Q&A: Ambar Timblo, MD, Fomento Resources Ltd

'Forget price, there is no domestic market for Goan iron ore'

As Goa’s third-largest miner, Fomento Resources Ltd accounts for a fifth of the 54 million-tonne iron-ore exports from the tiny Konkan state which is in the thick of illegal mining allegations of late. The company’s managing director, Ambar Timblo, tells Sudheer Pal Singh about the mix of complex issues haunting the state’s mining sector. Edited excerpts:

What is the major cause of suspicion of illegal mining in Goa?
One of the principal causes of suspicion is small-sized mines of less than 100 hectares. It is characteristic of Goa, and is one reason why dumps are placed outside the lease area, thus causing suspicion of illegalities. A miner needs area to do conservative and efficient mining. There are provisions in the law which allow a miner to place rejection stacks outside the lease. But it has to be done as part of the mining plan.

 

If this is a part of the approved mining plan, why is it being called an irregularity?
There is a belief that in the name of moving these dumps, the miners are excavating more ore than allowed under environment clearance. So what we need is more of a policing system to keep this under check. One needs to put more checks and balances to monitor movement.

In fact, a miner would first like to get rid of these rejects, rather than moving new ore. But the movement of dumps has been suspended because of the ongoing tension. That is why there has been a substantial drop in mining activity in Goa. What is worse is that Australia is slowly taking over the iron ore export market developed by Goa.

What is the likely overall impact of this order to ban dump movement on the company?
It would wash off 35 per cent of the cargo movement straight away, on the minimum. We sold 11.5 million tonnes of ore last year. It will be brought down to around eight mt if the situation does not improve.

The benefit of getting rid of this reject is huge as it makes mining more sustainable over a period of time. On the contrary, what we have is a ban on dump export.

There are reports suggesting that a reason for the problem is that prices getting realised in exports are upto 20 per cent higher as compared to the market rate. Do you agree?
Forget about price; there is no domestic market for the Goan ore. Domestic steel producers do not want our ore owing to its low iron content. But our cost of production — without considering the statutory cost of taxes, etc — is between $15 and $25. With statutory costs, the overall cost of production goes up to $30. If a ban is imposed, miners will have to shut shop. So, neither can we sell our ore to customers domestically nor can we forward integrate as setting up steel plants in Goa is not allowed as a matter of policy.

How justified is the figure of Ra 25,000 crore that is being cited as the worth of mineral illegally mined and exported from Goa?
I am at a loss to understand the source of the figure. The variation in the royalty received by the state government over the past two years and the value of exports is hardly two per cent. This is because all Goan ore goes in the direction of sea for exports. Therefore, there are checks of customs, ports, etc. I do not understand what is the alleged scam all about.