On an uplifting note, two more auctioned iron ore mines in Odisha – Guali and Jilling-Langalota – have started mining operations, according to latest news available with SteelMint. The mines had been awarded to state PSU miner OMC after steel major JSPL and Shyam Ores failed to commence operations due to disputes and other constraints after receiving vesting orders.
Union Mines Minister Pralhad Joshi inaugurated the two mines that are expected to augment iron ore production in Odisha, with a combined capacity of about 12 mn t.
The mines have been allotted to OMC under the new mining reforms for a period of 10 years and are required to pay a premium of 1.5 times of royalty (equivalent to 22.5%). It is believed that OMC will reserve around 70% of the minerals extracted for fulfilling long-term contracts and could put the rest for sale at auctions.
SteelMint previously reported that the government’s recent reforms measures encapsulate royalty for iron ore miners at 15% of the IBM’s average sales price (ASP) and the Central government has proposed an additional 22.5% to be paid to the concerned state governments, as in the case of the renewal for 20 years of NMDC’s contentious Donimalai iron ore mine in Karnataka.
The “additional amount”, which is 1.5 times of the royalty, will be applicable in case of NMDC’s iron ore mines in Chhattisgarh too. Therefore, the non-operational auctioned mines in Odisha – Guali and Jilling Langalota – that have been given over to state PSU miner OMC will have to bear this additional amount as will mines worked by steel major SAIL that are due for renewal shortly.
Thriveni Earthmovers and Kalinga Commercial Corporation are MDOs for the said mines.
New iron ore mines coming online could put pressure on prices. Supplies from Odisha have been increasing at a steady pace which is putting pressure on iron ore prices. Odisha’s iron ore production increased by 10% m-o-m to 11.4 mn t in Dec’20. NMDC has reduced prices for lumps and fines by INR 600-700/t for Feb’21. Odisha’s merchant producers such as Aditya Birla-owned Essel Mining too have cut offers by nearly similar quantum.
However on yearly basis production still remains lower than last year. Odisha’s iron ore production during Apr-Dec’20 was recorded at 68 mn t vis a vis 103.5 mn t in CPLY.
Improving iron ore supplies from Odisha, following commencement of operations at auctioned leases, is likely to put pressure on prices, SteelMint notes. This could result in better capacity utilization for the downstream sector.
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