Gujarat Mineral Development Corporation Ltd (GMDCLTD) Q2 FY23 Earnings Concall Transcript

Gujarat Mineral Development Corporation Ltd (NSE:GMDCLTD) Q2 FY23 Earnings Concall dated Oct. 19, 2022

Corporate Participants:

Roopwant Singh — Chairman and Managing Director

Rajat Das — General Manager, Marketing and Sales

Analysts:

Amit Dixit — ICICI Securities — Analyst

Venkatesh Subramanian — LogicTree Investment — Analyst

Bajrang Bafna — Sunidhi Securities — Analyst

Unidentified Participant — — Analyst

Subham Agarwal — Aequitas Investment — Analyst

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Aman Madrecha — Augmenta Research Private Limited — Analyst

Falguni Datta — Jet Age Securities — Analyst

Riken Gopani — Capri Global — Analyst

A. K. Iyer — General Manager, Accounts

Shreyans Badoni — Societe Generale — Analyst

Presentation:

Operator

Good afternoon, ladies and gentlemen. I am Michelle, the moderator of today’s call. Welcome to the Conference Call of Gujarat Mineral Development Corporation Limited arranged by Concept Investor Relations to discuss its Second Quarter and Half Year Ended September 30, 2022.

We have with us today, Shri Roopwant Singh, IAS, Managing Director; Shri L. Kulshrestha, Chief General Manager and Chief Financial Officer; Shri H. K. Joshi, Senior General Manager, Technical; Shri Swagat Ray, General Manager, Project Planning and Development; Shrimati A. K. Iyer, General Manager, Accounts; Shri Rajat Das, General Manager, Marketing and Sales; Shri J. N. Dave, General Manager, Power; Shri P. R. Shah, General Manager, Geology; and Shri Joel Evans, Company Secretary.

At this moment, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. Please note that this conference is being recorded.

I would now like to hand over the floor to Shri Roopwant Singh, Chairman and Managing Director. Thank you and over to you, sir.

Roopwant Singh — Chairman and Managing Director

Thank you so much, and we welcome all the participants we could be interacting with. We thank you for the interest in the second quarter earnings and the results shared so far.

Let us — I have my request to the moderator, we may begin or do we need a round of introductions from all those who are in the room? I think.

Operator

Sir, as you say. If you want, we can begin with the Q&A session.

Roopwant Singh — Chairman and Managing Director

Yes. Let’s us begin please.

Questions and Answers:

Operator

Okay, sir. Thank you, very much. We will now begin the question-and-answer session. [Operator Instructions]. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Dixit from ICICI Securities. Please go-ahead.

Amit Dixit — ICICI Securities — Analyst

Yeah. Good afternoon, sir, and thanks for the opportunity. I have three questions. If I may. The first one is with respect to the production, so, sales guidance. Now given that Q2 was a little bit subdued quarter because of heavy rainfall, would you be interested in revising your guidance downwards for the year? That was the first question. The second question is essentially on the other expenses part. So, since you know now the the prices of crude and derivatives are moderating, so do we expect that this cost on per tonne basis has peaked out? Number three, on the rear earth opportunity, if you could shed some light on where we are, I mean, regarding floated RFP, so what is the progress on that. That’s it. Thanks.

Roopwant Singh — Chairman and Managing Director

Amit. Amit, could you repeat the second question please?

Amit Dixit — ICICI Securities — Analyst

Yeah. So the second question was on other expenses essentially. So given that now prices of crude and derivatives are coming down and our other expenses are dependent on these prices, so do you see that that the other expenses per tonne have peaked out? I mean, this was the peak costs that that we even see. Yeah.

Roopwant Singh — Chairman and Managing Director

Note. Noted, noted. Thank you. Well, Amit, thank you for the interest. I would not like to repeat what we have already said and what is already known regarding the muted second quarter because of the monsoon. Yes, it has had an effect on our ambitious plans to touch 10 million tonnes this year. There would be a downward revision, but you should expect something in excess of 9 million tonnes very comfortably.

Number two. As far as the other expenses are concerned, the fixed expenses do remain the same. But there is a positive correction in the variable expenses because of the easing of the crude prices and that has had a beneficial effect. Production continues to remain high, prices continued to remain stable, so that works in our advantage and to the advantage of customers and our contractors also.

As far as the REE opportunity is concerned, we had engaged [Indecipherable] McKinsey to prepare strategic roadmap for taking this opportunity. That strategic roadmap is ready. It is an internal document, I would not be able to share so much. But whatever the findings, the prognosis, the strategy, everything is very heartening and very positive.

At the same time, the modality needs to be fine-tuned and approved by government and we still need to secure the asset in the name of the SPV, which we seek to further equip. And at the same time, the third development there is, we are working on Scoping study, which is essentially a technical examination and evaluation of how this asset would be able to capture most value for us.

You would have seen that RFP out in the open. It is on our website. The idea is to get one of the best international firms, who does this kind of a Scoping study. So that is in the final stages of being awarded, but we would be able to conclusively say something on this once once we are able to get our strategy through from the government, hopefully in this financial year. Thank you.

Amit Dixit — ICICI Securities — Analyst

Great, sir. Thanks so much for the elaborate answer. That’s a very helpful and all the best.

Roopwant Singh — Chairman and Managing Director

Thank you so much.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management will be able to answer questions from all participants in the conference, please limit your questions to three per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Venkatesh Subramanian from LogicTree Investment. Please please go ahead.

Venkatesh Subramanian — LogicTree Investment — Analyst

Yes. Mr. Singh, good afternoon. Thank you for the nice performance actually despite a subdued quarter. And what is heartening is to hear that you actually have a roadmap in-place and we are on course. So, two questions, sir, or actually the moderate says one questions, I’ll ask one. It’s a big-picture question, sir, which is if GMDC is to perform at the same level where we are doing currently with all things being in the same place, what kind of roadmap or what kind of vision do we have over three to five-year period? And if this is rear earth opportunity materializes and the lignite production also goes up according to the plans, what kind of scenario are we expecting, sir? Basically, what kind of alpha are we generating from the current situation, sir? Broad numbers, I’m not going to hold you to this, but just to understand what the management thinking is in terms of the next three to five years, sir.

Roopwant Singh — Chairman and Managing Director

Venkatesh, sure. Let me answer your question by — in a — by putting the RW opportunity at the back.

Venkatesh Subramanian — LogicTree Investment — Analyst

Okay, sir.

Roopwant Singh — Chairman and Managing Director

Please judge us on what we are currently best at our ambitious plans regarding that, which is lignite. Please also [Technical Issues] our other opportunities in the mineral space beyond lignite and I’m not talking of RW [Technical Issues] enable us to take a better view on this and to evolve the strategy. The management has embarked on a special project.

The project’s name is Project Shikhar [Phonetic]. It’s an internal strategic transformation initiative for the organization. Under this project, we have engaged metals washing [Phonetic] consulting group. The idea is to help us optimize our current lignite operations, improve processes, cut cost and improve the customer experience. At the same time, plan to significantly expand our lignite production capacity in the coming three to five years. We plan to do groundbreaking in fixed mines in the coming two years. And in the three to five years, we expect them to reach a sustainable rate of production, probably not the peak rate, but a sustainable rate of production. And at the same time, there are a lot of missed or dormant opportunities, which were there in the company. We have assets in manganese, we have assets in copper, we have an underperforming bauxite asset, we have huge reserves of limestone and silica sand. All these opportunities, we want [Technical Issues] reach the logical conclusion. And if you watch us in the coming three quarters, you would see a lot of RFPs on awarding new work to contractors for different minerals and you would also see a lot of activity, where the company is looking at the right kind of partners to help capture value in these minerals.

Other resources that are at hand and for some are modest and that for some they are in NIMs. So, that is our vision. In five to seven years from now would be a significantly larger lignite player and we would have a bouquet of other minerals also, which will be contributing significantly to our [Technical Issues] and bottom line. Bottom line probably will take slightly more because, a lot of CapEx would have to be pumped in these three to five years. In seven years, the ambition is to ensure that besides lignite, we get at least 40% to 50% of our revenues from other opportunities.

So have I answered your question Venkatesh?

Venkatesh Subramanian — LogicTree Investment — Analyst

Yes, sir. Fantastic. I did in fact. — I was looking-forward to a quantification in terms of numbers, but I will skip that for a later point, but one supplementary question is that. As GMDC, I know that there’s a lot of potential under the earth — as an organization, sir, considering that you have taken-up the mantle. As an organization, do you think you have the human potential and the culture within the organization to take it to the next level?

Roopwant Singh — Chairman and Managing Director

Yes. You have — that’s a very — a very sensitive point. And most of my colleagues who are sitting here are very senior General Managers, all of them have a smile on their face. This is a challenge. And this will be a challenge as we expand to newer vendors where we do not have expertise.

Venkatesh Subramanian — LogicTree Investment — Analyst

Right.

Roopwant Singh — Chairman and Managing Director

So, that is a challenge. In the coming quarters, we are going to develop this opportunity and look at partners. In the coming two years, we will build internal capacity so that we’re able to handle these assets. So, this is the plan. People don’t grow on trees. People have to be recruited and nurtured.

Venkatesh Subramanian — LogicTree Investment — Analyst

Right, sir.

Roopwant Singh — Chairman and Managing Director

And partners, yes, relatively they grow on trees. We have to find the right partner. So, one thing we’ll do early on. And the second thing is an initiative, which we should be kicking-in, in the next financial year. We are focusing on growth at the moment. And the next financial year, we are going to focus on our core. That is our people who we are. I think, there are more smiles in the room.

Venkatesh Subramanian — LogicTree Investment — Analyst

Sir, thanks. I think it’s it’s a good thing that are bringing up a smile during Diwali, so wish you the best. I will be in touch sir and will join the queue. Thank you, sir. Yeah.

Roopwant Singh — Chairman and Managing Director

Thank you, Venkatesh.

Operator

Thank you. The next question is from the line of Bajrang Bajrang Bafna from Sunidhi Securities. Please go ahead.

Bajrang Bafna — Sunidhi Securities — Analyst

Congratulations to the company for the good performance despite monsoon headwinds and hope that in next two quarters we’ll cover the most what we lost in the last quarter. So sir my first question pertains to, you have already you tried to answer the long-term strategy for next five seven years how the Company is going to look like. But so to say, if we try to understand from, let’s say, next two years perspective, apart from lignite where you are going to expand in terms of next six mines, which are the low-hanging fruits, where some work has already been done and we can see some sort of revenue flowing in or kicking in like your multi metal project or the limestone project or maybe bauxite or silica. So which could give us some sort of feel [Phonetic] for the revenue as well as the bottom line — may not be FY ’24, but if we can sense something that we are confident enough to get something on FY ’25 basis will be really helpful.

And my second question, sir, pertains to we off-late have seen that come sort of — no softening in the coal prices also, where the NLC NCOs [Phonetic] the companies have indicated that e-auction volume had not been picked-up, which has been done at the higher prices earlier. So, how are you seeing that particular thing going precisely into next two-three quarters, where we are seeing some sort of softening in the crude oil also. So, some sense on that will be really helpful, sir. So, these are the two questions.

Roopwant Singh — Chairman and Managing Director

Thank you, Bajrang. Bajrang, let me answer your second question first. Yes, there has been a softening, but can I rephrase it? I think, there is more maturity now compared to the highly volatile months in the previous financial year. Even there was a dip in prices in August, but it has a slight correction and I think there is maturity there.

So, that is why we have not taken a price rise in this financial year. But at the same time, what we have done is, we have focused on better targeting the pricing structure to the needs of our customers. From a simple two-stage small and large classification, we have moved to M — medium — micro, small, medium and large and super-large category, so that we are able to pass-on that advantage or differential pricing to the right kind of enterprise. And the micro units, most of them are very small players. We have introduced a system of discount below the base placed. So, we have moved on to a consolidation phase with regards to the relationship with our customers. And even if — there if there is a further correction in coal — international coal prices, we are mindful of that. We routinely track them.

We would not be averse to tweaking our prices depending on the production and the consumption centers.

And answering your first question, well, we are a mining Company. We don’t have any low-hanging fruits. We do not have any short-term remedies. We generally do not have quick fixes. Of the kind, when it comes to looking at larger projects. But even if you say there the low-hanging fruits would be the disposing the stock of bauxite that we have, disposing the huge stock of. Limestone that we have and disposing the inventory large stocks silica that we have.

To enable this, we have undertaken studies first. Then extensive sampling and testing at international labs. And now, we are going to rollout an exploratory method of beneficiation. If this works out, this will be rolled out at later stage so that we are able to customize our product to the requirements of the customers, so this would be the low-hanging fruits. But in the coming two years, you would see the benchmarks being laid for the strategy that we — I spoke to Mr. Venkatesh in the previous call. And please watch out for RFPs for awarding work and looking for partners in the coming three to four quarters.

Bajrang Bafna — Sunidhi Securities — Analyst

Got it. Thank you. Thank you very much sir, I’ll come back-in the queue for follow-up questions. Thank you, sir.

Operator

Thank you.

Roopwant Singh — Chairman and Managing Director

Thank you.

Operator

The next question is from the line of Ashish Kejriwal [Phonetic] [Indecipherable] Wealth Management. Please go ahead.

Unidentified Participant — — Analyst

Yeah. Hi. Good evening, everyone. Thanks for giving an opportunity. Sir, my question is related to lignite. What we understand is, our volume from I think two mines Rajpardi and Tadkeshwar, we are going to be exhausted in next two years and I don’t know whether at time any new mines will come into operation or not. So, my question is, where we are going to peak out in terms of volumes for next two years and five years?

Roopwant Singh — Chairman and Managing Director

Only one question? Okay.

Unidentified Participant — — Analyst

No. Second question is, I think, in your previous question you said that no if global coal prices falls, we can tweak prices. So, are we at parity to land at cost of imports or still we are at a discount, which normally is on a higher side as compared to earlier one. And lastly, we have seen lots of to-and-fro in lignite power plant in terms of PLF, in terms of consistent profit making. We are not seeing that for last a decade or so. So, what are the plans which we are having where we can get some confidence that it will be a consistent profit making in future. Thank you.

Roopwant Singh — Chairman and Managing Director

Okay. So, the power plant. Things have improved. Daily cash burn has gone down, but the kind of improvement that we have envisioned is going to take four to six quarters, because there has been — there has been a total lack of investment over the life period of the plant, till now so if we have to look at better performance it needs a major overhaul, a significant CapEx and a change in the way the electricity regulator deals with us. Thankfully there has been positive movement on all of these fronts.

As we get a commission on capital infusion and a better relationship with the power regulator, you should see things happening. And at the same time, efforts to reduce the cash burn are underway. As far as the parity issue is concerned, we are not at parity. We are — in calorific value, we are an inferior product compared to [Indecipherable]. But at the same time, lignite with its physical formation and the way it is mined and directly deliver to the consumer, it has a lot of acceptance in our — in our in the set of our consumers, so we maintain a parity and we are — currently, we’re holding on to that parity.

And as far as Rajpardi and Tadkeshwar are concerned, Tadkeshwar is not going to exhaust. Tadkeshwar had a major health, safety issues because there was sliding in the mine in — in the month of December last year, so we have — at the moment, we are going to engage the best of line consultants to ensure that we are able to take care of whatever happened and resume production to higher-level there. This mine was not going to get exhausted soon.

As far as Rajpardi is concerned, yes. Volumes at low. This mine would go towards closure. But at the same time, by the time it goes in closure, there is going to be a project which goes by the name of Damlai, which is going to come up adjoining to this project, so we should not see an excerption [Phonetic] or a situation of supplies from that place. The project will evolve combined into another. These are our plans and our ambitious plans are incoming three to five years. We seek to supply most satisfying to — half [Phonetic] the needs of [Indecipherable] environments of the State of Gujarat.

Unidentified Participant — — Analyst

So sir any number which you can provide that what the maximum, which we can do keeping in mind a aversion of Rajpardi and coming on the line [Phonetic] numbers.

Roopwant Singh — Chairman and Managing Director

An initial view for the company in the coming three to five years is to reach a production of 13 million to 15 million tonnes.

Unidentified Participant — — Analyst

Okay. And sir, lastly, is it possible to guide what kind of CapEx we have done in first half and total estimated CapEx in FY ’23?

Roopwant Singh — Chairman and Managing Director

Planned CapEx or which we have already incurred?

Unidentified Participant — — Analyst

No, no, total CapEx which will come to our cash flow in FY ’23 and first half what we have done.

Roopwant Singh — Chairman and Managing Director

So we have an indicative plan of approximately slightly in excess of 600 crores which will primarily be used for land acquisition and to lignite beneficiation plants. Coming year if condition to our aggressive pursuing of the new lignite projects, this CapEx would go up significantly, can double also and can go beyond that also. We have sufficient [Indecipherable].

Unidentified Participant — — Analyst

My question was what we have already done in first-half FY ’22.

Roopwant Singh — Chairman and Managing Director

No, no, nothing much has been done, because we are waiting to do hopefully in fourth — third to fourth quarter hopefully this land acquisition issues would come to — ahead and it would get clogged in their.

Unidentified Participant — — Analyst

Yeah. Thank you sir and all the best.

Roopwant Singh — Chairman and Managing Director

Thank you, so much.

Operator

Thank you. The next question is from the line of Subham Agarwal from Aequitas Investment. Please go ahead.

Subham Agarwal — Aequitas Investment — Analyst

Yeah. Thank you for the opportunity. Sir, my first question is with respect to the volume. So, on the basis of various operational and statutory constraints that you mentioned, I wanted to understand what is the maximum that we can produce per month currently. And secondly, again, you touched on Damlai coming up once Rajpardi goes out, so what’s the rated capacity of that and what will be the next mine after Damlai that is expected to come up? And if you can also mentioned the time when it will happen. Thank you.

Roopwant Singh — Chairman and Managing Director

Okay. So. The first thing that you should see happening is capacity ramp-up in Bhavnagar those RFPs are live and we would go up to 5 million tonnes near from Bhavnagar. This would be a significant production raise, number one. Second, you should look at which would come into production is, Lakhpat mine in Kutch. Thereafter, you should expect Damlai to come into production. Thereafter two more projects in South Gujarat. We are yet to staggered their operationalization. This is how it is going to rollout. And then after that, two more projects in Kutch District.

And I would not be able to do justice to your question of per month, because the mine-to-mine, the way the geology is, the way the mineral gets exposed, there are — there are challenges and changes. But if — please look at our annual figures, we shall be exceeding what we did last year. And like I said earlier, please look at us in excess of 10 million tonnes this year.

Subham Agarwal — Aequitas Investment — Analyst

Okay. Sir, and my second question was on realization. So, you have already touched it briefly, but I further wanted to understand. So, basically the current availability of coals from various the international and domestic market in your addressable sector, how do you view or what’s your view on the realization for rest of the year?

Roopwant Singh — Chairman and Managing Director

Supposing things stay as it is, this current delta continues, so the realizations — our better benchmark would not be the second quarter, but judge us on how we performed during the first quarter, so that is the kind of performance we should be looking at.

Subham Agarwal — Aequitas Investment — Analyst

Okay. Thank you. Thank you for answering my question.

Roopwant Singh — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Hitesh Chheda [Phonetic] from Lucky Investment Managers [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Sir, one clarification and one question to one of the participants. Did you mention the vision four, five-year of 13 million to 15 million tonnes or 30 million to 50 million tonne. The line was not audible.

Roopwant Singh — Chairman and Managing Director

13 million tonnes. Okay. 13 million to 15 million.

Unidentified Participant — — Analyst

Okay. My second question is, could you give us the trend in realizations on lignite, blended realization for quarter one and quarter two? And what are they running at now? And the slope versus the imported coal for the, same calorific value, how much discount we are still running at?

Roopwant Singh — Chairman and Managing Director

So, for the discount and delta, there is not a — there is not a straightforward answer, because production center and consumption centers are different, but it ranges in the range of almost 1. — if you look at kilocalorie wise, so the imported coal landed price would be in excess of INR2 kilocalorie. And our product would be in the range of INR1.5 to INR1.7.

Unidentified Participant — — Analyst

1.7 divide by 2, so so what.

Roopwant Singh — Chairman and Managing Director

So, this is landed cost, so this is not the realization that is to us, but this is what ultimately the customer pays.

Unidentified Participant — — Analyst

Okay.

Roopwant Singh — Chairman and Managing Director

But if you look at only fuel, the delta would further increase by 20 basis points, 25 basis points.

Unidentified Participant — — Analyst

Okay. And the realization grade [Phonetic] if you could just tell us quarter one, quarter two and now?

Roopwant Singh — Chairman and Managing Director

So it is the same realization is broadly in the same range. It is in the range of around INR1,500.

Unidentified Participant — — Analyst

So you haven’t taken any price increase, what was the last price circular that you had said?

Roopwant Singh — Chairman and Managing Director

This was in the last financial year. This year what we have focused on is not price rises we have focused on better customer segmentation and improving our relations for long-term.

Unidentified Participant — — Analyst

But that circular segment, customer segmentation did not result in any realization benefit?

Roopwant Singh — Chairman and Managing Director

No. That was not the intention. We have to onboard the customers to the new regime while some people would have got an advantage of moving to a lower bracket many others move to the higher bracket, so we did not fiddle with the price at that time.

Unidentified Participant — — Analyst

So all price increases taken in FY ’22, the realization is about 1,500 to 1,600 per tonne.

Roopwant Singh — Chairman and Managing Director

Yes.

Unidentified Participant — — Analyst

And this 13 million to 15 million tonne production target that factors the production rise from Bhavnagar, Lakhpat, Damlai, any of those mines coming in and production picking out at Rajpardi, [Phonetic] right?

Roopwant Singh — Chairman and Managing Director

Yes.

Unidentified Participant — — Analyst

And this is a three-year number, right, or a five-year number.

Roopwant Singh — Chairman and Managing Director

Three to five years.

Unidentified Participant — — Analyst

Okay. Thank you very much.

Roopwant Singh — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Vaibhav Badjatya from Honesty and Integrity Investment. Please go ahead.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Yeah. Hi, sir. Thanks for providing the opportunity. So, just two questions that I have. One is that, Gujarat, there will be elections in Gujarat very soon, so just wanted to understand in the model code of conduct will be applicable to price hike that we take or the price changes that we take or it will not be applicable. That is the first question. Second would be, just wanted to understand that on the supply of lignite side, which specific mines are — were impacted a lot last quarter, basically the quarter-ending September. So, just wanted to understand these two things.

Roopwant Singh — Chairman and Managing Director

The second question, there was some disturbance. Could you please repeat the second question?

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Yeah. So, the second question was I just wanted to understand due to the excessive rain, which mines — which pacific minus were impacted.

Operator

I’m sorry to interrupt. Mr. Badjatya, could you please keep your mouth piece a little farer from your mouth and speak?

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Okay. So I wanted to understand that under which — which mines.

Roopwant Singh — Chairman and Managing Director

Understood. Understood.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Yeah, which mines was impacted due to rains, which specific mines.

Roopwant Singh — Chairman and Managing Director

Well, however. all mines, all throughout three months. Some more, some less, but all the degrees of more and less are when compared with — severely affected. So, all mines were affected. And, yes, this ours is a listed company, but still 74% being held by the Government of Gujarat. It is a PSU and it is owned by the government of Gujarat. We will — not only will the model code of conduct apply on us, we will be mindful of the code during the elections.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Okay.

Roopwant Singh — Chairman and Managing Director

But as it is, prices have more or less stabilized. And we are operating at a comfortable differential, so. And this exercise would last for four weeks, so it should not have.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Right.

Roopwant Singh — Chairman and Managing Director

And this — the model code does not affect operations in any way at all.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Right. Sir, just a small follow-up. So as you said due to rain most of the mines were impacted. But if you see the percentage wise fall in the mine wise sales volume, it’s been excessive Surat clusters. The mines which supply to Surat cluster, there has been excessive very hard downfall there. So, sir, do you think that there is demand issue as well that the Surat cluster is facing or otherwise [Indecipherable] there would there would be very sharp decline in Surat cluster and all the [Indecipherable].

Roopwant Singh — Chairman and Managing Director

Vaibhav, yes, Surat was affected most critically, because 50% of the product goes there. And if you look at Surat and its vicinity the percentage goes beyond 60%. So, whatever. Happens will have an overwhelming effect on Surat. So that is how it was. And things were pretty great, the production was very low. And it mines — and I now speak with the hat on where seek the welfare and safety of my staff, my officers and my contractors. Things were very unsafe during these three months, but we have asked them with acceptable rate of production with none incident at all.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Okay. Okay, sir. That’s it from my side. Thank you.

Operator

Thank you. The next question is from the line of Aman Madrecha from Augmenta Research Private Limited. Please go ahead.

Aman Madrecha — Augmenta Research Private Limited — Analyst

Hello, sir, and thanks for the opportunity Sir, as you you mentioned that you have moved into grade and supplying to to large and micro level organization. And you mentioned that you’ve introduced the discount below the base price, so just can you help us understand like what percentage of the lignite goes at the discount below the base price and like what percentage goes to the large or the — the larger organization if you have that breakup.

Roopwant Singh — Chairman and Managing Director

Yes. It is there, can I request my General Manager Marketing and Sales to give you a perspective on what goes to the micro sector and what goes to the two large categories.

Aman Madrecha — Augmenta Research Private Limited — Analyst

Yes.

Roopwant Singh — Chairman and Managing Director

Mr. Rajat Das?

Rajat Das — General Manager, Marketing and Sales

Good afternoon. Actually by virtue of this segmentation, maximum volume goes to the micro sector and thereafter that will be followed by small and medium. And large one and large two are the top bracket and we are actually in the the industries which is having higher lignite congestion capacities. So, the clarifiction was basically followed with respect to the government’s guideline of MSME segmentation. So, that’s why it was a long pending reforms and that was undertaken during last few months. So, I think, I can able to answer.

Aman Madrecha — Augmenta Research Private Limited — Analyst

Yeah. And sir, in addition to this. I just wanted to understand like what is the difference in the realization if you are supplying to larger player as compared to a micro player. Because if you are looking at there different realization if I — like in quarter one with the realization on a blended level of around INR4,600 to INR4,700 per tonne and this quarter the realizations dipped down to around INR3,700 per tonne. So, it might be a factor of monsoon and the prices softening down, but can it be a factor because we are supplying to medium and micro-level organization that discount below the base price.

Roopwant Singh — Chairman and Managing Director

So, actually there is a difference of around INR120 between micro and the largest segment that is L2 customers. And small, medium and large ones fall in between. So, the difference is around INR120 per metric tonne.

Aman Madrecha — Augmenta Research Private Limited — Analyst

Okay. The difference is just around INR120 per metric tonne. Okay, okay. Thank you that’s all from my side.

Operator

Thank you. There is, a follow-up question from the line of Venkatesh Subramanian from LogicTree Investment. Please go ahead.

Venkatesh Subramanian — LogicTree Investment — Analyst

Yeah. Sir, just taking off from previous participant’s question on realization. So, is it fair to assume, sir, if I only take the current lignite volumes. And the other minerals as it comes along it’s a bonus. If I pegged it at a 10 million tonnes and the realization at INR1,500 per tonne, so are we expected to continue to post similar kind of operating profits over the next few quarters. And that’s my first question. And second, out of this, how much will — how much CapEx would you need, sir, for the next two, three years. I’m just trying to figure out whether will be able to maintain the same dividend payout.

Roopwant Singh — Chairman and Managing Director

Well, at the moment, lignite is a hot commodity. So whatever you produce gets sold. Our challenge with bauxite is slightly different, what we were producing was not getting sold. So, we will start producing that which gets sold. So, that would also contribute to volumes. CapEx, whatever estimation we’ve made this year is very modest, because many of the preparatory activities. The lion’s share would go to land acquisition.

As you know the entire process is fairly long run out, and the process was initiated during these financial years only, so we should see it clocking in towards the end of this year and a lot of it in the next financial year, so it would easily be double of what we are. And it also depends on our progress on on boarding new contractors and hitting ground in other projects so that will — that is another positive uncertainty to which we would have been answer by the end of fourth quarter.

Venkatesh Subramanian — LogicTree Investment — Analyst

Right, sir.

Roopwant Singh — Chairman and Managing Director

But we have — we have ample — we have ample reserves and other — we have our own planning, but we have onboarded BCG to help us to wait our capital plan and to prioritize them also. So, you have a competent team of experienced general managers from GMDC to do this capital planning and you have a team from the best consulting firm in the world, one of the best contracting firms to get it and help that team prioritize it.

Venkatesh Subramanian — LogicTree Investment — Analyst

Thank you. Thank you very much. I appreciate it.

Operator

Thank you. The next question is from the line of Falguni Datta from Jet Age Securities. Please go ahead.

Falguni Datta — Jet Age Securities — Analyst

Hello.

Operator

Kindly. [Speech Overlap]

Roopwant Singh — Chairman and Managing Director

Yes, Falguni.

Falguni Datta — Jet Age Securities — Analyst

Yeah. Good evening, sir. Sir, I have two questions. First is on the realization, which you mentioned is around 1,500 per tonne. But if we divide the value of lignite with the volumes, we come at a — and excluding this captive sales to the thermal power plant, we come to a realization of 4,300 per ton about, so why this difference in the number?

Roopwant Singh — Chairman and Managing Director

Ma’am there are — ma’am this is. I think, what we have quoted was the margin. This is the total realization. I believe, that is what is understanding gap that we have between us. So you are right and what we quoted was the realizations for the company and your second question.

Falguni Datta — Jet Age Securities — Analyst

No. So, 4,300 was the realized — is the realization, right? What is this number of 1,500?

Roopwant Singh — Chairman and Managing Director

It is our margin per tonne. Okay. And sir… Which is not flat, which we have said it is approximately 1,500 depending on mine, depending on center, it varies.

Falguni Datta — Jet Age Securities — Analyst

Okay, sir. And the second question is on your rear earth opportunity. By when would you be able to give a broad quantitative number on the — of the top line that you could be doing from this rare opportunity of yours?

Roopwant Singh — Chairman and Managing Director

Ma’am I’ll — I can only say at this moment our strategy report accounts very good numbers, very impressive numbers, but it is conditional to a slew of Privileges permissions that we need from the government. In securing that asset and taking it forward. So we will be — I will not be able to — I would not like to present a rosy picture of a Miraj, which is too far away. We think it is in our grasp and — but allow me some time to share those numbers with you. We have those numbers, they’re very good.

Falguni Datta — Jet Age Securities — Analyst

Fine, sir, and sir one final question is on the pricing of coal that we follow to set our price for our lignite, so how has that behaved over the last one month? Our benchmark against which we benchmark our lignite.

Roopwant Singh — Chairman and Managing Director

Our benchmark. Ma’am, we — what we are following is landed cost approach, because the production center in the consumption centers are spread over the entire State of Gujarat. So among the rationalizations that we did in the previous quarters was to ensure that the landed cost goes down by ensuring better alignment from the nearest mine so that was one-off which work to the advantage of both the customer and the company more stock started getting lifted.

So, that was what we did. This year, we started focusing on better targeting so that in future if we have to take corrections in prices, it can be upward, it can be downward and we have to sustain or generate revenues for our future growth strategy we have used these this quarter of lull introduction to for better segmentation.

Falguni Datta — Jet Age Securities — Analyst

At this realization that we have 4,300-odd, which is the value which we show for nine, so that excludes transportation cost, right? That is the ex-mine realization. I presume.

Roopwant Singh — Chairman and Managing Director

Yes, madam. Yes.

Falguni Datta — Jet Age Securities — Analyst

And sir, please if you could permit me one more question which is on the — do we have a plan orders in mind that we would be giving to so percentage discount to the micro customers of ours. I mean, do we have a particular percentage number in mind or how does it work.

Roopwant Singh — Chairman and Managing Director

Ma’am, [Foreign Speech] per tonne it is at 10 rupees to the base price.

Falguni Datta — Jet Age Securities — Analyst

Okay. Okay, sir. Thank you. That’s all from my side. Thank you so much.

Roopwant Singh — Chairman and Managing Director

Thank you very much.

Operator

Thank you. The next question is from the line of Riken Gopani from Capri Global. Please go ahead

Riken Gopani — Capri Global — Analyst

Hi, sir. Thank you so much for the opportunity I have two questions, sir, first one is on the existing realizations that we have disclosed. I see that the volatility in realizations of the Mata No Madh Mine is over the last two quarters. Very different compared to the other. Can you, help us understand that why is it, you’re not seeing that kind of a swing in realization and what is the way forward for that?

Roopwant Singh — Chairman and Managing Director

Please allow me to share this question forward this question to this Mrs. Aupama Iyer, Iyer, General Managers Accounts.

A. K. Iyer — General Manager, Accounts

Hello Mr. Gopani. It is it is Anupama Iyer. At least Mata No Madh — sir for Mata No Madh, my new supply to our power plant as well as power plant of [Indecipherable] also depending on their requirements our — and we supply them on the concessional basis. If their requirements are more, our realizations coming on from Mata No Madh mine. And if the requirement is less than the supply in the market more the realizations are better. There is a change in the realization of Mata No Madh project.

Riken Gopani — Capri Global — Analyst

Okay. So, this quarter basically there would have been less supply to the power plant, which is why the realization has improved. But on an overall annualized basis of that, I mean last year we did about 3.5 million tonnes from this mine, which is external supply, is there a number that you can share as to how much can it go up or down for the power plant supplies.

A. K. Iyer — General Manager, Accounts

It depends on the — how much power plant runs, because our power plant is also in this one. And the other is that.

Roopwant Singh — Chairman and Managing Director

Can answer that? Well, Gopani, the plant hopefully in the coming quarters would be taking periodic breaks for getting healthy and ready so that it could run at. At sprinting space him. In five to six quarters from now, so that would affect. That would that is in fact an opportunity to realize capture value from customers.

Riken Gopani — Capri Global — Analyst

In the market, Yes. Understood. Okay. Just one follow-up question to the comment you made in the earlier section about the CapEx that might need to be done for the power plant, which you said that could be significant. If you could outline what this could be and by when would you be sort of ready to spend this CapEx on the power plant?

Roopwant Singh — Chairman and Managing Director

To spend money on the plant, we need — we have. We need to seek permission of electricity regulator. We have submitted a petition for a CapEx in the range of, INR300 crores. Most of it will be a pass-through for the company, so once petition gets approved, that CapEx infusion would start, but it would not have an effect on our bottom-line, because it would be a pass-through for us.

Riken Gopani — Capri Global — Analyst

Understood, sir. And just one last question with regards to the mines that you’ve mentioned will come up in the next few years which is Bhavnagar Lakhpat and the Damlai, mines. Would, I mean, I see that you have very differentiated quality of coal and therefore realization vary significantly between Mata No Madh to Rajpardi to all so the newer mines which are coming up what is your assessment of the quality and, therefore, how does it influence our overall realization over the next few years.

Roopwant Singh — Chairman and Managing Director

I can’t have my view on the quality. So this geology and whatever quality I broadly integrate Bhavnagar is not a new project, but Bhavnagar is working for a major expansion, so there is no new asset there. We we are going to work on the quality of that that lignite it is fairly good. It is fairly good calorific value, but it has the infusion of pyrite, which we will seek to remove.

As far as the assets which are going to come up in Kutch. so the calorific value is more or less at par with the existing projects that is Mata No Madh project. The one which are going to come up. In South Gujarat are bothering our existing mines so, they would be in that quality so heartening news one is adjacent to party which is our best product and the second is adjacent to Tadkeshwar, which is again a good product and there is another product there, which is — which is between the two, so we will get good-quality there.

Riken Gopani — Capri Global — Analyst

Understood, sir. That is very helpful. Thank you so much for your answers.

Operator

Thank you, the next question is from the line from Shereyans from SG Securities. Please go-ahead.

Shreyans Badoni — Societe Generale — Analyst

Hi. Good afternoon, sir. I had a few questions, so the first one was on the power plant so I actually see the concessional core lignite that is supplied to the power plant. Now, we want to reduce the cash burn to zero like you said, but if I see the opportunity cost lost it is much higher than the fixed-cost so even if we are now single project basis if we look at in 0 cash burn, but we are losing more money and by not selling it into the market at this kind of realizations, so. I just wanted your view on that.

The second question was in the annual report you mentioned about — in your letter to shareholders that during the process of bidding for commercial coal and lignite blocks outside the home state, so. I just wanted any clarification on that, because we we’ve not heard anything on that area and also you mentioned of downstream integration areas like cement. I remember in the previous calls you mentioned that we won’t be directly involved in manufacturing of cement but just in supplying limestone to a partner or something like that. And the last was any update on the Fluorspar Beneficiation plant that. And another available.

Roopwant Singh — Chairman and Managing Director

Okay. So, a very valid cost, very valid question on opportunity cost so this issue we are trying to resolve with electricity regulator and the Energy Department. Hopefully you should see some positivity there we have asked to a move much simpler for formula.. Which allows GMDC do sustainable operations and the regulator also to get cheaper power there. So once this is done, we would see the the realizations has improved in the coming quarters.

Coal auction, yes we bid at a few places. Yes, the auctions for Ministry of Coal did not go so well. I believe they’re going to the auctioning them. And with our knowledge and experience that we have gathered. Now, I believe we should be in a better position to again capture value there. We — at some places ours was the only bid, hence the blocks that cancelled. And other places that the blocks we examined, I believe would go under significant redesigning, because there were no takers there.

And downstream integration, cement — Please wait for our expression of interest looking for partners in the coming quarters. You should see sizable movement there. Yeah. That is all I had to say.

Shreyans Badoni — Societe Generale — Analyst

Sir, so the 13 million tonne target so that so that does not involve any of these blocks that you would be bidding for and potentially the numbers right.

Roopwant Singh — Chairman and Managing Director

Our 13 to 15 is based on our existing resources and the blocks that we were allotted a, few years ago, which we are going to operationalize now. If that comes then these numbers change, our customer mix also changes and our strategy would go undergo a radical change.

Shreyans Badoni — Societe Generale — Analyst

Okay. And just the Fluorspar Beneficiation plant any progress on that?

Roopwant Singh — Chairman and Managing Director

We will update you in the coming quarters.

Shreyans Badoni — Societe Generale — Analyst

Okay. Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Roopwant Singh — Chairman and Managing Director

Thank you so much. I would like to close this conference with. A deep sense of gratitude towards all the participants and their Incisive and deep questions. We have been having this conference for, say, above a year now. And. I believe there is — I believe the questions-and-answers have all matured and move to the next level. Hopefully, we continue this exercise and the questions-and-answers move to further refined level and the company moves towards greater professionalism. I again thank Shri Amit, Shri Venkatesh, Shri Bajrang, Shri Ashish, Shree Subham, Shree Jitesh, Shree Vaibhav, Shree Amit again, Falguni ji, Shree Gopani, and Shree Shreyans. Thank you so much.

Operator

Thank you all for being a part of the conference call if you need any further information or clarification, please email gaurav.g@conceptpr.com. Ladies and gentlemen this concludes your conference for today. Thank you for joining us. Thank you for using Chorus Call Conferencing Services. You may now disconnect your lines. Thank you and have a pleasant day.