NSL Consolidated (ASX: NSL) has achieved another major milestone in its transition to producer, with the start of its ramp up to the targeted Phase 1 production capacity of 200,000 tonnes per annum from its Kurnool dry separation iron ore plant in India.
The company is targeting a staged ramp up to the full 1.5 million tonnes per annum by the end of 2014.
Importantly, NSL has received a number of expressions of interest from local steel mills in regards to offtake agreements for the Kurnool iron ore.
Kurnool represents an attractive iron ore supply solution for these steel mills due to its close proximity. NSL is currently negotiating potential agreements.
Cedric Goode, managing director of NSL Consolidated, commented on the milestone: “We have made significant progress to date at Kurnool within our communicated budget and timetable.
“Importantly we anticipate generating meaningful cash inflows during the quarter, with strong domestic prices and low ex gate costs, as we are now ramping up to full production.
“We are buoyed by the interest from local steel mills in securing offtake from our operations and are hopeful to execute one or more sales agreements in the near future.
“Our journey is only just commencing, as we progress through completing Phases 1 and 2, to utilising our experience and actual performance to lift NSL to its desired 1.5 million tonne per annum target by the end of 2014.
“This target being possible through bolt on wet and dry separation plants to increase output, together with sourcing additional ore feed through strategic acquisitions and supply agreements.”
Full production ramp up
The ramp up process during the quarter includes expanding equipment and labour at the Mangal mine, starting up the Kuja mine and recruiting and training additional dry plant operators.
NSL is targeting an initial steady production rate of 200,000 beneficiated tonnes per annum from the first phase of operations at the Kurnool stockyard, with beneficiated grades of up to 58% achieved earlier this year.
A 58% iron ore product sells domestically for about US$70 to $93 per tonne, meaning that at 200,000 tonnes per annum production, NSL is looking at first phase revenue of $14 to $18.6 million.
In Phase 2 of the project, NSL aims to ramp up production to 400,000 tonnes per annum at higher grades of between 58% and 62% iron. First sales are anticipated in the first half of 2013.
NSL is targeting production of 1.5 million tonnes per annum by the end of 2014, which is achievable through strategic acquisitions and supply agreements.
NSL is the only foreign company to own and operate iron ore mines in India.
The Kurnool stockyard in southeast India is a 12 acre industrial site located adjacent to NSL’s existing Kuja iron mine in Andhra Pradesh. The stockyard will source its iron from the nearby Mangal iron ore mine.
Indian steel consumption on the rise
India is the world’s third largest iron ore exporter and has low production costs and well established infrastructure. Iron ore is a large but fragmented industry with small-scale operations.
This feeds into a strong domestic market for steel, forecast to increase substantially.
India's leading steel producer JSW Steel forecast recently that Indian steel consumption is seen rising to about 130 million tonnes in 2020 from about 67 million tonnes this year as growing incomes and urbanisation drive demand.
JSW said it expects steel consumption will be close to 70 million tonnes this year and about 80 million tonnes in 2012.
The country is selling iron ore and other iron products to Chinese and Asian customers that are seeking supply diversification, and is also the world’s fifth largest steel manufacturer with an annualised growth rate of 10%.