JSW Steel Will Aggressively Bid for Karnataka’s “C” Category Mines Auction

In a recent conference call with JSW Steel for Q1 FY17 ending results, SteelMint learned that JSW Steel will aggressively bid for Karnataka-based C category mines block auction to be conducted on 10 Aug’16.

It should be noted that on 22 Jun’16, Department of Mines & Geology (Govt. of Karnataka) issued the addendum in which it has further extended the due dates for bid submission for upcoming mine block auctions. The due date for submission of initial price offer thereafter technical bids which were earlier fixed at 11 Jul’16 has been extended to 10 Aug’16.

Total 14 mines (12 mines from Bellary and 2 from Chitradurga district in Karnataka) will come under auction. The mines have a total environmental clearance of around 13.4 MnT pa and total geological resources of around 196 MnT pa. The average Fe grade of mines ranges from 39-59%.

Also, the company faced some issues related to stamp duty for lease permission beyond 30 years, but as the Karnataka DMG has made all the clarification regarding stamp duty and eligibility criteria with revised scheme, JSW Steel is positively looking forward in acquiring mining leases and will aggressively bid in Karnataka iron ore mine block auction. The mining auction process is likely to be completed by 30 Sept’16.

Other key highlights discussed during conference call

1. Lower cost of raw material namely coal and iron ore benefited the company in Q1 FY17.
2. The cost of raw material increased around 1% in Q1 FY17 as compared to Q1 FY16 due to the introduction of NMDC’s differential policies.
3. In Karnataka, due to the scarcity of raw material, the steelmaker spend around INR 590/MT additional purchase cost while purchasing material from Karnataka e-auctions as compared to Chhattisgarh.
4. The steelmaker source around 600,000 MT iron ore per month from NMDC out of total 1.8 MnT iron ore requirement for its Vijayanagar Plant.
5. FDT (Forest Development Tax) is only accounted while purchasing the raw material from Mysore Minerals, rest not applicable.
6. The company is looking for logistical advantages. Recent freight adjustments for short lead goods traffic makes transportation cheaper for the company. This will help reduce local freight charges for the consignees who promise long term traffic commitment.