S.Y. GHORPADE Chairman
The Sandur Manganese & Iron Ores Limited
I extend to you all a very cordial welcome to the 65th Annual GeneralMeeting of the Company.
The year ended with a total income of about Rs. 720 crore (cr) an increase of Rs.97 cror 16% over the previous year. This is attributed to improved sales volume and prices ofall products comprising ores and silico-manganese.
Production of ores were contained within the Maximum Permissible Annual Production(MPAP) limit of 1.6 million tonnes (Mt) for iron ore and 0.285 Mt for manganese ore. Withsales of 1.5 Mt iron ore and 263 kilotonne (kt) of Mn ore the turnover was Rs.319 cr andRs.165 cr respectively. This was bolstered by silicomangnese sales of 33 kt to yield aturnover of Rs.203 cr. Higher Mn ore output and better grades helped this record sales.
Because the Company made a net profit after tax of about Rs. 142 cr against Rs. 107 crin FY18 the Board of Directors are pleased to recommend 35% final dividend in addition to35% interim dividend for FY19 as morale booster for better things to come.
To promote capital build-up and reinforce the Company's 1-Mt steel plant project inprogress it is important to pursue enhancement of iron ore production from 1.6 Mtpy to3.85 Mtpy. This is all the more important in the light of nearly 40 mining leases inKarnataka expiring in 2020 followed by e-auctioning. It is a gloomy prospect so far assupply disruption of iron ore goes. In this context SMIORE had applied way back in 2009for production enhancement but processing the application was suspended due to theSupreme Court's ban on mining on 29 July 2011. The Company recently followed up theapplication updating all clearances at the behest of Ministry of Environment Forest andClimate Change (MoEFCC). Hopefully the approval for enhancement to 3.85 Mtpy will beobtained soon.
The Government of Karnataka amending the penalty on buyers of ore by the Mines &Geology Department for delayed registration would certainly help not only the buyer butalso the seller for enlarging the market potential.
This will strengthen the Company's resolve to undertake infrastructural development atmines such as (i) Downhill Conveyor System (DCS) mandatory for green transportation; (ii)concreting or black topping of about 30 km Mines' internal roads and joint participationin construction of about 35 km of vital evacuation routes and (iii) housing for workersto improve their living conditions. The Company has allocated a budget of Rs.80 cr forthese projects out of the total capital outlay of Rs. 600 cr in Stage 1 of Phase 1 of the1 Mtpa Steel Plant Project.
On the industrial front the 1-Mt Steel Project approved by the Govt of Karnataka in2014 took off with the construction work of 400-ktpy vertical coke oven batteries (112ovens) in July 2018. After crucial preheating of the ovens 50% of coke output is expectedin November from two sets of batteries and the remaining two by February 2020 to beginfull scale commercial production. Once this is commissioned the power generated by thehot gases from the coke covens will be fully utilized in the ferro alloy plant which isundergoing installation of a new furnace repair & refurbishment of two existingfurnaces.
A new 24-MVA submerged arc furnace (No.5) is being installed on the site of the old20-MVA furnace (No.2) by Ghalsasi Smelters (P) Ltd. The electrode regulation system of theold submerged arc furnaces (No.1 & 3) will be refurbished by the state-of-arttechnology also by Ghalsasi Smelters (P) Ltd. These will be housed in a lower-hooddesign protecting the components from hazardous heat atmosphere for trouble-freemaintenance. This will also be equipped with the modern electrode regulation systemdesigned specifically for Mn alloy smelting. Purpose of this refurbishment andinstallation plan is to ensure that at least two furnaces are in operation at any time tooptimize the use of potential 216 GWH of energy per year and restrict the sale of lessviable surplus energy to the grid.
Cost of gas-fired power is substantially cheaper than the current coal-fired thermalpower. Consequently the production of ferroalloys will become more viable and will have acompetitive edge when prices fluctuate triggered by demand-supply forces.
Given the conditions for steady- state operations both consistent quality andproductivity are assured. Relatively maintenance- free operation is an elixir forcontinuous process operations.
The 400-kt metallurgical coke produced per annum would be sold to neighbouring steelplants and foundries. The installed capacity would constitute 50 per cent of local demandother than that of JSW-the major steel producer. Once the power plant and the ferroalloyplant operations are stabilized we could confidently proceed with the installation of theblast furnace for pig iron smelting in Stage II of Phase-1. This would require half thecoke produced and promote value addition of iron ore by way of 70% sinter feed.
Steel production is a measure of economic health of a nation. It is heavily dependenton infrastructural growth. Planning for future challenges the National Steel Policy 2017envisages 300 Mt of steel production by 2030-31. This is aimed at raising the per capitaconsumption to 168 kg from 64 kg today yet much lower than the global average of 214 kg.Buoyancy in construction housing rail and road making ports and automobile sectors wouldensure a healthy GDP (Gross Development Product).
Corporate Social Responsibility & Corporate Environment Responsibility
The Company has spent Rs. 1.7 cr in FY19 and is required to spend Rs.3.1cr in FY20corresponding to 2% of previous three-years average net profit. Most of this will beexpended for 600 scholarships (53%) to needy children under the Sandur Vidya ProtsahaScholarship Scheme and the MYG Special Training Centre for rehabilitation of child labour;the rest (47%) for Health and Sanitation Program and other local needs.
Besides CSR the Company has also embarked upon local area development projects in theneighborhood of its ferroalloy and steel plant projects including mining buffer zoneareas as part of its Corporate Environment Responsibility (CER) mandated by the Ministryof Environment Forest and Climate Change. The budget for CER is Rs.70 crore representing3% of the capital expenditure of of the steel plant project. The Company has already spentRs.7 cr and has earmarked Rs.16 cr for FY20. The actual and budgetary expenditure aredeployed towards education health hygiene and other developmental works crucial to thelocal area and will progressively increase with capital investment in the steel project.Indeed industrial growth in the region will promote economic growth that benefits thecommunity and the society at large.
As is customary employee welfare is the Company's major ethos of business. To providebetter and more effective food security the Company has enlarged its ration supplyscheme. The earlier package comprised rice jowar wheat toor dal jaggery cooking oilgram dal chillies and rava. Besides these nine essential commodities six more areincluded in the new scheme- sugar urad dal puffed rice moong dal groundnuts and friedgram dal (or puttane).
The nutritious diet of essential commodities is designed to meet the monthlyrequirement of a family of five persons. The hallmark of this revised scheme is providingan eligible employee with subsidized food package at Rs.145 based on 1972 prices asagainst actual cost of Rs.3200 at today's market rates. Significantly the employee'stake-home salary is bolstered and his measure of satisfaction intensified. Thus theCompany's basic objective of raising the standard of living is achieved.
I take this opportunity to thank all Directors on the Board for their keen interest andvaluable guidance. I would also like to thank our bankers who have come forward to supportus in financing Stage 1 of the Project. We are indeed grateful to the Central and StateGovernments for their constant support. Also I wish to convey my thanks to our loyalworkforce which has extended its wholehearted cooperation for a better future.