NMDC Ltd

for the year 2009-10

Dear Members,

On behalf of the Board of Directors, I take pleasure in presenting the 52nd AnnualReport on the performance of your Company, together with the Audit Report and AuditedAccounts, for the year ended 31 March 2010 and the Report thereon by the Comptroller andAuditor General of India.

1.0 PERFORMANCE HIGHLIGHTS

• Turnover for the year under review was

Rs.6239 crore compared to Rs.7564 crore in the previous financial year 2008-09recording a decrease of 18%.

• Profit before tax was Rs.5207 crore compared to Rs.6648 crore in the previousfinancial year 2008-09 recording a decrease of 22%. Profit after tax was Rs.3447 crorecompared to Rs.4372 crore in the previous financial year 2008-09 recording a decrease of21%.

• Net worth increased to Rs. 14250 crore as on 31.03.2010, 23% higher thanRs.11615 crore in the previous financial year 2008-09.

• Interim Dividend @ 75% on the equity shares of Re.1/- each aggregating Rs.297.35crore was paid.

• As an MoU singing PSE with the Government of India, your Company's performanceduring the year qualifies for excellent performance.

• Supply of Iron Ore to domestic industries recorded 206.53 lakh tones as againstthe previous year supply of 225.98 lakh tonnes, recording a decrease of 9%. Total exportsof Iron Ore during the year was 34.32 lakh tonnes against 38.74 lakh tonnes in theprevious financial year 2008-09 recording a decrease of 11%.

• During the year 194.05 lakh Kwh Power has been generated by wind electricitygenerators as compared to 65.46 lakh Kwh of power in the previous financial year 2008-09.

I am pleased to present in brief the physical and financial performance of your Companyduring the year under review:

2.1 Production

Note:

a) The Hon'ble Supreme Court of India has granted permission for re-opening of DiamondMining Project for a maximum period of 15 years with certain conditions. After fulfillingthe conditions, the project work started on 20th June, 2009.

b) Silica sand mining operations are suspended since November, 2007 due to commercialreasons and the Lalapur Silica sand mines are kept under care and maintenance.

2.2 Sales of Iron Ore

Notes:

a) Production and sales of Iron Ore were partially affected in 2009-10 due toconstraints caused by Maoist activities in evacuation of products from Bailadila mines.

b) The effect of recession continued during the first quarter of 2009-10.

c) The serious damage to Essar pipeline affected evacuation.

2.3 Other Sales

3.1 Operating Results

3.2 Profit & Dividend

During the year under review, your Company has earned profit before tax of Rs.5207crore on a turnover of Rs.6239 crore in comparison with those of previous year'sachievement of Rs. 6648 crore and 7564 crore.

The Company has paid interim dividend @ 75% on the equity shares of Re.1/- eachaggregating Rs.297.35 crore. The Board has recommended subject to shareholder's approval,payment of final dividend of Rs.396.47 crore. (Total dividend aggregating Rs.693.82crore).

4.0 DEPOSITS

The Company has not accepted any Fixed Deposits during the year under review.

5.1.1 Bailadila deposit-11/B

To achieve targeted production of 50MTPA by 2014 - 15 the construction of Deposit 11Bmine at expanded capacity of 7.0 million tones of ROM per annum has been taken onpriority. The estimated capital expenditure towards this is Rs.607 crore. Out of whichRs.320 crore is for Plant and Rs.188 crore is for mining machineries. Expenditure incurredtill 31st Mar' 10 for the plant is 213 crore. Due to Naxaltte activities progress of theproject work is getting hampered. The expected date of completion is March 2011. Projectprogress till 31st Mar'10 is 56%.

5.1.2 Uniflow System at Bacheli

M/s East Coast Railways have been assigned the work of execution of the"Construction of Uniflow Dispatch Line at Bacheli on K.K. Line of East Coast Railwaysof Waltair Division for Civil, OHE and S&T works" as a Deposit Work for which anamount of Rs.15,60,86,038/- has been deposited with East Coast Railways on 02.01.2006towards the estimated cost of the work based on the detailed estimate for Civil, S&Tand OHE submitted by M/s East Cost Railways. This has since been revised by Railway due toadverse ground-condition of the area.

M/s East Cost Railways have invited the Tender for execution of balance works such asearth work in formation, minor-bridges, RCC retailing walls, drains, protection works,ballast supply, transportation of P-way-materials, P-way linking and other misc. works.Tender was opened on 23.03.2010 and further finalization of the contract for execution ofwork by M/s East Cost Railways is in progress. The time for completion of work is 15months from the date of award of work by M/s East Coast Railways.

5.1.3 Fourth Line in Screening Plant-ll of Bailadila-14/11C

The work of installing Fourth line in Screening Plant II of Bld-14/11C was awarded toM/s TRF and the firm completed the work and the Performance Guarantee test conductedduring November 2009. Report of the Performance Guarantee test is under approval.

5.1.4 Slime-based Pig Iron Plant at Jagdalpur

Matter related to setting of slime based Pig Iron Plant has since been closed becauseof construction of ISP.

5.1.5 Merger of Sponge Iron India Limited

The Scheme of Amalgamation/Merger between the Company and Sponge Iron India Ltd hasbeen approved by Ministry of Corporate Affairs, Government of India (MCA) pursuant to itsorder dated January 18, 2010. In view of disinvestment of shares by. Govt, of India and tofacilitate consolidation of accounts, the Company through its Legal Counsel to the mergerprocess Amarchand & Mangaldas has made an application to MCA seeking orders forfurther extension of time upto 2nd July, 2010 for filing the sanction order with Registrarof Companies, Hyderabad. Orders from MCA are awaited.

5.1.6 Kumaraswamy Iron Ore Project

To compensate the depleting reserve of Donimalai Iron Ore Mine and augmentingproduction capacity towards achieving the target of 50 MTPA, the construction ofKumaraswamy mine with capacity of 7.0 MTPA was envisaged. MEGON is appointed as EPCMconsultant. The entire project has been planned to be executed in six packages. TenderEnquiries floated for packages 1, 2 & 3 (Crushing Plant Package, Downhill ConveyorPackage & Electrics and Substation package) and the same are under various stages offinalization. Down hill conveyor Package (Package -2) is the most critical Package &the project completion / commissioning is 24 months from the date of issue of LOA for thispackage.

5.1.7 Windmill in Karnataka

9.0 MW Wind Power Project has been commissioned on 30th September 2008 and connected toKPTCL grid. 1.5 MW Wind Energy Farm has been commissioned on 31st March 2009 and connectedto KPTCL grid.

5.1.8 Low Silica Limestone Project, Arki (HP)

Mining Lease is due in August 2010. Joint inspection of Mining Lease was done by aCommittee of SDM, DFO and officials from PED, PHED, HPSCB and Mining Office on 7th April,2010. Mining Officer, Solan, has forwarded inspection report for the State Geologist on30.04.2010. Inescapability certificate for 1851.03 Bigha of Private land issued by DeputyCommissioner, Solan to Commissioner of Industries on 09.09.2009. Additional Secretaryadvised Commissioner of Industries to obtain approval of Principal Secretary (Rev) forrelaxation under Revenue Land Maximum Limit Amendment Act, 1972. NMDC vide letter dated17.03.2010 has also requested Principal Secretary (Rev) to accord relaxation as desired.Draft P&R scheme has been prepared as per guidelines of State Government. Applicationfor Govt. / Forest land (84.36 Hect) was submitted on 01.09.2009; RO submitted treeenumeration and revenue details to DFO on 27.01.2010; DFO made inspection on 10.02.2010.Public Hearing was conducted successfully on 12.01.2010. Director (Env. S&T) / MemberSecretary, State Pollution Control Board forwarded proceedings of PH to the Secretary,Ministry of Environment & Forest. NMDC has requested Govt, of Himachal Pradesh, HPSCBand Ministry of Environment & Forest to consider transport of Limestone by road for 4- 5 years as per TOR issued by Ministry of Environment & Forest. Application has beensubmitted to the Commissioner of Industries for permission to draw water from Gambhar Khadas per the scheme of I & PH Dept. on 04.01.2010. MoU was signed between NMDC &SAIL on 16.11.2009. Working Group met on 06.01.2010 and decided action plan. Corpus fundis being created. Scope of work for feasibility report has been finalized. Working groupvisited Arki mine, ACL mine, Plant and proposed siding at Bharatgarh and decided furthercourse of action. As per the advice of State Geol, action has been initiated forsubmission of application for inclusion of left out areas in Mining Lease boundary.

5.1.9 Panthal Magnesite Project

NMDC has formed a joint venture company with J&K minerals limited in the year 1989to explore and exploit panthal magnesite mine to produce dead burnt magnesite. The JointVenture is named as J&K Mineral Development Corporation Ltd and is a subsidiary ofNMDC. After an initial phase of uncertainty regarding future of the Panthal MagnesitePlant due to inadequate demand in the market, J&KMDC Board in its 157th meeting heldon 30.11.2009 decided to review the project. Subsequently Board of NMDC decided to reviewthe project by setting up a 30,000 TPA Dead Burnt Magnesite plant.

Mining Lease has been renewed for further period of 10 years in favour of NMDC. Publichearing has been conducted successfully and public hearing proceedings forwarded byJ&K SPCB to MOEF, New Delhi. W.O has been issued in favor of M/s.MN Dastur as EPCMconsultant. Demand note has been raised by SMVDSB towards tree felling, compensatoryafforestation and NPV.

5.2.1 Bailadila Iron Ore Deposit-13

Your Company has formed a Joint Venture Company NMDC-CMDC Ltd. with CMDC to developDeposit 13 as a stand alone project of 10 MTPA. Necessary statutory clearances / approvalsto execute the project are awaited.

5.2.2 Bailadila Deposit-4

It is envisaged to develop Deposit 4 as joint venture with CMDC as a stand aloneproject for supplying raw material to the steel plant at Nagamar.

5.2.3 Rail Link between Dalli-Rajhara - Raoghat Railway Line Project

Two Tahsils under Bhanupratappur Sub-Division have been affected due to construction ofRailway line. (1) Bhanupratappur Tahsil (2) Anthahgarh Tahsil. Land acquisition was donein 15 villages of Bhanupratappur Tahsil and 12 villages of Anthagarh Tahsil. Action hasbeen taken for land acquisition in 27 villages in two Tahsils. Land registration has beencompleted in both the Tahsils and the land was handed over to Railway Department well intime.

The construction of quarters for Railway staff in Village-Kanhargaon and constructionof Railway office at Bhanupratappur was already commenced and the construction of Railwaytrack is under progress.

5.2.4 International Coal ventures Limited (ICVL)

The Joint Venture company International Coal ventures limited (ICVL) has beenincorporated.

The opportunities for acquisition of coal properties abroad were pursued in Australia,Indonesia, Canada and USA.

5.2.5 Memorandum of Understanding with Department of Mines & Geology (DMG),Govt, of A.P., Andhra Pradesh Mineral Development Corporation (APMDC), Govt, of A.P. andNMDC Limited for Mineral Exploration in the State of A.P.

Your Company has entered into an MoU on 29th January, 2010 with Department of Mines& Geology (DMG), Govt, of Andhra Pradesh and Andhra Pradesh Mineral DevelopmentCorporation (APMDC), Govt, of Andhra Pradesh for mineral exploration in the State ofAndhra Pradesh.

5.3.1 Tanzania

In Tanzania, your Company is pursuing the gold exploration works in Bulyang'Ombe andSiga Hill area. NMDC has been granted Retention Licence' at Bulyang'Ombe and Siga Hillareas. EIA/EMP report for Bulyang'Ombe area submitted to National Environmental ManagementCommittee (NEMC) for its approval. EC expected shortly, which shall enable grant of MiningLease.

5.3.2 Tunisia

Your company participated for the SRA Ouertane Project in Tunisia in consortium withRashtriya Chemicals and Fertilizers (RCF) as lead member, Krishak Bharati CooperativeLimited (KRIBHCO) and Gujarat State Fertilizers Company (GSFC) submitted a Non-bindingPre-qualification bid for a Rock Phosphate deposit.

The lead member - M/s Rashtriya Chemicals and Fertilizers (RCF) in the consortium madean macro financial review of the project and dropped the proposal for furtherparticipation in view of the perception of financial risk involved and also theuncertainties with respect to basic infrastructure such as water availability, ports andrailways till getting firm commitment as well as start of development of infrastructure bythe Govt, of Tunisia. The non-commitment of lead sponsor -M/s RCF to the submission ofbinding offer canceled the whole process.

5.3.3 Australia - Your company has submitted proposal in consortium with ABSBoulder for acquiring stake in Ridley Magnetite Iron Ore project in Australia.

5.4.1.1 In respect of Bailadila-1 & 3

Your Company has filed Writ Petition before the Hon'ble High Court of Delhi againstallotment of PL of Deposit-1 in favour of Tata Steel & PL of Deposit-3 in favour ofESSAR Steels. The Writ Petitions are pending before the Hon'ble High Court of New Delhi.

5.4.1.2 The PLs being pursued in Chhattisgarh are -

Your Company has applied 8 PL's in 2006-07 & 2007-08 in Dantewada District. Inaddition to that, your company has also identified 4 new Iron ore area and applied forPL's in Dantewada and 3 PLs in Kanker districts in July / Sept - 09. Your Company ispursuing all the applied PLs with Chhattisgarh Govt.

5.4.1.3 In Jharkhand

Sasangada: Your Company applied for PL/ML in the west Singhbhum district. State Govt,recommended to Central Govt, for prior approval for grant of PL in favour of JV Co. (NMDC& JSMDC).

Your Company has signed MOU with Dept. of Mines . & Geology (DMG), Jharkhand forexploration Iron ore & other minerals in the State of Jharkhand. Under the MoU signed,your Company shall be taking up

exploration for iron ore in West Singhbhum Dist. (Silpunji -Kanturia & Sasangadaarea).

Ghatkuri (Notified Forest): Your Company is pursuing ML application for Ghatkuri IronOre Deposit for exploitation in JV with State Government. Your Company has filedImpleadment Petition requesting the Apex Court to direct maintaining status-quo of theState Government Notification of 27.10.2006 which reserves exploitation of Ghatkurideposit by PSU's. The case is pending before Hon'ble Supreme Court of India. In addition,your company is also pursuing for MLs for Budhaburu, Ankua RF and Jhilingburu.

5.4.1.4 In Karnataka

Your Company is pursuing for ML for Ramandurg, Kumaraswamy (contiguous to ML No.1111),Kudre Kanive Kaval, Jaisingpur, Bhavihalli, Narayanpura, Vyasanakere & Hanumanhalli,Sy. No. 278 of Kenkere, Ramthal & Aihole, Bababudangiri.

5.4.1.5 In Orissa

Your Company is pursuing for ML for Mankadnacha.

5.4.2.1 In Jharkahand

Your Company is pursuing for ML/PL for Pahardia - Rungikocha (West Singhbhum District)and Parasi-Kutachauli-Khotadih (Ranchi District).

5.4.3.1 In Andhra Pradesh

Your Company is carrying out exploration work in

5 PLs (Revenue area) of Kalyandurg area, Anantapur Dist. Your Company is pursuingforest permission for exploration in the other 3 PLs falling in the Forest area.

5.4.3.2 In Madhya Pradesh

Your Company has been granted 2 PLs (Baghain 6 Sarang) and exploration work is inprogress. Your Company is also pursuing for other 3 PLs viz., Rampura, Karmatia &Lakshmipur for early grant in favour of NMDC.

Your Company has also been granted RP over and area of 2092 Sq. Km in TikamgarhDistrict, M.P. for diamond exploration. Application for forest clearance has beensubmitted. After obtaining forest clearance, RP work will be taken up.

5.4.3.3 Beach Sand

Your Company carried out exploration for Beach Sand in Ganjam Dist., Orissa. As theresults are not promising, the area has been relinquished.

5.4.4.1 In Uttar Pradesh

Your Company is pursuing for PLs for Tsgapan area, Dangli and Dangli RF.

5.4.5.1 In Chhattisgarh, your Company has applied for 8 Coal Blocks viz. West ofBeijin Phatepur, Girari, Gitkunwari, Ongaon-Potia, Batatikolga Central, Puta Parogia &Karline and Tara Coal Block in Raigarh and Sarguja District.

5.4.5.2 Your Company has applied afresh for 4 Coal Blocks in Jharkhand viz.Pachwara South, Tokisud South, Rautpara and Parabatpur (North).

5.4.5.3 In Madhya Pradesh, your Company was . granted 2 underground Coal Blocksviz. Shahapur

East and Shahpur West in Sahdol District. The Coal exploration in the above 2 Blockshas been completed by MECL (Nagpur) and Geological Report is prepared. Mining lease isapplied for and Mine plans are under preparation for submission to Ministry of Coal.

5.4.5.4 In Orissa, your Company has applied for 1 Coal Block i.e. Kupano- Labo.

5.4.6 Bauxite

5.4.6.1 In Jharkahand

Your Company is pursuing for PL/ML for Mahaudih village, Kujam village, Utani, Akasi& Putrang villages, Kotih village, Kujam & Chirodih villages in Gumla District.

5.4.7 Dolomite:

5.4.7.1 In Chhattisgarh

Your Company is pursuing ML application for Sadartera Dolomite Block in BastarDistrict.

5.5 Business Diversification

Your Company has undertaken various business diversification initiatives as under:

5.5.1 3.0 MTPA Integrated Steel Plant in Chhattisgarh

• 'In-Principle' decision is taken for setting up of 3.0 MTPA integrated Steelplant at Nagarnar, near Jagdalpur, Chhattisgarh where NMDC already has 995 acres of landin its possession.

• Foundation stone for the plant has been jointly laid on 03.09.2008 at the handsof Honorable Shri Ram Vilas Paswan, Union Minister for Chemicals, Fertilizers and Steeland Shri. Raman Singh, Chief Minister of Chhattisgarh.

• MOUs have been signed between Chhattisgarh Government and NMDC as well asbetween NMDC and CMDC on 03.09.2008.

• IEM (Industrial Entrepreneur Memorandum) acknowledgement received on 18/11/2008.

• TEFR & Investment of Rs. 15,525 crore approved by Board on 07.01.2010.

• Environment Clearance already received on 15.09.09.

• Rail transport clearance received on 17.02.09.

• Railway consultant has been appointed on 29.12.09 and preparation of feasibilityreport is under progress.

• State Govt, of Chhattisgarh has already sanctioned water for construction andoperation purpose.

• Chhattisgarh State Power Distribution Company Limited has approved and agreed toconstruct power line to make construction power available by end July 2010.

• Discussions are in progress with Chhattisgarh State Power Distribution Co.Limited & Chhattisgarh State Power Transmission Co. Limited for operational power.

• Acquisition of additional private land of approx. 787.62 acres is in advancedstage at Dist. Administrative level.

• Allotment of Govt. Revenue land of 102.64 acres is under consideration ofGovernment of Chhattisgarh.

• The process of short listing of technology suppliers for 6 major packages hasbeen already completed and remaining 2 major packages will be completed by end of May2010. NMDC decided to set up Oxygen plant package on BOO basis.

• Out of 8 major packages, Limited Tender Enquiry for 3 packages has been alreadyfloated.

• Process for appointment of consultant on EPCM (Engineering Procurement &Construction Management) is in progress.

• Forest clearance for 25.72 Hect. (63.56 acres) forest land is awaited to. enablestart construction activities.

5.5.2 2.0 MTPA Pellet

Plant in Chhattisgarh

The main objective of this project is to prolong the life of Tailing Dam at BacheliComplex. TEFR has been prepared. Design basis for Pellet Plant Bacheli is frozen. W.O hasbeen issued in June '09 in favour of M/s MN Dastur as EPCM consultant. Execution ofProject is divided into Six Packages. The estimated capital expenditure towards this isRs.807 crore. Now it is planned to construct the Pellet Plant adjacent to Steel Plant atNagarnar. Raw material will be transported through a slurry pipeline. The comple ^sal isbeing

prepared.

5.5.3 1.2 MTPA Pellet

Plant at Donimalai

The main objective of this project is to prolong the life of Tailing Dam at Donimalai.TEFR has been prepared. Survey work Completed. Soil investigation Completed. Design basisfor Pellet Plant Donimalai is frozen. W.O has been issued in June '09 in favour of M/s MNDastur as EPCM consultant. Execution of Project divided into Six Packages. The estimatedcapital expenditure towards this is Rs.572 crore. Tender Enquiry floated for Peptization,Beneficiation, Site leveling & MRSS Packages.Project is scheduled to be completed bySep'12.

5.5.4 MOU has been signed with the West Bengal Mineral Development & TradingCorporation Limited for exploring coal blocks allotted to them. No further development.

5.6.1 SOLAR POWER PLANT

Your Company is venturing into to development of solar power development projects inIndia. It plans to register as a Solar power developer under the Jawaharlal Nehru NationalSolar Mission (JNNSM) for which NTPC Vidyut Vyapar Nigam Limited (NVVN) has been appointedas nodal agency by Ministry of Renewable Energy, Government of India.

5.6.2 A Demonstration beneficiation plant for BHJ is being considered at Donimalai(3 LAKH TPA). The flow sheet has been finalized. MECON has been finalized as Consultantfor preparation of TEFR.

5.7.1 Your Company signed MOU with Rio Tinto India Private Limited to co-operate ininvestigating mutually advantageous potential investment opportunities primarily for ironore and other commodities both within India and globally.

5.7.2 Moving globally your Company has also joined hands with Kopano Ke MatlaInvestment Company (Pty) in the Republic of South Africa for e oloring and exploiting themineral resources in south Africa.

5.7.3 Your company signed MOU with Tata Steel on 22nd Jan, 2010 to jointly explorethe possibility of setting up integrated steel plants, downstream value-addition projects,acquisition and development of mineral resources for steel making etc.

6.0 R&D ACTIVITIES

Details as required under the Company's Rules 1988 (Disclosure of particulars in theReport of Board of Directors) are at Annexure-I.

7.1 J&K Mineral Development Corporation Ltd (J KM DC)

The annual report of the subsidiary company is annexed.

7.2 NMDC-CMDC Ltd (NCL)

The annual report of the subsidiary company is annexed.

7.3 NMDC SARL, Madagascar

The annual report of the subsidiary company is annexed.

7.4 NAM - India MDC (Pty) Ltd, Namibia

The annual report of the subsidiary company is annexed.

7.5 Statement pursuant to section 212 of the Companies Act, 1956, pertaining to theSubsidiary Companies is at Annexure-ll.

8.0 ENVIRONMENT MANAGEMENT:

Your Company prompted to design, develop, document and implement EnvironmentalManagement Systems in line with ISO 14001 Environmental Management System standards at allits Iron Ore and Diamond production projects, with the aim of strengthening and achievingcontinuous improvement in environmental performance.

• The four major production projects, Bailadila Dep-14/11C, Dep-5, Donimalai andDiamond Project have been accredited with ISO 140012004 EMS by M/s DNV, Hyderabad. TheEnvironment Management System Certification was issued on 4.12.2008 and is valid up to2011.

• The Corporate approach to environmental management seeks continuous improvementin performance by taking account of evolving scientific knowledge and communityexpectation.

• Environmental monitoring studies at all the production projects have beensuccessfully completed for the year 2009 to 2010 by the MOEF recognized external agenciesand also by Jhe respective State Pollution Control Board-authorities. The studies indicatethat SPM, RPM, S0₂, NO_x and CO levels at all the production projectsare well within the prescribed limits as per CPCB and State Pollution Control BoardStandards.

Mine Safety - Activities

NMDC has its training centers in all its projects. They are equipped withinfrastructure as required under Mines Vocational Training Rules. These centers cater tothe needs of, basic training, refresher training and training for skilled workers and alsofor those injured on duty.

In each mining project of NMDC sufficient number of workmen inspectors are nominated/appointed for mining operations, mechanical and electrical installations as per statutoryrequirements.

Mine Level Tripartite Safety Committee Meetings have been conducted in each of theoperating mines. Except DMP, Panna all the projects have conducted the meetings this year.This meeting is conducted once in a year at project level with senior officials, UnionRepresentatives and DGMS Officials in which Safety Performance and its appraisal is madeand the recommendations are implemented.

Tripartite Safety Committee Meetings are being held regularly once in a year at HeadOffice. This year due to changes in Zonal/Regional Offices of DGMS, Corporate LevelTripartite Safety Committee Meeting will be conducted with the consultation of DGMSofficials at the earliest.

Safety Committees have been constituted in every operating mine and pit safety meetingsare held every month discussing the safety matters and corrective actions related to workatmosphere.

Man days lost per 1000 man days worked for the year 2009-10 is 3.01 against 5.66 forthe year 2008-09.

ISO 9001:2008 Certification:

NMDC Projects - BIOM, Kirandul Complex, BIOM, Bacheli Complex; Donimalai Iron Ore Mineand R&D Center are accredited with ISO 9001:2008 Certification. Certification Auditswere conducted successfully at BIOM, Kirandul Complex and BIOM, Bacheli Complex in themonth of November 2009. II Surveillance Audits were conducted successfully at DonimalaiIron Ore Mine in the month of February 2010 and at R&D Center in the month of October2009.

OHSAS 18001:2007 Certification:

NMDC Projects - BIOM, Kirandul Complex, BIOM, Bacheli Complex and Donimalai Iron OreMine are accredited with OHSAS 18001:2007 Certification in the month of December 2009.

OHS Activities:

Occupational Health Services have been provided with adequate manpower andinfrastructure and are functioning in full-fledged manner at all the projects, headed byQualified Doctors trained in OHS at Central Labour Institute, Mumbai.

Periodical Medical Examination under statute is carried out regularly in all theprojects, with a planned programme. All the results, are computerized and individual filesare being maintained.

11.0 IMPLEMENTATION OF OFFICIAL LANGUAGE POLICY

Successful efforts for the implementation and progressive use of Official language weremade by NMDC Ltd. in all its production Units and Head Office during the year 2009-10.

Training in Hindi was imparted to the employees. Hindi-Workshops were also conductedfor the officers and employees having working knowledge of Hindi. Various programmes suchas "Hindi Divas, Hindi Pakhawada, Rajbhasha Maah", District level competitionsin Hindi etc were organized during the year to bring awareness among the employees andtheir family members and also among the employees of other offices situated in and aroundHead Office and various production

Units. Incentive Schemes at Central and Regional level were implemented and suitableprizes were awarded to the eligible employees.

Rajbhasha Technical Seminars in Hindi were organized during the year in ProductionUnits. Rajbhasha Souvenir and technical Seminar books were also published. Apart fromthese publications - Hindi House Journals viz. NMDC Patrika published bi-lingual alongwith Baila Samachar, Bacheli Samachar, Hira Samachar -monthly Hindi bulletins andDoni-Samachar trilingual monthly bulletin were published.

During the year NMDC Ltd. has also conducted Hindi Officers meet under the auspices ofSteel Ministry in which Hindi Officers of all the PSUs of Steel Ministry including HindiOfficers from the Ministry participated.

NMDC Ltd was awarded the Government of India's Indira Gandhi Rajbhasha Puraskar (2ndPrize) for excellent implementation of the Official Language policy and progressive use ofHindi amongst the PSUs of Region 'C for the year 2007-08. Sri Rana Som, CMD, NMDC Ltd.received the shield from Her Excellency President of India Mrs. Prathibha Patil at afunction held at Vignan Bhavan, New Delhi on Hindi Divas, 14th September, 2009.

NMDC Ltd. was also awarded Rajbhasha Shield - 1st prize for the year 2008-09 by TownOfficial Language implementation committee (undertakings) Hyderabad-Secunderabad, forexcellent implementation of the Official Language policy amongst the PSUs situated in twincities.

12.1 Employee-Employer relations

The overall industrial relations situation was peaceful and cordial during the year.There was no strike/lockout affecting the Production and Productivity.

12.2 Scheduled Castes & Scheduled Tribes

122 persons belonging to Scheduled Castes and 152 persons belonging to Scheduled Tribeswere appointed during the year 2009 against 609 posts filled in by direct recruitment.

12.3 Strength of SCs & STs as on 31th March 2010

12.5 Particulars of employees drawing Rs.2 lakhs per month or Rs.24 lakh per annumunder Section 217 (2-A) : NIL

12.6 Staff Welfare activities

Education, health and township facilities, workers' participation in Management Schemeand other Bipartite fora have been functioning satisfactorily. Inter Project Tournaments,both indoor and outdoor, cultural programmes etc. were held in different Projects duringthe year.

13.0 HUMAN RESOURCES DEVELOPMENT

Your Company has taken various HRD initiatives during the year under report 81% of theemployees were covered in various training events. HRD index, i.e. trainingmandays/working mandays achieved for all the employees during the year is 1.21 against thetarget of 0.99.

13.1 In-Company Training Programmes

Your Company conducted 11 in-company training programmes covering 237 employees duringthe period under review. The areas covered include Pygmalion Manager, DisciplinaryProceedings, Auto Desk Auto Cad, Finance for Non-Finance, MDP, Legal Aspects of Tenders,Contract Management & Arbitration etc.

13.2 External Training Programmes

Your Company nominated 348 executives to 126 External Training Programmes during theyear under report.

13.3 Foreign Training Programmes

Your Company deputed 20 Executives to attend training/seminars/conferences and studytours abroad in 7 events during the year.

13.4 Executive Trainees

Your Cofnpany recruited 92 Executive trainees (Mining, Mechanical, Electrical Civil,Mineral Processing, Materials Management, Geology, Industrial Engineering, Commercial andFinance) during the year.

14.0 VIGILANCE

Your Company's Vigilance Department is certified to confirm to ISO 9001 : 2008 QualityManagement Systems. Vigilance Department is playing a productive role for continuoussimplification of systems and procedures to facilitate faster and effective decisionmaking in a transparent manner. To ensure compliance of laid-down systems and procedures,Vigilance Department conduct surprise checks, regular inspections and CTE typeinspections. Based on the outcome, preventive / administrative actions and systemimprovements are initiated. Awareness programmes are conducted in all units of theorganization to sensitize employees on the evil effects of corruption.

15.0 DIRECTORS'RESPONSIBILITY STATEMENT

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, withrespect to Directors' Responsibility Statement, it is hereby, confirmed that -

i) In the preparation of the annual accounts for the financial year ending 31st March2010, the applicable accounting standards have been followed along with proper explanationrelating to material departures;

ii) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit or loss of the company for the year under report;

iii) The Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956,for safeguarding the assets of the company and for preventing and detecting fraud andother irregularities;

iv) that the Directors have prepared the annual accounts on a going concern basis.

16.0 DIRECTORS

During the year under review, the following were appointed as Directors of the Companypursuant to orders of Ministry of Steel, Government of India:

The following Directors ceased to be Directors on the Board of the Company for the yearunder review:

The Board places on record its deep appreciation for the valuable contribution made byShri K.R. Venkateswarlu and Shri B.S. Meena during their tenure on the Board of theCompany.

17.0 AUDIT

On the advice of the Comptroller and Auditor General of India, New Delhi, your Companyappointed the "following firms of Chartered Accountants as Statutory Auditors of yourCompany for the year 2009-10:

18.0 CORPORATE GOVERNANCE

The details on Corporate Governance are given at Annexure-lll.

19.0 Report on Management Discussions

A Report on Management discussions and Analysis as required in terms of Clause 49(F) ofthe Listing "Agreement is enclosed at Annexure-IV.

20.0 Corporate Social Responsibility

At NMDC, the purpose of its business is maximization of value for all stakeholders andCSR is considered as a source of competitive advantage.

The focus of our CSR initiatives is integrated development of community in the villagessurrounding our establishments which are among the most backward tribal villages of India.

NMDC has initiated integrated development of villages to facilitate sustainable incomegeneration through employment / self employment by targeting education and skilldevelopment. NMDC is also offering facilities in healthcare and infrastructure to enablethe beneficiaries engage in income generation activities.

Integrated Development of Villages

Pre-project survey taken up in 58 villages and completed in 45 villages. Integrateddevelopment works initiated in 8 villages during 2008-09 are in progress. Further,integrated development activities of 5 villages in Bailadila @ Rs 820.32 lakhs are to beinitiated shortly.

Hospital on Wheels

'Hospital on Wheels' facility launched on 1/1/2009 to provide Medicare in 29 villagespredominantly inhabited by tribals, in Bailadila is running successfully.

Medical Vans equipped with ultra modern medical equipment are visiting the villagesevery day. For 'Hospital on Wheels', the requisite manpower inclusive of two dulyqualified Doctors has been provided.

During the year 2009-10, 29552 patients have been treated.

Scholarship Scheme

The Scholarship Scheme to motivate SC/ST students to pursue studies beyond 8th Classupto Degree in Engg/Medicine is in operation in five Districts of Bastar & eightvillages surrounding Donimalai Project.

For the 2008-09 academic year, an amount of Rs. 209.75 lakhs covering 6404 students hasbeen disbursed making the total outgo on Scholarships at Rs. 252.55 lakhs for the academicyear 2008-09.

For the academic year 2009-10, the number of Scholarships is around 23000 at a cost ofRs. 650 lakhs.

Education

Activities relating to the establishment of Residertial Schools at Geedam, Kuwakonda,Dantewade and Nagamar in Chhattisgarh & Sitapur in UP, Polytechnic at Dentewada andNagamar as well as ITI at Nagamar are in various stages of progress.

Literacy improvement programme in 84 schools of Dantewada @ Rs.368.02 lakhs to beinitiated shortly.

Mid-day meal Programme

Mid-day meal programme covering 10,000 children in & around Donimalai Project isrunning successfully.

Skill Development

Skill Development workshops on Jute / Bamboo / Bell Metal / Terracotta / Sisal craftsto develop the latent skills of the Bastar Villagers have been organized. The results arevery encouraging & are yielding revenue to the trained un-employed youth.

Schemes with partnership of State Governments

Works relating to Solar Electrification in Dantewada and Kuwakonda blocks and SolarLighting in the houses and on the roads in Bijapur, Dantewada, Bastar and NarayanpurDistricts of Chhattisgarh @ Rs. 1611.29 lakhs are nearing completion.

Work on the establishment of a*GurukulAstha for SC/ST/OBC Orphans at Geedam @ Rs1291.19 lakhs has commenced.

During 2009-10, an additional contribution of Rs 375 lakhs for the construction ofhouses for the slum-dwellers in Bellary District, Karnataka has been made. With this thetotal contribution is Rs 1875 lakhs till date.

Apart from the contribution of Rs 558.34 lakhs for creating of various kinds ofinfrastructure in Chhattisgarh, NMDC has committed an additional amount of Rs.6853.86lakhs for a variety of works including By-pass road to Jagdalpur as proposed by the StateAuthorities.

Infrastructure Development

Expenditure on various infrastructure development works viz., Roads, Culverts,Community Halls etc has been to the tune of Rs 1303.93 lakhs.

CSR works in other than peripheral areas

• Construction of Flood, Relief Shelter at Kusheshwar Asthan, Bihar is inprogress.

• Establishment of a Residential School in Sitapur Dist, UP is in progress.

• 'Hospital on Wheels' facility in Sitapur & Lakhimpur Kheri Districts of U.P.in operation.

• Contributed Rs. 1000 lakhs for Flood Relief works in Andhra Pradesh &Karnataka.

• Relief to victims of Fire accident at Rohru, H.P.

• Relief to flood victims in Rohru, H.P.

• Contribution of Rs 50 lakhs for the establishment of Multi Disciplinary Hospitalat Hyderabad.;

Promotion of Sports

• Promotion of Archery in Chhattisgarh.

• Sponsorship of World Snooker championship 2009.

• Promotion of Handball in Chhattisgarh.

• Sponsorship of National Rapid & Blitz Championships 2009.

• Support to District Football Association, Panna.

• Provided Sports material to Nagarnar, Amaguda & Manganpur Gram Panchayats.

Misc. CSR activities

• Support to Ramakrishna Mission Sanatorium, Ranchi for the purchase of Vehicles.

• Sponsorship of Rajyotsava Chhattisgarh 2009.

• Contribution to Bastar Dussehra Lokotsav 2009.

• Assistance to M/s SPIC MACAY.

• Assistance to International Levi Festival at Shimla.

• Financial Support to various other reputed Organizations.

21.0 IMPLEMENTATION OF RIGHT TO INFORMATION ACT, 2005

Your Company is proactively complying with the provisions of the Right to InformationAct, 2005. A)l information sought under the Act have been furnished within the stipulatedtime period.

22.0 DISINVESTMENT OF SHARES BY GOVERNMENT OF INDIA

During the year under review, Government of India disinvested 8.38% of its holding inthe Company aggregating 332,243,200 equity shares of the face value of Re.1/- each throughan Offer for Sale. The Government of India received Rs. 9930.42 crore out of the saiddisinvestment process. Accordingly, the equity shareholding of President of India in NMDCstands at 90%.

23.0 Implementation of Integrity Pact

1. With a view to maintain transparency in all dealings with contractors and vendorsand keeping with international practices, NMDC & Transparency International India(Til) developed an Integrity Pact Programme.

2. All the tenders for the contracts and civil works above threshold value of Rs. 20.00crore and procurements above threshold value of Rs. 10.00 crore are the subject matters ofIntegrity Pact.

3. After the implementation of said programme, Head of Safety Dept. was appointed asNodal Officer and a Review Committee comprising of Functional Directors of NMDC wasconstituted. This Committee was also vested with the powers to modify the Integrity Pactprocedure and systems.

4. Shri M. Gopalkrishna, IAS (Retd.) and Dr. S. Ramnarayan, Professor, ISB wereappointed as independent external monitors (IEMS) for ovqrseeing the Integrity Pactprogramme.

5. During the year, under, review, a total of 13 cases of tenders with a value of Rs.914.31 crore were covered under the Integrity Pact.

24.0 ACKNOWLEDGEMENT

Your Directors gratefully acknowledge the support, cooperation and guidance receivedfrom the Ministry of Steel, Ministry of Mines and Ministry of Forests & Environmentand other Departments of Government of India and the State Governments of Andhra Pradesh,Chhattisgarh, Karnataka, Madhya Pradesh and Jharkhand.

Your Directors acknowledge the support extended by the valued and esteemedinternational and domestic customers, Shareholders stakeholders, MMTG, Chennai Port Trust,Visakhapatnam Port Trust, Railways and other Departments of the Central and StateGovernments. We believe that our long-term success is dependant on our domestic customerrelationship and responsiveness. We will do everything possible to provide our customersbetter, timely and value added services.

The success of your Company is due to the commitment and dedicated efforts of themanagers and employees at all levels. Your Directors place on record their appreciationand also acknowledge the support and co-operation of All India NMDC Workers' Federationand their members for the smooth functioning of the Company's operations.

Rana Som

Chairman-cum-Managing Director

Place : Hyderabad

Date : 04.06.2010

TECHNOLOGY: EFFORTS IN TECHNOLOGY ABSORPTION:

R&D Centre is committed to maintain its excellence in undertaking product andTechnology Development Missions related to ore and Minerals through continual improvementin process and efforts are made to enhance customer's full satisfaction. The R&DCentre functions in the following thrust Areas:

• Upgradation of processing Technology of existing process plants for betterproductivity and meet the customer; requirement.

• Development of Technology for Utilization and Recycling of mine waste mineralproducts.

• Development of Value Added products.

• To carryout further advanced studies on beneficiation of Mine products like BHJ& BHQ.

NMDC, as one of the MOU signing companies, it fixes annual targets for alt unitsincluding R&D. In this direction, R&D Centre has achieved rating of"Excellent" in the MOU performance indicators.

Achievements and improvements carried out in the development of new process, products,cost reduction, and quality improvement in various areas / fields of R&D Centre duringthe financial year 2009-10 been formulated in the proceeding sections:

1.1.1 Pilot Plant Facility for Production of 300 TPA Hydrogen Reduced Carbon FreeSponge Iron Powder from Blue dust

• NMDC in collaboration with DMRL has established the feasibility of producing"Carbon free sponge iron powder "from Blue dust of Bailadila at laboratoryscale. Carbon free sponge iron powder finds application in producing soft - magnetic iron,friction components, food fortification, micro-motors, food preservatives and highcompressibility admixes etc.

• Based on encouraging results decision was taken by NMDC to setup a pilot plantof 300 TPA capacity for production of hydrogen reduced carbon free sponge iron powder atR&D Centre of NMDC.

• The work of construction as well setting up of this pilot plant was awarded toM/s. Gas Institute of National Academy of Sciences, Ukraine in January 2006. The erectionof plant has been completed and it was successfully commissioned in December-2009. Theplant after some minor modifications and replacement of muffles based on observations madeduring commissioning will be ready for PG Test by July 2010 and will be ready forcommercial production after successful PG Test.

• The iron powder*produced during trial operation and commissioning has been sentto various customers like Midhani, Crompton Greaves, Hoganas, HAL for evaluation andcharacterization. In House studies are being carried out for densification andoptimization of flow properties as per industry requirement.

1.1.2 Nano Crystalline Powder from Blue Dust:

• A technology for production of nano iron powder using Blue Dust has beenestablished at lab scale in collaboration with MISA (Moscow State Institute of Steel andAlloys). The product is evaluated and accordingly facilities for the production of nanoiron powder on lab scale are being created at R&D Centre.

• This project has been initiated with an objective to develop high value materialfrom Blue Dust. The output from this facility would be used for development of market andgeneration of data for setting up a scaled up production unit.

• Procurement of critical equipments has been completed. Civil works for makingworld class laboratory also completed. Electrical works are under progress. Positioning ofequipment are under progress.

• Crucial Applications of Nano-structured Iron Powder are in Electro-magnetic,Automobile, Computer and Paint industries apart from Pharmaceutical applications.

1.2.1 Setting up of Pilot Plant for Commercialization of Precipitated Silica SodiumSilicate and Zeolite - A:

• A Memorandum of Understanding (MOU) has been signed between Central Salt &Marine Chemicals Research Institute (CSMCRI), NMDC Ltd and Kanoria Chemicals &Industries Ltd., to set up Pilot Plant for Scaling up the process for production of valueadded Silica based products from Kimberlite tailings. Action has been initiated for theextension of MOU.

• NMDC & CSMCRI had approached funding agencies & submitted proposals forthe funds.

1.3 Development of Various Grades of Ferrite Powders:

• Naval Material Research Laboratory [NMRL] has requested to produce special gradeof microwave absorbing ferrite for defence application at NPD. The technology forproduction of ferrite will be provided by NMRL and NMRL are in discussion with NMDC forsigning of MOU.

1.4 Advanced studies on beneficiation of BHJ & BHQ of various NMDC's in houseproducts:

Beneficiation studies on.BHJ/BHQ Iron Ore of Donimalai Iron Ore Project were completedsuccessfully. Lean grade BHU BHQ Iron ore samples of Donimalai assaying 40 - 42%Fe,38 - 40% Si0₂ were subjected to beneficiation studies. Based on the studies, itwas possible to produce concentrate assaying Fe>64.5%, SiO₂<5.5% and AI₂O₃<0.5%with a yield of 28 - 32%. Based on the flow sheet developed by R&D Centre, ademonstration beneficiation plant of 0.36 MTPA capacity is being setup at Donimalai. M/sMECON is preparing TEFR for the above project.

1.5 ISO - 9000 Certification:

Regular internal quality audits and management review, meetings were carried out foreffective implementation of Quality management system. Second Survivelance Audit based onthe revised standard of ISO-9001-2000 was carried out successfully during October 2009 andthe Auditors had recommended for continuation of "Certificate of approval" forquality management system, which is valid upto October 2010.

2.0. Investigation /Exploration Support:

• Processing of 104.240 MT out of 132.29 MT of Kimberlite LDD from Chigicherla arecompleted and processing of balance Kimberlite is in progress.

3.0 Developmental Support:

• Recovery of iron values from the iron based residue/COB from Sukinda Mines,Orissa through Hydrometallurgy and physical beneficiation route. Studies are underprogress.

• LDD samples of Kalyandurg area-prioritized 35 batches of samples weighing 48.60Metric Tonnes was processed and concentrate was produced.

• During iron ore mining about 10-12% waste is being generated in the form of lowiron value slime, which are lying in tailing dam and creating space and environmentproblems. Studies of possible utilization of Slime without beneficiation in sintering areunder progress.

• Studies of utilization of Slimes after beneficiation for iron ore pellet makinghave been completed.

• Studies on utilization of mine waste generated [Kimberlite] during diamondprocessing at Panna Mines in Agglomeration of iron ore are under progress.

4.0 Production / Projects Support:

• Forty Three Nos (43), of project works of various NMDC ProductionUnits(Projects), Two (2) nos of Development works(in-house) and Two (2) InvestigationProjects were completed for different need based requirements of the Corporation.

5.0 Sponsored Projects:

• 12 number of various sponsored Projects were taken up for variety of iron ores,Slimes & Tailings for evaluation which includes Mineral Beneficiation, Flowability,Ore Mineralogical up-gradation including physical and Chemical Characterisation tests werecarried out.

6.1 Utilization of Kimberlite Tailings:

• MOU was signed on 13th December, 2005 between Central Salt & Marine ChemicalResearch Institute, NMDC Ltd., and Kahdfia Chemicals & Industries Ltd., to set up aPilot Plant for up-scaling the process for production of value added Silica based Productsfrom Kimberlite Tailings.

6.2 Nickel Extraction Technology:

• Global Expression of Interest (EOI) was floated by NALCO for preparation of TEFRfor installing 10,000 TPA Nickel production plant. This was awarded to M/s EIL forpreparation of TEFR on 24.03.08. M/s EIL has submitted TEFR for evaluation.

7.0 Future Plans:

• Up-gradation of technology for beneficiation of low-grade iron ore.

• Creation of facility for reduction under load testing: To determine Softeningcharacteristic of iron ore & pellets and optimising operational parameters in Blastfurnace.

• Upgradation of Agglomeration Lab with latest equipments.

8.0 TOTAL R&D EXPENDITURE AND TURNOVER YEAR WISE