Tata Steel is weighing option of getting into commercial mining: CFO

With 100 years of expertise in captive mining, Tata Steel is now weighing the option of getting into commercial mining.

Evaluation of a wider mining strategy is a natural adjacency for Tata Steel. The focus will be to develop a cost competitive, technology-driven, resource and capital efficient operating model, said Tata Steel Executive Director and Chief Financial Officer Koushik Chatterjee.

Chatterjee was responding to shareholders’ queries at the Tata Metaliks annual general meeting. Shareholders had asked whether Tata Steel and Tata Metaliks would participate in mining auctions. 

Tata Metaliks is looking at backward integration and will participate in the bidding for captive blocks. The commercial mining business could be housed under a separate entity, with Tata Steel already working on a plan to reorganise its operating subsidiaries in India into long products, downstream, infrastructure and utilities, and mining. The captive mines would, however, have to be with Tata Steel. 

Though Tata Steel is a 30-million tonne mining firm, it is known as a steel company as the mines are captive. It is likely to change in the future.

Tata Steel’s raw materials operations in India are spread in three broad areas — iron ore, chromite and coal. While iron ore and coal are for captive use, there is a bit of merchant mining that Tata Steel does even today and that is the chrome ore, which it mines for the ferro alloys division. The chromite and manganese mines and their operations have been amalgamated under the ferro alloys and minerals division, which is a separate strategic business unit.

The captive mines are at Jharia and West Bokaro in Jharkhand, located within 200km from Jamshedpur. The iron ore units are located at Noamundi, Joda, Khondbond and Katamati in Jharkhand and Odisha. “Over decades, Tata Steel has built capabilities and leadership capacity in mining. Our mining practices and eco-preservation initiatives are respected by all stakeholders,” Chatterjee said.

Development of the mining sector provides an opportunity for multiplier effect on the economy across the larger supply chain and it is heartening to see the government taking steps to invite wider investments in the mining sector, he said.

Last year, the government had approved the methodology for auction of coal mines/blocks under the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, what was touted to be one of the most significant coal sector reforms. India has over 300 billion tonnes of coal reserves. 

Asked whether the commercial mining business would be a separate entity, Chatterjee said, “We will see whether we do it in Tata Steel or make it a separate entity.” Tata Steel, however, is in a consolidation mode. So, Tata Steel would be the big integrated player with its plants at three sites — Jamshedpur, Kaliganagar and Angul and then the subsidiaries would be reorganised to simplify the corporate structure. 

For instance, Usha Martin, acquired earlier by Tata Sponge, will be renamed Tata Steel Long Products and it is being mooted as a vehicle for growth in long products. 

Apart from specialised longs like what Usha Martin is producing, it would have wires and recycled scrap. Eventually, scrap-based steelmaking would also be a part. Similarly, the other subsidiaries would be reorganised such that there would be three main verticals like downstream, infrastructure and utilities and mining. The timeframe for the reorganisation, however, would depend on regulatory approvals.