FAQ
Q1. What is the future prospect of this Company?
Ans. Gujarat NRE Mineral Resources is a resource prospecting Company primarily engaged in oil and gas exploration. We have two exploration licenses for prospecting in the Canning Basin region of Western Australia which is extremely potent with oil bearing wells in the immediate vicinity. The size of the tenements is more than 10,000 sq. kms. Preliminary studies too are quite encouraging. Considering this, and the fact that the Company has also acquired running coke plants in Gujarat, I am personally optimistic about the future prospects of the Company.
Q2. What kind of returns can be expected in GNMRL?
Ans. As for returns, let me be very specific. The exploration business is characterized by long gestation and high rewards. While exploring for and finally striking oil involves a long period of time and meticulous, back breaking work; the rewards, when they come, are naturally of a quantum that justifies the time and effort. Therefore, it is not right on my part to speculate on the kind of returns an average investor can expect. However, it may not be out of context to mention that an investment of Rs. 10 Lacs in 1994 in our flagship, Gujarat NRE Coke Ltd. is now worth more than Rs. 27 crores, a growth @ 45% CAGR over a period of 14 years.
Q3. When will the Company be listed?
Ans. I do not see the Company being listed before a period of two to four years. I am talking of this period because, this is the amount of time that will be required for us to be in a position to have some drilling results and ensure that we are in a position to offer ourselves as a lucrative opportunity to the investing community.
Allow me to take this opportunity to communicate a simple fact. As I have stated earlier, this is an oil play – a long gestation, high reward offer. We are making this Rights Issue with a view towards giving an opportunity to the loyal investors of Gujarat NRE group, many of whom have been with us since the inception. The idea is very simple – to accord an opportunity to these investors to bless the child in its infancy. Let me reiterate again, long term investors in our group have benefited the most, and I would like investors in this Company to benefit from such long term investment. Hence, the decision to keep this Company unlisted at present.
Q4. At what stage, on a scale of one to ten, are the exsploration activation currently?
Ans. I would say we are at about 6.5. All the major legal, environmental and statutory formalities have been complied with. All available 2D and geo seismic data have been compiled and the necessary infrastructure for the collection and interpretation are now in place. What will come next is detailed field studies and the 3D studies which will help us pin point the exact locations where to sink in the drills.
Q5. What are the prospects of striking Oil / Gas?
Ans. Based only on the data that is available to us, I can say that our team of geologists & geophysicists are extremely optimistic. The fact that the region is historically known for its oil bearing nature and that there have been oil discoveries in the immediate vicinity of our tenements also bolster this optimism. Suffice to say, as prudent investors, we are keeping our fingers crossed (and our lips shut).
Q6. What is the source of optimism?
Ans. The interpretation of the data that we have collected so far.
Q7. The move into met coke – will it not expose the company to the vagaries of commodity cycles?
Ans. Like all commodities, global prices of both coking coal and met coke have their own cycles and they are linked to the steel pricing cycle. True. However, being a sibling of India's largest independent coke producer with its supply firmly secured, the Company will have natural synergic benefits. Now look at the flip side – as we sell most of our products to the foundries and soda ash plants in Gujarat itself, we are not really affected by the down turn of the steel price cycle.
Moreover, Met Coke prices are currently at an all time high and on 1st January '08 China has increased the export tax from 15% to 25% thereby signaling a continued upward trend in Met Coke prices. As such, in hindsight, our decision to acquire three running coke plants with current monthly production at 9000 tons in Gujarat has been a well timed one as these Plants are already generating cash profits.
Q8. Will this move not cannibalise the group flagship GNCL's business?
Ans. On the contrary, we believe, the move will only strengthen the Group's presence in its core focus areas.
Honestly speaking, these small scattered coke making capacities were lying in the vicinity of Gujarat NRE Coke's plant in Gujarat and were suffering because of the uneconomic scale and their relatively smaller size. Each with their unique characteristics were too tiny for the flagship's involvement. However, the fact that they were located at our own backyard raised logistical issues and often acted as a hindrance, especially in matters relating to market dynamics and price realizations. These units however, when combined in GNMRL, are an invaluable asset, providing GNCL with a second line of effective and potent fire power.