Just started looking at Lloyd metals, very little info other than their PPT:
- They’re mining in a naxalite-prone area and getting 100%+ refund for any investment they make (don’t know for how long it is)
- They’re taking protection from MH state police force to run their mines, and paying the state for it.
- Police wasn’t available during last elections and mining had to be stopped
- Looks like they don’t have mining capability (or don’t know how to overcome naxal problem), hence they’ve signed up with a 3rd party to mine iron-ore for them
- No taxes – don’t fully know why and for how long it’ll be zero taxes. Are they deducting from earlier losses, in addition to recent adverse judgement for not supplying iron ore to erstwhile partner ?
- They’re predominantly merchant mining – selling iron ore, and a bit of DRI (sponge iron Q3 sales vol similar to GPIL Q2).
Don’t know how they made 23% operating income last 2 quarters with iron ore sales (77%) and sponge iron the rest (power sales is miniscule) – GPIL made 17% last quarter selling downstream products, but recently was making 28%+.
| Capacity | Lloyd’s now | Lloyd’s proposed | GPIL now |
|---|---|---|---|
| Iron ore mining | 3 MMTPA | 10 MMTPA | 3.05 MMTPA |
| Pellet | – | Unknown | 2.7 MMTPA |
| DRI/Sponge | 0.27 MMTPA | +72K MTPA | 0.5-0.6 MMTPA |
MTPA – Metric Tons Per Annum
MMTPA – Million Metric Tons Per Annum
Can’t understand the valuation difference – is market paying a premium for 10MT iron ore mining almost approved, and pellet/DRI/steel plants construction in-progress ? Expectation here is iron-ore sales at 3x can start from Q4FY23.
Maybe Lloyd’s is currently in a position where GPIL aspires to be 3 years down the line (mining output).
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