Major Odisha-based merchant iron ore miner Serajuddin & Co. has raised Apr’21 production by an impressive 57% to 1 mn t, according to SteelMint data. Production by the miner in Mar’21 was recorded at 430,000 t.
Production has gradually inched up from 200,000 t in Nov’20 to 400,000 t in Feb’21. Through a notification dated 16 Apr’21, the Odisha government announced that it would allow iron ore miners a five-fold increase in stacks that are made for sampling of iron ore before evacuation.
SteelMint notes that this move is likely to facilitate smoother evacuation of iron ore from mines in the state thereby directly benefitting merchant lessees such as Serajuddin that had previously sought exemption from stacking rules, in which case they would be charged royalty at the highest grade of iron ore.
Stacking relief
Serajuddin operates the Balda iron ore block in Odisha’s Keonjhar district which covers 343.981ha and has an EC limit of 15.15 mn t per annum. Serajuddin won the block at the Odisha minerals auctions in 2020 by promising to pay a premium of 118.5%. The miner has to guarantee iron ore dispatch of at least 8 mn t for the first two years, as per its mine development & production agreement (MDPA) with the Odisha government.
The company had written to the Director of Mines, Odisha in Feb’21 conveying the “tremendous practical difficulties” it was facing in handling “such a large volume of annual dispatch through the stacking mechanism”. Serajuddin started operations at the block from Oct’20.
Many iron ore miners sought exemption from stacking previously as they could afford to pass on the extra cost incurred by way of royalty to end-users. But with the successful bidders at the auctions in 2020 quoting very high premiums margins are expected to shrink sharply for most iron ore miners in Odisha.
MDPA & minimum production requirement
Again, in Apr’21, the company approached the state government for reconsideration of the minimum production requirement under MDPA. The reasons cited for inability to ramp up production were inaccessibility to F 1 Block area of the Balda mines following an order by the Joint Director of Mines, Joda, issued in late-Dec’20. Apart from having an iron ore processing plant at the block, the miner had also planned ore production from the block, as SteelMint learnt from sources.
That apart, the other reason cited for loss of production was restriction from carrying out operations in Block A of the Balda block in order to avoid undue interference in lifting of iron ore stocks left by the previous lessee. The old lessee, Serajuddin alleged, had huge stacks of ore in the working benches of the quarry in Block A and was allowed by the state government to remove the stocks till Oct’20, which interfered with production.
Under sub-rule 1 of Rule 12 (A) of the MMDR Amendment Act, 2021, auctioned leases have to ensure minimum dispatches on a quarterly basis. Failure to maintain minimum dispatch criterion for three quarters in a row can result in termination of mining lease.
Increase in volumes
Serajuddin’s production had slumped to a paltry 1.79 mn t in FY’21 – vis-a-vis 14.94 mn t in the preceding fiscal – due to non-commencement of production till Oct-Nov’20 at its newly-acquired block. Even after that production plummeted well below MDPA requirements due to reasons cited by the miner. However, with easing stacking norms, the merchant producer is expected to ramp up volumes, SteelMint notes.
Leave a Reply