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Bethesda, Maryland, Sept. 13, 2012 (GLOBE NEWSWIRE) -- India Globalization Capital, Inc. (NYSE MKT: IGC) (NYSE Amex: IGC), a company competing in the rapidly growing materials industry in India and China, announced that it is restructuring its rock aggregate business.
As previously announced, we have been reviewing our rock aggregate assets in India in order to streamline the business and enhance shareholder returns. Today, as a part of that review, IGC announces that it has successfully restructured its two rock aggregate crushers, cutting our annualized fixed costs by approximately $600,000.
Ram Mukunda, CEO of IGC said, "Our two rock aggregate crushers have been operating well for the past several years. We have spent considerable time and resources developing this business. However, we expect uncertainty in the regulatory environment that could hurt the business in the medium term. We have therefore decided that it is strategically better to close the two existing crushers, end the joint venture in Nagpur, lease out some of the equipment, and redeploy the remaining resources to the iron ore business. With the acquisition of iron ore beneficiation plants and mining assets in China that have about $550 million of high grade ore reserves, our priority is the iron ore business."
The Indian government recently declared that rock aggregate is a minor mineral not subject to royalty refund. This action will dramatically reduce the operating margin for all rock aggregate operators. Further, the government has ruled that crushers within a 25 km radius of Nagpur will have to be moved. As a result, IGC's 49% joint venture crusher in Nagpur will eventually have to be moved to another mining site. This move would entail the deployment of significant new capital that would not generate satisfactory returns. By being proactive on restructuring the rock aggregate crushing business, we maintain flexibility with the equipment and stay ahead of any impending regulatory changes that could adversely affect our business.