NMDC to resume operations at the Donimalai iron ore mine after 9 months

The high court of Karnataka has cleared the way for public sector miner NMDC to resume operations at the Donimalai iron ore mine, its largest in the state.

The mine was closed by NMDC for the past nine months, after a state government order to impose an 80 per cent premium levy of the average sale price from there.

With around 37 million tonnes (mt) of annual capacity, the mine accounts for a fifth of Karanataka's iron ore production capacity. 

The development, say mining companies, will not put pressure on prices in Karanataka since demand is high and export from the state is also likely to restart. It would cheer steel makers in the state, beside many others, including employees who have been eagerly waiting for this, says N Baijendra Kumar, chairman and managing director of NMDC. 

Estimated deposits at this mine are around 143 mt, worth Rs 40,000 crore. NMDC got a 50-year lease in 1968, which ended in early November 2018. Th state decided to levy a premium on the ore extracted from the mine, while extending the lease. NMDC did not agree, stopped mining and petitioned the high court (HC), which has given an order favourable to NMDC. The company hopes to restart the mine in a month. It says th closure cost it two mt oof ore and the state government lost Rs 420 crore. 

At present, iron ore prices in Karnataka are stagnant, while the global price is surging. Last year, the average international price of 62-grade Fe (ore with 62 per cent iron) was $71.6 a tonne; this is now $100.2. In Karnataka, however, this year's average price of NMDC fine ore is Rs 2,480 a tonne, when it was Rs 2,533 last year. 

Basant Poddar, former head of the southern chapter of the Federation of Indian Mineral Industries, says ore demand in Karnataka is limited. The demand and supply ratio is fixed. In this scenario, neither production of steel nor of iron ore has risen over the years. Demand for iron ore in the state is not driven by market sentiment but majorly controlled via sale mechanisms such as e-auction. So, the price in Karnataka has been stable for two to three years. 

Poddar said resuming of the Donimalai operation would not affect the price. He expects the Vizag and Kudremukh steel units to consume most of NMDC's production. He also hopes exports will restart, with the Supreme Court-apppointed monitoring committee having recommended that these be allowed up to an amount equal to what was imported in 2018-19. Petitions have been filed at the apex court for export permits and a hearing is expected this month or early next month.