India's Odisha starts auction of iron ore mines

India's eastern state of Odisha has put one of the country's largest iron ore blocks up for auction, as the state begins the process of finding new owners for several mining leases that will expire on 31 March next year.

The Nuagaon iron ore mine, which is currently operated by the KJS Ahluwalia group, has a reserve estimate of 792mn t, with 51.79pc of the reserve consisting of 45-55pc Fe fines and lump and the rest at 55pc or higher Fe grades.

Finding a single buyer for such a large mine in an open auction could be challenging with steel mills' profit margins squeezed by sluggish domestic demand as India's economic slowdown continues. The tender document for the mine does not specify any end use for the ore, which allows large steel mills as well as merchant mining firms to bid for the asset.

Odisha has put six other ore blocks up for auction, of which five — Thakurani, Jaribahal, Roida II, Narayanposhi and Ganua — have limited the use of ores for steel and pellet-producing companies, barring merchant mines from bidding for these assets.

The last date for submitting bids for the seven blocks is 18 November.

Several mining leases in Odisha and Karnataka states, which are two of India's main iron ore and steel producers, are expiring on 31 March 2020 that could lead to a shortfall of over 60mn t/yr of iron ore supplies. Most of the expiring leases will be auctioned, although state governments will possibly grant some of the leases to state-controlled companies without going through an auction process. Karnataka in south India has not yet put any of the expiring leases up for auction.

If the auctions are not finalised in time and extend into the 2020-21 fiscal year starting 1 April there could be an escalation in domestic ore prices and the possibility of increased iron ore imports. There has been no official word yet on the regulatory requirements for the new owners of these mines, most of which are already operational. Mines typically take up to two years to start operations from the date of start of an auction.

source: Argus Media