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NMDC freeze on Donimalai mining: Karnataka iron ore prices to rise 10-15%

JSW Steel says it has made arrangements to source iron ore from outside Karnakata to ensure uninterrupted supply for its steel plant

T E Narasimhan  |  Chennai 

iron ore mining, mining, iron ore
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Public sector mining major NMDC's suspension of at Donimalai, Karnataka could result in an increase of 10-15 per cent in iron ore prices, say industry sources. Current prices of the mineral in Karnataka are Rs 1,500-Rs 2,500 per tonne, depending on grade. NMDC's decision came after the imposed 80 per cent premium on from the mine.

Meanwhile, JSW Steel said it has made alternate arrangements to source iron ore from outside Karnakata to ensure an uninterrupted supply for its steel plant.

ALSO READ: After state govt's levy, NMDC suspends iron ore-mining in Karnataka

While NMDC officials were not available for comment, Basant Poddar, former chairman and member, Federation of Indian Mineral Industries (FIMI) South, says “It's a prerogative decision of the State Government. As per the auction regime act 2015, the government cannot levy any premium on the existing mines, though it can do so on new/renewed mine leases.”

He said imposing 80 per cent premium will adversely affect NMDC revenue, and will result in additional costs. Source estimate that NMDC would be losing Rs 1,348 per tonne, leading to a Rs 9.44 billion loss per annum. Donimalai capacity is about seven million tonnes.

are already paying 15 per cent towards royalty, 20 per cent for SPV, 4.5 per cent towards DMF (District Mineral Foundation) and 0.5 per cent to NMET National Mineral Exploration Trust.

This suspension will cause a temporary disruption in the supply of raw material, and will lead to 10-15 per cent hike in price, Poddar said.


ALSO READ: Iron ore struggles to clamber out of the pits on restricted e-auction

The had extended the lease till November 2038, on payment of 80 per cent of the average sale value as published by Indian Bureau of Mines, said NMDC.

NMDC urged Karnataka Chief Minister to reconsider the move, stating it is not economically viable. The Chief Minister, NMDC says, in turn has directed all concerned to relook at the legal and other issues.

JSW Impact

“The temporary suspension of mining at Donimalai will further increase shortages of iron ore in Karnataka. JSW Steel has made arrangements to source more iron ore from outside the state to ensure an uninterrupted supply for its plant," says Seshagiri Rao, Joint MD, JSW Steel Group CFO.

ALSO READ: JSW Steel emerges as preferred bidder for iron ore mine in Karnataka

Industry sources say JSW has been buying around 5 mn tonnes of iron ore a year from NMDC's Donamalai mine.

Recently JSW won six iron ore mines, of which two are operational, yielding 700,000 tonnes of ore. When all six mines start operations from the middle of FY20, the company will get around 5.1 million tonnes.

So, on a net level, JSW may have to import one million tonnes of the mineral or buy from Odisha.

First Published: Wed, November 21 2018. 17:31 IST
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