Gujarat Mineral Development Corporation was established by the Gujarat government in the year 1963 for developing important and major mineral resources of the State. Company commenced its operations; with small sand crushing plant at Surendranagar, which supplied graded sand to consumers all over in the State. Later company started two projects, consisting of the silica sand crushing plant at Surajdeval in Saurashtra and the fluorspar project at Kadipani in Baroda district. After the commencement of the Lignite Project in Panandhro in Kutch in 1974 and the opening of the second mine at Rajpardi in Bharuch district in early 80s, the growth of company showed a tremendous increase. Gujarat Mineral Development Corporation has decided to expand its reach beyond Gujarat for minerals and other sources.

The state-owned mining major has been allotted coal blocks in Chhattisgarh and Jharkhand and the company has decided to go for two pithead coal-based power plants with a total capacity of 1,250 mw in both the states. GMDC has been granted approximately 350 million ton of mineable reserves in Morga-II block of Korba district in Chhattisgarh and another plot in Jainnagar, Hazaribaug district in Jharkhand, with 100 million ton mineable reserves. UTI Mutual Fund has acquired 7,30,761 equity shares of Gujarat Mineral Development Corporation Limited in last few years.

Products & Services-

Its product range includes wide variety of minerals like Lignite, Bauxite, Fluorspar, Granite, marble, manganese, silica sand, limestone, bentonite, ball clay etc. GMDC has been supplying important minerals like fluorspar to industries like steel, textiles, aluminium, refrigerants, foundries, etc. It is engaged in the development and extraction of major mineral resources in Gujarat. It has developed several mining centers based on continuous mining systems and beneficiation plants for producing energy minerals like lignite, basic commodities like base metals and industrial minerals like bauxite, fluorspar, granite and marble. Company is the country's largest lignite merchant and second largest producer of lignite in the country. Around 90% of the company's revenues are contributed by lignite. Its major mines include Panandhro, Akrimota, Umarsar and Mata-no-madh.

Recent Development-

Gujarat Mineral Development Corporation is ready to venture into wind power generation. Company has firmed up its plans to take up 100 MW wind power project in a phased manner. The Gujarat government has already approved generation of 100 MW wind power by GMDC. It is believed that this is the first wind power project of the company and it will be implemented in a phased manner. Company has planned a total of Rs 6 billion investment for the project.

Valuation-

Company enjoys a dominant position in lignite production and sales. User industries like power; cement and textiles are using lignite, as a substitute to coal, because it's highly cost-effective. With the global prices of coal scaling-up significantly from past few years these increased prices will eventually get reflected in company's profitability in the long run. At current market price, stock is trading at 9.94 P/E multiple of its FY2011 Estimated EPS. We recommend investors to "BUY" "GMDC" with medium to long-term investment horizon.