India: SAIL expected to resume iron ore auctions from Jharkhand

State-run Steel Authority of India Ltd (SAIL) may soon receive permission for resumption of iron ore sales through auctions from its mines in Jharkhand, sources intimated SteelMint. While SAIL has already received permission for conducting iron ore auctions from mines in Odisha under the company's Raw Materials Division (RMD), permission for the same is still awaited from the Jharkhand government.

Ministry tweaks rules

It bears recall that the Ministry of Mines (MoM) had tweaked the rules pertaining to obtaining compulsory permission from concerned state governments before conducting minerals auctions. The ministry had clarified that companies such as SAIL could intimate the state governments and the IBM prior to holding auctions but would need to secure permission in order to carry on conducting auctions in the long run.

Following the easing of rules, SAIL conducted iron ore auctions from its Kiriburu and Meghahatuburu mines in Jharkhand in Dec'20, selling 288,000 t of iron ore fines (Fe 61%), as reported by SteelMint. As a matter of fact, fresh allocations from mines in Jharkhand contributed to total Dec'20 iron ore sales at auctions crossing the 800,000 t mark.

However, as permission from the Jharkhand government was still pending, the steel major discontinued allocations for auctions from its Jharkhand mines in subsequent months.

The Ministry of Mines (MoM) has allowed SAIL to sell up to 50% of its annual iron ore production in the open market subject to payment of 150% of existing royalty as 'additional amount' under the Sixth Schedule of the MMDR Amendment Act, 2021. The second round of MMDR Amendment Act announced recently allows mines that were reserved as captive prior to 2015 to sell 50% of their annual production in the open market upon payment of additional amount after the Amendment came into effect in late-Mar'21.

Fresh and dump fines

In addition, the steel major has been accorded permission to sell 70 mn t of iron ore dumps and tailings from its mines in Jharkhand, Chhattisgarh and Odisha. As SAIL lacks requisite pelletisation infrastructure, merchant sales of dump ore are in the interests of pellet producers as well as steel manufacturers without captive mines who may choose to beneficiate such ore for steelmaking. This, by and large, happens to be the line of reasoning followed by the central government.

It deserves mention that SAIL Chairman Soma Mondal laid the foundation stone for a 1 mn t per annum pellet plant in Chhattisgarh on 12 Jun'21 to enable conversion of large volumes of slimes lying at the Dalli and Rajhara mines into pellets.

Similarly, SAIL had earlier entered into a joint venture with state-owned KIOCL to set up a 4 mn t pellet plant, most likely on the premises of Bokaro Steel Plant in Jharkhand, for which feasibility studies had been undertaken. Yet absence of pelletisation facilities makes auction of low-grade iron ore an attractive prospect, especially because such ore had zero value till Sept'19 when the government opened a window of opportunity for SAIL by allowing the steelmaker to sell a fixed quantum of both fresh and dump fines in the merchant market.

SAIL's Gua mine in Jharkhand has stocks of around 30 mn t of iron ore fines (Fe 60-61%), while the Kiriburu and Meghahatuburu mines have a combined stock of around 5 mn t of iron ore tailings, as per SteelMint reports.

The dump fines in Jharkhand are mainly found at the Durgaiburu mining lease of the extensive Gua block which has estimated iron ore reserves of over 186 mn t. The iron ore dumps had been accumulating prior to ISP, Burnpur's merger with SAIL in 2006 due to lack of facilities at ISP to beneficiate dump fines.

Outlook

Once the steel major receives permission for conducting iron ore auctions from the Jharkhand government, iron ore fines supplies are expected to ease, SteelMint believes. Tight ore supplies have been a major concern for eastern- and central India-based steel mills. Needless to say, the enhanced sale of iron ore at periodic auctions will bolster the steel major's revenue collections at a time when domestic iron ore prices are at record highs.

SAIL has sold 5.5 mn t of iron ore at auctions between May'20 and May'21, as per SteelMint reports.