Merchant mines in Odisha may reopen next month as local govt issues orders

Topics Odisha mines

Before issue of vesting orders, the state government had initiated steps to collect Net Present Value (NPV) from the bidders
Merchant mines in Odisha are set to recommence operations towards the middle of next month. The local government here has issued vesting orders necessary to restart mining activity at the leases.

Before the expiry of their leases on March 31 this year, the Odisha government had held online auctions of 24 merchant blocks containing deposits of iron ore, manganese and chromite. To facilitate seamless change in ownership and continuity in mining operations, the Centre had extended the validity of all statutory approvals, including critical ones like environment and forestry clearances by two years.

However, the onset and rapid spread of Covid-19 pandemic queered the pitch for the smooth run of mining operations. As Odisha pioneered the announcement and enforcement of lockdown, most administrative departments barring those dealing with essential services faced shutdown. The lockdown to contain the viral contagion delayed paperwork needed to grant formal approvals to keep the mines running again.

Lately, the state steel & mines department has issued vesting orders to all successful bidders excepting one block won by Goa-based merchant miner Fomento Resources. The bidder needs to comply with all the terms and conditions enlisted by the state authorities. Fomento had emerged as the preferred bidder for Nadidih iron ore block, quoting a steep premium of 145 per cent.

“We expect to execute lease deed agreements with all successful bidders early next month. The miners are mandated to commence activity at their mines within 15 days of inking the lease agreements. Going by that timeline, merchant mines should be able to start mining around mid-July”, said an official privy to the development.

Before issue of vesting orders, the state government had initiated steps to collect Net Present Value (NPV) from the bidders. NPV is the amount to be forked out in lieu of diversion of forest land for non-forest activity. Besides NPV, the new leaseholders have to pay incremental fees and bank guarantee before they could lay their hands on ore extraction. When the state began auctions of mineral blocks, it had set the reserve or floor price at 0.5 per cent of the estimated value of the resource. Bidders had shelled out 10 per cent of this value. Now, they need to pay an additional 10 per cent plus a matching bank guarantee of the combined sum (10 per cent + 10 per cent).

Online auctions of lapsing merchant blocks in Odisha had generated frenetic bidding interest. Average premiums at auctions climbed to 104 per cent. Most of the incumbent leaseholders- Aditya Birla Group owned Essel Mining & Industries Ltd and Rungta Mines lost their prized mines as aggressive bidders placed big bets to bag the coveted resources. Sajjan Jindal led JSW Steel emerged as the key disruptor at online auctions, winning four iron ore mines. ArcelorMittal and Jindal Steel & Power Ltd (JSPL) secured one block each. Among existing lessees, Serajuddin & Company and Tata Steel managed to hold on to their iron ore and chromite leases respectively amid intense competitive bidding.

The reopening of merchant mines is expected to assuage supply woes and cool prices. Inventory accumulated by steel players dependent on the merchant ore market is tapering. Besides, seaborne iron ore trade had seen a flare up in prices after supply crunch from Brazil that is combating a spike in Covid positive cases. The buoyancy in international prices had triggered concerns on a possible hike in domestic iron ore prices which have been subdued on a muted demand from the steel industry. NMDC, the country’s largest commercial iron ore miner, had gone for back to back price cuts for both iron ore lumps and fines in April and May as demand petered out.

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