NALCO, NMDC share prices gain as nod for royalty rates for Lithium, REEs lift prospects

Indian Stock Market: Metals stocks remained in focus and Nifty metal index was up more than 1% with gains being led by NMDC share price that were up almost 6% . National Aluminium Company share price (NALCO) also gained more than 4% while Hindustan Copper share price was also up almost 2% .

The decision by the central government approving royalty rates of 3% each for lithium and niobium and 1% for Rare Earth Elements (REEs) lifted Street sentiments. The expectations have increased that the government will soon start the auction of critical mineral mines in a few weeks. NMDC has big plans for such metals and has already obtained a prospecting licence to carry out exploration activities for lithium reserves in Karnataka. Other companies as National Aluminium Company Ltd (NALCO), Hindustan Copper are amongst the top Lithium mining companies also a part of the joint venture Khanji Bidesh India Ltd (KABIL), created by the Ministry of Mines.

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As the news flow remains positive lifting sentiments for these companies, a boost is also being provided by the rebounding iron-ore and base metal prices. The international iron-ore prices that were at $105 a tonne in August are now trading at close to $120 a tonne. NMDC has hiked prices for its produce. Lump ore prices were hiked to Rs. 5,200 per ton from ₹4950 a tonne. Also, its sales during first half have increased by 25.43% to 20.53 million tonne (MT). Rising volumes and prices improve earnings outlook . 

Analysts at Motial Oswal Financial Services said that in line with the recent surge in iron ore price in the international market, NMDC has already undertaken two price hikes in less than a month, aggregating to ₹450 per tonne. They maintained positive ratings with price target of ₹170.

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For Nalco and Hindustan Copper as outlook improves on critical earth metals push the base metal prices have also seen some rebound. The sustenance of higher base metal prices, however, remains key. Analysts at Kotak Institutional Equities estimate Alumina Ebitda for Nalco at Rs250 crore ( up 78% yoy, 55% sequentially) and aluminum Ebitda at Rs400 crore ( up 109% yoy) led by lower costs during Q2.

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