Investor (Non-Deal) Presentation

FEBRUARY 2020

NMDC LIMITED
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Section 1
Overview of Iron ore and Steel Sectors
 Trends in Global steel production and apparent consumption
Apparent Steel Consumption v/s Production (Million Tons)
1808
1670 1730 1712
1633
1538 1545 1650 1550 1505 1620 1520 1627
1414 1446 1560
859 880
828 847 816 819
836 829

822 822 804 808 871 928

702 731

2011 2012 2013 2014 2015 2016 2017 2018

China's steel production Rest of the world steel production Apparent steel use

❖ 2019 (for 11 months) production -1684 Million Tons as compared to 2018 (for 11 months) production- 1640 Million Tons.
❖ Gap in supply and demand is expected to decrease in near future resulting in increase in global demand of iron ore.
❖ China’s environmental crackdown, the supply-side reform and the closure of lower-end induction furnaces have pushed
steel rebar prices up by about 38 percent in 2017-2018
❖ One of the key determinants of future growth will be the economic growth of India and South-east Asian countries.

Source: World steel Association

 Trends in Indian steel production and consumption
160 142 90
138
140 122 128
110 85
120 101 103 107
Million tons

91 97 98
100 89 90 80
80 78 82

%
71 74
80
60 75
40
70
20
0 65
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Crude steel capacity Crude steel production Capacity utilization%

Source: Ministry of Steel

Steel Consumption (MT) in last fiscal* ❖ Crude steel production capacity increased
9.13 at a CAGR of 8.1% between FY2011 and
7.97 7.79 7.82 7.65 8.1
6.63 7.1 FY2018
4.25
4.08 4.01
5.3
3.74 3.6 3.65 ❖ Crude steel production has increased at a
3.31 3.55 CAGR of 5.6%
2.95
3.89 4.88 4.08 4.05 4.45 ❖ Indian iron ore production likely to grow to
3.32 3.78 3.55
2.35 meet the domestic requirements
Apr'19 May'19 Jun'19 July'19 Aug'19 Sep'19 Oct'19 Nov'19 Dec'19
Finish Long Finish Flat Total Increase in steel prices is strong
indicator for iron ore demand
Source: Steel Mint
Last Fiscal indicates the period starting April 2019 till Dec 2019
 Trends in Finished steel prices
49570
43981 44573 43851 43100
38097 40094 38384 38204 37750
35660
INR/tonne

33982

2015 2016 2017 2018 2019 2020*

HRC prices CRC prices Source: Steel mint
*2020 data is till 3rd Feb 2020.

Past 12 months Price Trend

49000 49000 46000
Due to sluggish demand in domestic steel 44000 42350 44300
40900
sector and rise in inventories among major 38400

INR/tonne
players, prices dropped in the steel sector.
42000 43000 41500
However, since December domestic steel 39500 36750 34250 37750 39250
demand improved which is reflected in the
rising domestic steel prices. The steel prices
has already seen the trough and likely to
continue increasing. Jan'19 Mar'19 May'19 Jul'19 Sep'19 Nov'19 Jan'20 Feb'20
HRC CRC
 62% Fe Fines, CFR China (INR/dmt)
Feb'20, 5810

(83)
USD/DMT)

GLOBAL MACRO

May-16

May-17

Jan'18

Jan'19

Jan'20
Nov'18

Nov'19
Jan-16

Jan-17

Jul'18
Sep'18

Jul'19
Sep'19
Nov-16

Nov-17
Jul-16

Jul-17

Mar'18

Mar'19
Mar-16

Mar-17
Sep-16

Sep-17

May'18

May'19
INDICATORS 62% Fe Fines, CFR China
REMAINS
STRONG FOR ❖ Iron Ore prices have been increasing steadily over the years,
with peaks and lows amidst global concerns.
IRON ORE
❖ Prices reached a peak of 125 $/tonne amidst supply concerns
from Brazil due to Brumadinho dam disaster.
❖ Prices traded over 90 $/tonne due to limited supply from Vale
S.A in Brazil amidst heavy rainfall south of Brazil.
❖ CORONAVIRUS outbreak impacting the Chinese economy has
led the iron ore prices drop to 83 $/tonne since the beginning of
February 2020.
 Iron Ore: Overview of the Domestic Market
Target as per 437
500 NSP, 2017 35
30.7
30
400
129 156 191 201 207 25
300 20
15.7 16.2
200 12.1 15
12.9
7.1 9.1
10
100 4.6
5
7.3 5.4
0 0
FY 15 FY 16 FY 17 FY 18 FY 19 FY 30 (P)

Iron Ore Production (MT) Export (MT) Import (MT) Source: IBM and Steelmint

❑ Production is increasing Y-o-Y from FY’15 and expected to increase further.

❑ ~74% of India’s iron ore is high-grade Hematite, with Fe > 63%, one of the best in the world.
❑ Domestic supplies are likely to grow substantially till 2020 as non-captive miners will maximize production on account of expiry
of leases in 2020
 Trends in Indian Iron Ore prices
Prices of Iron ore Lumps (Fe 62% to 65%) – Price of Iron ore Fines (Fe 62% to 65%) –
INR/T
INR/T

3833
2393

2753 1917

1884
2633

Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4
2016 2017 2018 2019
2016 2017 2018 2019
Chhattisgarh Karnataka Odisha Chhattisgarh Karnataka Odisha
Source: IBM for prices till Aug -19, Steel Mint for prices from Sep – 19 till Jan -20 as the same was not published in IBM

9
 4,500

4,000

3,500

3,000

Rs. Per Ton

2,500

2,000

NMDC Iron 1,500

Ore Price 1,000

Trend 500

-
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E
2018-19 2019-20
LUMP 3,264 3,448 3,892 3,185 3,253 3,278 2,937 3,500
FINES 2,670 2,760 3,152 2,632 2,733 2,680 2,392 2,960
AVG 2,884 2,999 3,398 2,827 2,916 2,891 2,578 3,150

The steel prices has already seen the trough and likely to continue increasing
Distribution of Merchant and Captive Miners in Odisha

Distribution of Merchant and Captive Miners in Odisha

Production (MT)

• Currently 84 MT of Iron ore in Odisha is produced by

Merchant miner.
48 • The trend of premium being quoted in the auctions is
not feasible for merchant miners since the price
84 incurred to miners will be more than 100% of selling
price, which would result in de-facto end use
arrangement.
36
• Consequently, post auctions this 48 MT of iron ore
that was previously available for sale in open market
would not e available for sale in market.
22 22
• The shortage of 48 MT of iron ore in the market
would be existing Merchant Miners such as NMDC.
FY 19 FY21

Captive Merchant De-facto Captive

 Iron ore requirement of successful bidders as well is more than their requirement
for end use
S.N. Company Crude Steel Crude Steel Total Iron ore Auctioned Other blocks Shortfall (MT)
Capacity Capacity requirement in blocks Odisha (MT)
(Mt) 2019 (Mt) 2024 2024 (MT) (MT)

1 JSW 18 29.7 47.5 26.3 11.85 9.35

2 Arcelor Mittar & NSL

10 12 19.2 5.5 13.7
(Essar)
3 JSPL 8.6 8.6 13.8 3.1 10.7

4 RINL 7.3 7.3 11.7 11.7

Sub-total (A) 43.9 57.6 92.2 31.8 14.95 45.45

5 SAIL 18.6 21.4 34.2

6 Tata Steel 18.6 27.3 43.7 • The chart explains the capacity expansion plans
of steel players in the country. The capacity
Sub-total (B) 37.2 48.7 77.9 expansion of existing customers presents an
7 Others (C) 52 67 107.2
opportunity for increased sales in mid-term.

Total (A+B+C) 133 173 277.3 • The increase in capacity of 40.2 MT requires 64
MT of additional Iron ore
 Production profile of steel majors

Production Capacity (MT) Production (MT)

20 20

15 15

10 10

5 5

0 0
FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19

JSW JSPL SAIL TSL RINL JSW JSPL SAIL TSL RINL

❖ Tata Steel is eyeing for 30 million tons capacity

❖ JSW aims to produce 40 million tons of steel.
❖ SAIL has invested to enhance the capacity to 21.4 million tons.

Expansion plans for the steel majors are a strong indicator of increasing demand of iron ore in the coming future.
Current demand for NMDC iron ore is intact and new demand is likely to come against expiry of iron ore mines by
31st March, 2020.
Source : https://www.argusmedia.com/en/news/1943732-tata-steel-aiming-for-30mn-tyr-capacity-by-2025, JSW Reports
 Major existing customers of NMDC and their offtake

Customer Off-take (Mt) % of Total Off-take (Mt)

FY19-20 FY19-20 Off-take (Mt) % of Total Off-take (Mt)
(Apr-Dec) (Apr-Dec) FY18-19 FY18-19
RINL 5.19 23% 8.69 27%
Essar 5.23 23% 7.14 22%
JSW (Group) 6.12 27% 8.36 26%
CG Parties 1.84 8% 2.36 7%
Export 1.77 8% 1.18 4%
KIOCL 1.35 6% 1.72 5%
Others 1.53 7% 2.93 9%
Total 29.15 100% 32.38 100%

• JSW has expansion plan of around 12 MT of steel capacity which will • The other parties have planned expansion plans of 12 MT which shall
require additional 19 MT of iron ore. require additional 19 MT of iron ore.

• Essar has expansion plan of 2 MT which will require additional 3.2 MT of • The sale to CG parties could see a drastic upward trend in the coming years
iron ore. on account of capacity expansion of other players in the country.
 CG units
South
Korea

China
Japan
Gujarat
Essar
Chhattisgarh

JSW ISPAT / Welspun Maharashtra RINL

Andhra Pradesh  Japanese steel mills (LT contract)
JSW Steel  POSCO, South Korea (LT contract)
*Not to scale
KIOCL Karnataka

*Not to scale
• Long Term Contracts with Key International
Customers
• Prices are fixed quarterly benchmarked to prices
of Platts Fe 65%

Strong Domestic and International Customer Base

Section 2
STANDING STRONG IN GLOBAL COMPETITION
 770 Rs/ TONNE
ONE OF THE LOWEST COST OF
PRODUCTION

1.32%
ONE OF THE HIGHEST PRODUCTION TO
RESERVES RATIO.

OPTIMIZING EFFECIENCY
A Highly profitable firm with large reserve base and high returns to
shareholders

770
2.73 BT 61 % 4.7 %
Rs/Ton

Large reserve base One of the lowest EBIDTA Margin at par Dividend Yield
operating cost among with best performing
comparable firms firms in business

Source: NMDC, PwC Analysis. Conversion rate of USD/INR : 70 BT : Billion Tons

 Robust Operational And Financial Performance In FY 20 (9M)
Strong Performance despite non operation of DIOM

Operational performance Rs10.64 EARNINGS PER SHARE

Financial performance

PRODUCTION 220.15 LT 01 Text to go here go here go here go

here go here go here go here
Book Value per REVENUE Rs 8512 Crore
Rs 95.4
SALES 228.95 LT share
EBITDA Rs 4898 Crore
EXPORTS 17.71 LT
02
11% Return on Equity Capital Rs 1052 Crore
OPERATIONAL Rs 770 /tonne Expenditure
COST
RETURN ON CAPITAL
03 Text to go here go here go
here go here go here go here
PAT Rs 3259 Crore
33% go here
EMPLOYED
Text to go here go here go here go here go
here go here go here 04
NMDC CREATING VALUES FOR SHAREHOLDER’S
Source: NMDC’s Reports, PwC Analysis 19
Globally one of the lowest cost producer and high EBIDTA Margin Iron ore player

Operating C1 cost per ton EBIDTA Margins 14.3

(USD) (%)
25 13.3
100
20
12.7
75
15

10 50

14.3 13.3 12.7 12.5 12.4 61 12.4

61 61
5 54
25 12.5 46

0
BHP Rio Tinto NMDC Vale FMG 0
12/02/2020 12/02/2020
BHP Rio Tinto NMDC Vale FMG

Drivers for low costs are : Stability/predictability of expenses such as wage increase, LTA with OEMs ; Proximity of expansion projects to existing mines
enabling lesser investment and fungibility of resource pool & Access to large talent pool in India
Source : NMDC Reports. Annual report 2018 of BHP, Rio Tinto, Vale and FMG. INR 70 = US$ 20
Government of India is the major stakeholder of NMDC Limited

5.85%

69.65%
❖ Among Insurance companies major
share holding is of LIC India -12.89%
❖ Market Cap: 34782 Crores as on 7th
Feb 2020
(NSE NMDC Share price : 113.60 INR)

Source: NMDC Reports and PwC Analysis

21
Financial strength is the cornerstone of NMDC success
2016-17 2017-18 2018-19 2018-19 2019-20
Upto Q3 Upto Q3

Sales 8830 11615 12153 8509 8512

(INR Crores)

EBITDA
(INR Crores) 4510 6472 7519 5230 4898

PAT
(INR Crores) 2589 3806 4642 3188 3259

Net Worth
22519 24354 25952 27578 29212
(INR Crores)

Capital
3465 2346 2090 829 1051
Expenditure
(INR Crores)

Earnings
7.22 12.03 14.70 10.64
10.08
10.64 10.64
Per share (INR)
22
Source: NMDC Reports and PwC Analysis
 NMDC revenue growth driven by large best quality asset base

Location of NMDC’s mining facilities

2019-20 (up to Q3)

Madhya Pradesh
Revenue Growth
Bacheli Mining
Panna Diamond Chhattisgarh Complex:
Mine Deposit – 5, 10
2018-19 (up to Q3)

and 11A

Karnataka
Donimalai Mining
Kirandul Mining Complex:
Complex: Donimalai
Deposit – 11C, 14
Donimalai Mining Chennai Port
Complex:
Kumaraswamy`

Source : NMDC Reports and PwC analysis 23

Consistent high production and sales of iron ore are drivers for NMDC Profitability

Iron Ore Production (LT) Iron Ore Sales (LT)

220 229
75 88
2019-20 (Upto Q3) 85 2019-20 (Upto Q3) 84
0 0
60 56

218 222
65 77
2018-19 (Upto Q3) 80 2018-19 (Upto Q3) 82
21 21
52 41

0 50 100 150 200 250 0 50 100 150 200 250

Total KDL BCH DIOM KIOM Total KDL BCH DIOM KIOM

Source : NMDC Reports and PwC analysis 24

 Capital Expenditure up- to January, 2020 and Expansion Schemes
1822 1814.17

❑ NMDC has already incurred the targeted capital expenditure

for FY 2019-2020 (up-to Jan’20), and is expected to incur
additional 500 Crores by 31st March, 2020.

Major Scheme – wise Capital Expenditure planned to be

Capex Target Incurred Capex (upto Jan'20) incurred in future
Schemes Estimated Cost (INR crores) Cumm. Till Date (INR crores) Status
3 MTPA Steel Plant at Chhattisgarh 23,140 16,468.33 CONTINUING
Slurry Pipeline (Phase- I) 2,907 140.23 CONTINUING
3rd Screening plant and
augmentation of loading facilities at 1,207 104.12 CONTINUING
Kirandul
5th Screening Line SP-2 and 310 DH
24.83 17.51 CONTINUING
Conveyor upgradation at Kirandul
Crushing Plant and Downhill
560.23 0.73 CONTINUING
Conveyor system of BLD 14
Screening Plant II at Donimalai 399.75 0.00 NEW
Chigargunta- Bisanatham Gold Block,
421.48 0.00 NEW
Chittor District, Andhra Pradesh
Slurry Pipeline (Phase-II) 6,000 0.00 NEW
TOTAL 34,660 16,731
Source : NMDC Reports 25
Section 3
Future Plans
 Ramping up Mining and Evacuation capacities

Mining Capacity Evacuation Capacity

(MTPA) (MTPA)
Sectors FY’21 (E) Ramp up by FY’21 (E) Ramp up by FY Mode of Evacuation
FY’24 24

28 40 Railways
Bailadila Sector
34 34 Road
(Existing Mines) 1 1
8 8 Essar’s Slurry Pipeline
Bailadila Sector 16
(New Mines)
-
- 14 NMDC’s Slurry Pipeline
Donimalai Sector 14 17 14 17 Road & Railways
Grand total 48 67 51 80

NMDC has planned for sufficient evacuation capacity to meet the requirements of production ramp up from
various capex projects like Screening Plant at Kirandul and Donimalai, Downhill Conveyor upgradation etc.
Diversification: Forward-integrate to value added businesses (Pellet, Steel)
NMDC Iron and Steel Plant (NISP), Nagarnar Product mix including by-products
2.20% 6.20%
19.40%

6.20%

66%

Pig Iron HR Coils/ Sheets/ Plates

BF Coke (surplus) Granulated Slag
By- products

The NMDC Iron and Steel Plant (NISP) is located in the

Bastar district of Chhattisgarh., about 16 km in North- East
direction from Jagdalpur town. The Plant is located 1 Km
31.6% 20.7%
north of the National Highway No. 63. Amaguda railway
station. Visakhapatnam port is the nearest port located at a
distance of about 350 km from the site.
EBITDA MARGIN PROFIT MARGIN
Strictly private and confidential 30 October 2019
PwC Draft
 Diversify into strategic and critical raw materials required by the nation and other
commodities

Exploring opportunities for 92.46% stake in

strategic and critical raw Legacy Iron Ore
materials like Rare Earths. Limited, Australia -
involved in exploration
Exploring battery minerals of iron ore, Nickel,
like lithium & cobalt Gold, tungsten and
4 Gold Base Metals.
mining
leases in
Tanzania.

26% stake in ICVL which owns

coking coal deposit in
Mozambique,
 Diversification into commercial Coal Mining
Recently, NMDC has also been awarded Rohne coking coal block and Tokisud coal block, hereby expanding
the business portfolio from Iron ore to coal as well.

Rohne Coking Coal Block Tokisud Coal Block

• Total Lease Area- 1245 Ha • Total Lease Area- 585.18 Ha

• Mining Capacity- 8 MTPA • Mining Capacity- 2.32 MTPA
• Stripping ratio: 3.09 cum./ tonne • Stripping ratio: 2.83 cum./ tonne
• Expected Annual Revenue- Rs • Expected Annual Revenue- Rs
1,482 crores 500 crores
• EBITDA- INR 534 crore • EBITDA- INR 276 crore
• Investment: 2,278 crores • Investment- ~451 crores
(including washery)
Section 4
Achiviements, Awards and Recognition
 Major Achievements During FY 19- 20

Operations Technology Investments Awards Other Aspects

▪ 2.76 LT higher
▪ NMDC Adopting SAP ▪ Expansion to Coal ▪ NMDC received the ▪ Ministry of Mines has
production of Iron ore.
as ERP solution in mining through Rohne prestigious S&P Platts amended the ‘MMDR act
▪ Highest ever
Kalpatru and Tasra blocks Global Metals Award 2015 with regard to
production& Dispatch
▪ Competitive allocation. 2019 under CSR renewal of mining leases
from Kirandul & KIOM
advantages to NMDC ▪ Extension of leases of 4 ▪ Hon’ble VP of India allocated to Government
▪ Highest ever dispatch
by harnessing Bailadila iron ore mines presented “Best Companies.
from Bailadila Sector
technologies such as for 20 years Supporting organisation ▪ The company has
IOT, AI, Data Analytics ▪ IBM approved mining to Quality Circle adopted Ind AS 116
making NMDC a plan for production Movement “Leases” Effective from
technology leader enhancement from KIOM ▪ Innovative Stakeholders 1st April 2019
Interface Award under
SCOPE Corporate
excellence

32
 Accolades received for exemplary work

Awards and Recognition

•Platts Global Metal Awards 2018 & 2019 at London

•Navratna status in 2008
•National safety award conferred by President of India
•5 star rating to mines by Ministry of Mines.
•Governance now Public service undertaking award
•“PSU Award 2018- Metals & Minerals” by Dun &
Bradstreet
•Hindustan Ratan Award- Best Financial
Only company to receive the
•CSR Leadership Award 2018 prestigious S&P global PLATTS
•India Green Energy Award, 2018 metals award 2019 in corporate social
•Greentech HR Platinum Award 2018 responsibility category for two times
in a row.
Spreading Smile through ethos of sustainable development
NMDC has put a complete ban on Others
single-use plastic in all its offices
and projects.

NMDC has spent USD 10.5 million Environment 16% Education

for plantation as part of its green
initiatives during FY2016 to FY2019.
6%

26
NMDC has spend an average of
USD 26 Million per year towards 38%
CSR initiatives from FY2015 to
FY2019. Hygiene 12%
Million USD
First organization to bag the S&P
Global Metals awards in CSR
category for two consecutive years
(FY2018 and FY2019). 28%
NMDC is improving educational infrastructure
and providing necessary facilities for over Infrastructure
29000 students with a view to provide
conducive environment to continue studies
and enhance overall learning.
Conversion rate of INR to USD: 1 USD = 70 INR
 Partnering with local communities
Eco-friendly Miner Care for Health Education

− 5 Star ratings for Mines wrt to − NMDC operates full-fledged hospitals

sustainability from Government of India − Shiksha Sahayog Yojana: Scholarship
at projects
scheme for tribal students.

− All projects of NMDC ISO14001 certified − All projects are OHSAS 18001 certified
− Balika Shiksha Yojana: Sponsoring 40 tribal
girls to Nursing courses
− 3rd party monitoring of air quality, water − Hospital on wheels
quality, noise & vibration
− Education Hub: partnered with Govt. of
− Free medical treatment of employees Chhattisgarh for creation of Education Hub

− Free medical treatment to local − Construction and operation of polytechnic .

community at projects’ hospitals.
Transformational leadership
backed by innate risk-taking
ability, the discovery of new
horizons of growth

HARNESSING TECHNOLOGY
 NMDC’s Transformational change brought about by axes of changes

❑ Upskilling its manpower through

❑ Implementation of fleet skill development program at
management systems, ERP projects, trainings and seminars
implementation, Enterprise data ❑ Culture building program for
hub implementation improving happiness and state-
Digital Improvement
Transformation of-mind of employees
Projects

Human
Resource ❑ Capacity enhancement and
❑ R&D Centre declared as a Investments
Expenditure augmentation
“Centre of Excellence” by UNIDO
❑ Renewal of mining leases
❑ Improvement of screening
❑ Diversification into steel and pellets
efficiency, utilization of waste
❑ Foraying into commercial coal mining
slimes for production of pellets,
❑ Exploring opportunities for strategic
improvement of flowability of
and critical raw materials assets
materials through chutes
such as Rare Earths, battery
minerals such as lithium & cobalt
Source: NMDC Sustainability Report 2018 37
RESPONSIBLE MINING
THE INNATE CULTURE

SUSTAINABILITY
Scientific Mining
Social Responsibility
Climate Protection
Biodiversity Conservation
Economic Development
 Transitioning Towards a Carbo-Neutral Economy

22%
Renewable Energy

975 MwH
INR 56.42 Crores
Energy Saved
Environmental Expenditure

113650 Nos. 27 Nos.

Plantation carried out Check Dams Constructed

36542 cubic meter.

Retaining Walls Constructed
Source: NMDC Sustainability Report 2018 39
THANK YOU