Key takeaways from SteelMint’s 5th Indian iron ore and pellet summit

• Odisha iron ore production may drop 20 mnt this fiscal on export duty impact
• Goa government aims to float first auction NIT in current month itself
• Royalty on royalty scrappage can result in 20% potential savings for miners

Morning Brief: The scanner was on raw material security and the latest amendments to the MMDR Act, 2015 in the pipeline. Speakers at the 5th Indian Iron Ore & Pellet Summit, organized by SteelMint in New Delhi recently, offered suggestions to counter the present iron ore challenges. Many dwelt on the need eliminate fragmented leases and develop other minerals, too, whose demand is likely to increase in future. The export duty impact was noted while many wondered if the resumption of mining in Goa was ill-timed amid the export duty although it was a welcome move.

The government has so far auctioned over 186 mineral blocks in efforts to boost iron ore supply. However, iron ore accounts for only 52 of these. Around 85% of the blocks auctioned are of bulk minerals with 45% pertaining to ferrous minerals. Only four states — rich in iron ore and limestone deposits — account for 65% of mineral blocks auctions.

Of the 52 iron ore blocks auctioned till FY22, 38 are either brownfield or expired leases while 32 are located in Odisha, which remained the most attractive destination for auctions in terms of bidder participation.

Setting the tone for the conference was Shri Sanjay Lohiya, Additional Secretary, Ministry of Mines, Government of India, while giving his keynote address. He called upon the iron ore and steel industry to look into beneficiation, saying it will bear fruit in the medium to long term. With the government working on a beneficiation policy, Lohiya stressed that most companies do not want to beneficiate iron ore which is the need of the hour. “High-end technology is not required here but only a bit of effort,” he reminded.

He also said over the next few years there will be a premium on green steel. He urged the steel industry to seek implementation of whatever government recommendations were required to remain competitive in future in terms of green steel.

Dr U.C. Jena, Additional Director of Mines, government of Odisha, while dwelling on the question of whether Odisha’s iron ore production will touch the 200-mnt mark by FY25, spoke of a possible loss of 20 mnt in iron ore production from Odisha this fiscal. From 140-145 mnt last fiscal, production is expected to fall to 120 mnt this fiscal due to the impact of the export duty.

Dr Suresh Shanbhogue, Director, Directorate of Mines, government of Goa, charting the way forward for the Goan iron ore industry, dwelt on initiatives being taken to resume mining in the state. He said:

• Goa has decided to go for auctioning as per the MMDR Act and Supreme Court directions. “We are half way through. We have already onboarded SBI Caps for transaction advisory services, MECL for geological assessment reports, and MSTC for the auction platform.
• Blocks have been identified.
• The model tender document’s first draft is ready. Geological reports of the blocks — first draft of the summary reports — are ready. The model tender document is expected to be approved soon and a timeline will be set.
• The target is to come out with the first notice inviting tender (NIT) in this month itself.
• Initially Goa is looking for “low hanging fruits” ie, expired mining leases – where mining can resume immediately.
• Simultaneously, the state government is drafting geological reports of composite licences though this may take time.

Indian Iron Ore, Pellet Production & Demand Outlook – FY25

A.K. Padhy, Executive Director, Commercial, NMDC, dwelt on the PSU miner’s Vision 2025-26.

• The mega miner aims to ramp up iron ore production capacity to 67 mnt by FY26 and 47 mnt in the current financial year (FY23) — an increase of ~11.5% compared to the previous financial year.
• The vision plan’s key drivers include increase in iron ore mining and evacuation capacity to 67 mtpa, strategies to enter new international and domestic markets and strengthening exploration. n Plans are afoot to forward integrate to value added businesses (pellets & steel) and diversify into strategic and critical raw materials.
• Capacity augmentation of existing mines and development of new mines as JVs are also in the pipeline. The company is developing and deploying technologies for beneficiation of lean ores to extend life of mine and move towards zero waste mining.
• Padhy also informed about the slew of evacuation-enhancing initiatives being undertaken. For instance, intermediary stock piles will enable NMDC to converge iron ore in lean seasons and improve dispatches in the rainy and peak demand seasons.
• NMDC will commission its 3-mtpa steel plant in Nagarnar in the current financial year which will boost demand of iron ore from its Bailadila Complex.
• The 1.2-mtpa pellet plant commissioned in 2017 at Donimalai will achieve its full capacity by FY24.

Manish Kharbanda, President, PMAI and Group Head, Legal, Corporate Affairs, Environment and CSR, JSPL, said:

• Dispatches from iron ore mines from Odisha have fallen by 32% from 11.5 mnt in May 2022 to 7.8 mnt in June, 2022. There is a need to revisit the policy of export duty on pellets in the larger interest of common good.
• Talking of low raw material security, he reminded that post-2015 auctions, there have been cut-throat competition and exorbitant bid values. After adding mining levies of towards royalty, DMF and NMET, the net bid value exceeds the market prices, ie, by more than 100% ASP in all cases.

Vivek Nishant Nath, GM, Sales & Marketing, OMC, said:

• OMC achieved highest-ever annual production of 31.71 mnt and highest-ever annual sales of 27.73 mnt in FY22.
• By FY27, it plans to ramp up sales to 76.9 mnt. OMC targets to increase its share in Odisha iron ore production to 34% by FY’27 as against 22% in FY’22.
• OMC will play a critical role in fulfililling iron ore demand within Odisha as well as from other states, he said.

Opportunities in Indian Iron Ore & Coal Mining Sector

Pukhraj Sethiya, Co-founder and CEO, Reval Consulting, said:

• Skewed distribution of blocks auctioned indicate lack of exploration of other minerals and hence lack of inventory for auction.
• Talking of future opportunities in expiring iron ore leases and other blocks, Sethiya said at least five captive and eight non-captive leases will expire over the next few years till 2030.
• At least six explored/near-explored assets are available for auction.
• He reminded that 90 ML applications have been cancelled as part of 10A2C and that four blocks in Odisha are on hold. “While there are opportunities in the pipeline, challenges remain due to the small size of assets and poor quality of data in many cases and delays in the auction process,” he concluded.

Manish Singla, Associate Director, Energy and Natural Resources, CRISIL, speaking of the mineral auctions, said,

• 85% of the blocks are contributing only 15% of the revenues for the states.
• He reminded that 50% of the iron ore blocks have less than 20 mnt of resources while 40% were bought at more than 75% premium.
• He rounded off that market demand for battery minerals is high. Thus, the Centre/ states need to focus on these other than bulk minerals like iron ore or limestone – processes for which have become relatively streamlined.

Key Reforms in the Pipeline to Further Boost Indian Mining Industry

Kapil Mantri, EVP and Head, Corporate Strategy & Business Development, JSPL, said:

• In India, the combined effective taxes on mining are highest among major mineral-rich countries.
• The issue of royalty over royalty further increased the royalty from 15% royalty + 32% (DMF + NMET)] = 19.8% to 23.7%.
• If the royalty on iron ore is INR 1,476 as per 2020 ASP, then the royalty, after deducting royalty plus DMF and NMET from the IBM price, is INR 1,116. “Once the government addresses the issue of royalty on royalty, there can be a 20% potential savings for miners,” he said.

Manish Mishra, Chief, Corporate Affairs, Tata Steel, dovetailed his speech with India’s steel production.

• He said a key takeway is that other states, including Jharkhand and Chhattisgarh, have done well in terms of blocks coming up for auctions and this will increase availability of iron ore and give impetus to the long-term goal of achieving steel targets in India.
• If Indian steel wants to benchmark itself with the best in the world, it will not come with fragmenting leases of 1-2 mnt.

Ramakrishna Chinnamsetty, Head of Mining & Business Development, AM/NS India, said:

• If there is a distinction between the mining lease areas then one can get the composite licence. It is not the end of the road for the mining company.
• He also questioned whether the IBM ASP is the right methodology for arriving at pricing or whether the National Mineral Index can fix the bugs.

Mohit Ratolikar, VP, Commercial, JSW Steel, stressed on:

• Incentives for using low-grade iron ore and that tailing management has become a headache for the industry. India has 140-150 mnt of beneficiation capacity but hardly 50% of this is used because tailing generation over a period of time is choking the space available with the plants.
• The government needs to form a task force immediately with the involvement of private companies, associations etc and evolve a cluster approach so the byproducts can be efficiently used and mineral life can be enhanced.

By Madhumita Mookerji