India: OMC floats long-term linkage proposal for iron ore sales from new mines

State-owned mining major Odisha Mining Corporation (OMC) has floated an expression of interest (EoI) for long-term linkage with state-based user industries for supply of iron ore from its new mines Guali, Jilling-Langalota and Tiringpahar - all in Keonjhar district of the state.

Jilling-Langalota and Guali were given over to OMC by the government recently after the new lessees failed to commence production after the Odisha auctions in Mar'20. OMC has allocated material from the two mines at its recent auction on 10 Mar'20, as reported by SteelMint.

Recent initiation of operations at Tiringpahar, after the mine's lease period was extended to 2034, along with the Gandhamardan B block has contributed to boosting OMC's overall supplies. The state PSU miner's iron ore production in 2019-20 was recorded at over 12 mn t.

Grades of iron ore to be supplied by OMC from the 3 mines to long-term linkage consumers are sized ore or calibrated lump ore (CLO) from 10-40 mm and with ferrous content of +62% and iron ore fines (Fe+60%) - characteristically less than 10 mm in size.

Prices of the different grades of iron ore to be supplied are determined by the average weighted prices at periodic e-auctions conducted by OMC and are, therefore, flexible and driven by market dynamics. Prices are inclusive of statutory levies such as royalty, DMF and NMET as well as GST as fixed.

Only Odisha-based end-user industries (steel, sponge iron, etc.) are eligible to enter into long-term linkage for purchase of iron ore from OMC which is for a period of 5 years, with the provision of annual review on a yearly basis. However, the linkage is on a year-to-year basis.

There is a provision for end-users to put in place a mechanised ore evacuation system from OMC's mines for transportation of minerals. The quantity to be offered is determined by a committee appointed by the government for the said purpose. Quantity is also determined by an end-user's 'authorised production capacity' and long-term purchase agreements with other miners in the state, with the shortfall in production thus to be plugged from long-term linkage with OMC.

SteelMint has a copy of the EoI notification issued by OMC which contains the key clause that state-based units and PSUs as well as small industries that have previously failed to become OMC's MoU customers can apply for long-term linkage.

As a rule, the state-owned miner reserves not less than 50% and not more than 70% of saleable minerals for linkage consumers, while the rest is reserved for e-auctions. However, OMC accords differential treatment to integrated steel mills in Odisha as well as 'MoU-signed steel plants' already in operation compared to new consumers.

With OMC inviting EoI for long-term linkage pacts for iron ore sales along with allocating material from the new iron ore mines at period auctions, supplies of the key steel-making ingredient in Odsiha is set to rise thereby benefiting the end-users in the state. OMC has set a target of over 13 mn t of iron ore production in the current fiscal. Production in the Apr'20-Sept'20 period stands at 4.3 mn t. For long term linkage notice, Click here