Goa to sell 6 lakh tonnes of iron ore on May 12

Procedural delays and lower prices in the spot market dampens exports

The Goa government is readying to hold the third e-auction for sale of 600,000 tonnes of iron ore on May 12, 2014. This is also the first time after the Supreme Court lifted ban on mining in the state on April 21.

Out of 600,000 tonnes being auctioned, fines constitute a major portion at 527,304 tonnes and 84,057 tonnes are lumps. The lowest grade (Fe) put on auction is 43 per cent Fe and highest grade is 62 per cent Fe. The average grade is 54-55 per cent Fe, according to Directorate of Mines and Geology, Government of Goa, which has announced the schedule of e-auctions.

Out of the earlier two auctions held in February and March this year, a total of 1.6 million tonnes have been auctioned. But only 160,000 tonnes have been moved out of the state for exports.

The exporters are not too keen to fast track exports from Goa due to delay in securing various permissions before exporting the material. Also, lower spot prices have dampened the spirits of exporters. Currently, the 58 per cent Fe iron ore is traded at $76 per tonne FOB (freight on board), while 63 per cent Fe is fetching around $95 per tonne.

This means, a majority of the cargo is still lying at the port and the third round of auction could be very difficult or risky for bidders as Goa port might stop movement by June 15 due to monsoons.

Only one shipment of 71,300 tonnes have been moved in April and one more shipment is preparing to be loaded in the next few days.

?If some of the traders want to take risk and acquire cargoes then this could be the last round of auction but again they would only buy small quantities as the movement of cargoes from Goa is very slow and delays are persistent,? said Prakash Duvvuri, head of research, OreTeam Research, a Delhi-based iron ore research firm.

Amona & Kotamby Jetties have the maximum material as of now and definitely bidders are looking at alternate ways to move the cargoes bought at previous auctions. Till now, the 2 auctions have brought in nearly Rs 260.68 crore from sales, he said.

Meanwhile, following the directions from the Apex Court, all the auction proceeds will remain with the state government and only an average mining cost will go the miners. About 10 per cent of the sale proceeds will go towards the Goa Iron Ore Protection Fund for environment conservation.

Miners (or cargo suppliers) are unsure as to when they would receive their payments. The SC order has stated that only average mining costs would be given to the suppliers if found illegal.

Till the legality of the mines is not resolved the money might not be paid back to them. The money will be kept in a separate account monitored by the monitoring committee and paid only when the final judgment on the legality of the mines is passed. If the miner is found to be illegal as per the SC order then possibly only an average mining cost would be paid to him and rest of the auction amount kept by the state.

The miners and bidders are facing several challenges in Goa, as there is no clarity as to who would pay the storage charges for the iron ore lying at jetties and ports. Although it is said that the storage charges at the port & jetties shall not be paid / borne by the bidders, but the confusion is still existing. As of now, the charges are not to be paid and if anyone has paid then it could be reimbursed. Storage charges outside port are not to be paid, OreTeam analyst pointed out.

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