Iron ore producer NMDC shares gained as much as 1.7 percent
in morning on Monday after global brokerage house JP Morgan maintained
overweight call on the stock despite likely of Donimalai mine from the company.
The stock was quoting at Rs 102.25, up Rs 1.65, or 1.64
percent on the BSE, at 09:57 hours IST.
JP Morgan also expects the stock to hit a target of Rs 145
over a period of one year, implying a potential upside of 43 percent from the
last regular trade, though there could be potential loss of production due to
Donimalai mine, which could be near-term earnings risk.
The rise in stock could be on account of short covering as
it was down 8.5 percent last week after Karnataka Mining Secretary Rajender
Kataria warned NMDC that the state will cancel the lease of its Donimalai iron
ore mine if the state-owned miner refuses to pay an additional levy on the sale
of its ore.
Report said the state asked for higher share from iron ore
sales of NMDC's Donimalai nine and is open to auctioning the mine if NMDC
refuses to comply with the decision.
Karnataka’s threat to cancel the lease stems from a dispute
between NMDC, India's biggest iron ore miner, and the state government over its
decision to impose an 80 percent premium on ore sales from Donimalai.
Karnataka levied the premium when it renewed NDMC's license
for Donimalai on Nov. 2. NMDC contested the 80 percent premium in a November 1
letter to the Karnataka government that was reviewed by Reuters. The company’s
earlier license did not include the premium.
JP Morgan said Donimalai mine renewal issue becomes more
difficult and there could be a long legal route ahead and possibility of
production being lost.
On November 14, NMDC management told CNBC-TV18 that the
demand for premium on Donimalai mine is very high and resolving the issue will
be key to achieve sales volume target of 36 million tonnes. Donimalai mine is
not functioning currently, it said.
Last week, the iron ore producer reported a 24.6 percent
year-on-year decline in its second quarter profit to Rs 636.4 crore and tepid
0.7 percent growth in revenue to Rs 2,437.9 crore.
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