OMC to open four new mines, increase output to beat iron ore crunch

State-controlled Odisha Mining Corporation (OMC) aims to open four new iron ore mines in this financial year as it anticipates a deficit in iron and supplies from March 2020. The validity of merchant mines is lapsing next year which is why OMC also wants to scale up output at its existing flagship operations like Daitari and Gandhamardhan.

“Last financial year, our production is estimated to be in upwards of 10 million tonnes (mt). By 2020-21, we are targeting an iron ore output of 20 mt. Of late, OMC has been obtaining environment and forestry clearances for its mines with alacrity. The approvals will enable us to kick-start operations from four new iron ore leases in 2019-20”, said a senior OMC executive.

OMC committing to scale iron ore production could soothe the frayed nerves of steel and other industries vexed over the supply crisis that may erupt with validity of merchant mines expiring by March 31, 2020. Odisha has 16 operative iron ore mines with an approved limit to mine 79.80 mt.

For ramping up production at its older mines like Daitari and Gandhamardhan, OMC is banking on enhanced mechanisation. The mining PSU is embarking on the MDO (Mine Developer Cum Operator) model for the iron ore sector to accelerate output. The MDO currently is in vogue at many coal mines in the country but it has not been tested on a massive scale for iron ore operations.

“We have recently floated tenders to select an MDO partner. OMC is keen to rope in private operators and involve them in streamlining our operations”, the official added.

With the envisaged ramp-up in output, OMC expects its overall sales to double to Rs 8,000 crore, from around Rs 4,000 crore now. Besides iron ore, OMC runs chromite mines. It has also forayed into commercial bauxite mining, conducting auctions for liquidating the raw material for alumina refineries. Bauxite auctions by OMC are biennial in frequency and are open to all aluminium producers. Traders can participate after the requirements of the end use industries are exhausted. Besides the auction mode, OMC has a long-term agreement with Vedanta Ltd to supply bauxite for feeding the latter’s Lanjigarh refinery in southern Odisha. The pact mandates OMC to offer 70 per cent of the bauxite mined from its captive lease at Kodingamali near Rayagada, also in the state’s southern belt, to the Vedanta-owned refinery.

But its iron sales have kept OMC’s cash registers buzzing. Major steel producers like Jindal Steel & Power (JSPL, Tata Steel, Jindal Stainless Ltd (JSL) and a clutch of other mid-sized and smaller scale steel manufacturers have been sourcing iron ore from OMC either at electronic auctions or via long-term pacts.

OMC is also a key iron ore supplier to steel plants and other end user industries with operations outside of Odisha. 

 253 iron ore mines are lapsing nation wide by March 2020. Of the total mines headed for expiry, only 33 are working.

“Lapsing of large mining capacity is bound to create marked demand-supply imbalance in iron ore. These mines have to be auctioned before March 31, 2020 to ensure seamless production and continuity in operations. The process will also help avoid retrenchment and law & order problems stemming from loss of jobs”, said an industry source.

By 2020, the domestic iron ore output is seen rising to 225 mt as per an Icra report as merchant producers will step up extraction in view of thier lapsing mines. Odisha, the largest producer, will contribute almost half to this target.