Price cut improves interest in Goa iron ore auction

A sharply lower base price yielded results in the eighth round of iron ore auctions conducted by the Goa government on Tuesday. Bidders booked 250,000 tonnes of the 1.1 million tonnes of iron ore for sale.

The response was better than in the previous auction, when bidders had bought 55,000 tonnes of 1.01 million tonnes put for sale. The government had reduced the base price of low grade ore by up to 72 per cent for the latest auction.

"Weak ore prices globally and subdued demand from China could be reasons for the response. Considering the previous auction, the response was good," said an official. The base price for ore with 63 per cent iron content was reduced to Rs 500 a tonne in the eighth auction from Rs 1,800 in the previous one. Base prices for ore with 59-61 per cent iron were likewise set at Rs 500-860 a tonne,  down from Rs 1,530.

"We reduced the base price to attract participation. But bidders were not interested in buying more probably because of unfavourable market conditions and falling global iron ore prices," the official said. The government has decided to pay Rs 250 a tonne as excavation expenses for the ore to the original miners. When mining was banned in the state in 2012, the government took control of 15 million tonnes of ore from private miners. Of this nearly six million tonnes have been sold. The rest is in various stages of being auctioned.

"While the selling price was not made public, it is estimated bidders booked ore at near the base price," said Haresh Melwani, chief executive officer, HL Nathurmal & Co, a miner in Goa.

The state government has expedited ore auctions to clear the mine sites ahead of recommencement of mining in the state by the end of September. Ore is, however, yet to be lifted from the sites due to bureaucratic and legislative hurdles.