India: Odisha to Allow Sponge Iron, Pellet Makers at Iron ore Auctions

The Odisha government which has decided to resume auctions of iron ore after the Centre's decision to hike mining lease area limits to 58 square kilometers (sq km), will allow pellet producers, pig iron makers, and sponge iron manufacturers to participate at the auctions.

The state government has taken cues from Karnataka where the secondary steel manufacturers were allowed to partake in the auctions process. Odisha has hitherto auctioned three iron ore blocks- Ghoraburhani-Sagasahi, Kalamang West and Netrabandh Pahar. All three iron ore blocks have been bagged by steel producers- Bhushan Steel Ltd (now Tata Steel BSL), Essar Steel and Bhushan Steel & Power Ltd. The three iron ore resources were offered to steel manufacturers as end-use.

But as Odisha now prepares to put 20 lapsing merchant iron and manganese mines to online auctions, it feels permitting secondary steel makers will bring in more competitiveness to online auctions.

The iron ore and manganese mines currently under the leasehold of merchant producers like Rungta Mines, KJS Ahluwalia, Sirajuddin & Company, Feegrade & Company, Aryan Mining & Trading Corporation (AMTC), Patnaik Minerals Pvt Ltd, Kaypee Enterprises and others will be auctioned. The validity of these mines ends by March 31, 2020.

One iron ore mine- Guali with 198.74 million tonnes (mt) deposits now held by RP Sao will be reserved in favor of a state PSU, most likely Odisha Mining Corporation (OMC). Tata Steel's Sukinda chromite mine will also be reserved for an Odisha government-controlled PSU.

Auctions of iron ore and associated mineral blocks will be conducted in two phases, the dates for issuing Notice Inviting Tenders (NITs) and tender documents being October 4 and 14. It has been decided to reserve five iron ore blocks for end-use industries, the remaining resources will be up for grabs by merchant miners.

After the issue of NITs, the bids are set to be invited on November 18 and 28. Letters of Intent (LoIs) to the preferred bidders will be issued on January 3 and 15, 2020.

All these blocks pertain to the mining leases which are under operation and it is expected that there will be seamless transition of operation by the new leaseholders post-March 31, 2020. Considering that the large number of iron ore blocks is being notified for auction simultaneously, it was decided to suggest a higher reserve price to protect against low bids.

The high levels committee has recommended a reserve price of 15 percent of sale value for blocks with iron ore resource up to 10 mt and 25 percent for deposits up exceeding 10 mt. For manganese, it has been pegged at 15 percent of the sale value.

Please click here for Mining minutes of the meeting details