Japan to negotiate price agreements with buyers for supply of iron ore.
In early 2007, the government imposed an export duty of Rs300 per tonne ($7) on higher grades and Rs50 on lower grades, to discourage exports and to conserve future supplies for domestic steel makers, many of which are planning to expand.
India’s ministry for mines said in June it opposed the tax and it wanted to encourage local firms to sell ore overseas.
The government, which is trying to calm soaring inflation, has persuaded steel firms to hold their prices steady since May and is keen to keep iron ore prices down to help steel makers.
Earlier, the Indian Express daily said NMDC was increasingly looking at foreign opportunities to boost its mineral reserves.
“NMDC, which contributes 15% to India’s total iron ore production, was also in the race to acquire a mine in Canada for Rs30 billion,” the newspaper said.
“With no fresh allocation of iron ore mines domestically, NMDC had signed a joint venture agreement with India’s Spice Energy and was close to clinching a deal to acquire mines in mineral-rich Eritrea, Congo and Armenia,” it said.