Tata Steel Arm Bags The Sukinda Chromite Mine At 93.75% Premium

- Mar 19, 2020-

Tata Steelsubsidiary TS Alloyshas retained the mining rights for the 95.81-million tonne Sukinda chromite deposit in Odisha, people aware of the matter told ET. 

The company emerged as the highest bidder in the auction held on Tuesday, committing to pay the Odisha government 93.75% of the average sale price set by the Indian Bureau of Mines. The mining right is for 50 years. 

A spokesperson for Tata Steel said the company has not been officially informed about the auction results. 

Tuesday’s auction, which saw participation from Vedanta, MSPL and Rungta, is probably the shortest so far. It began from a floor price of 93.65% and ended after just two bids, according to those in the know. 

This takes Tata Steel’s chromite resources from the three mines bagged through auctions to a total of 108.6 million tonnes. Although the steelmaker has its own ferrochrome plants in the state--at Bamnipal and Gopalpur--all three are non-captive leases whose material can be sold in the open market. 

The company will be mining these, paying the state an average premium of 93%, or Rs 93 on Rs 100 worth of chromite mined -- in addition to taxes and royalty. 

Tata Steel has been mining the Sukinda deposit, sometime as a captive lease and then as merchant, since the 1950s. It has a small township in Odisha’s chromite district of Sukinda, with a little school and a small hospital. At 120 m deep, operations at the open-cast mine are set to become costlier when it is eventually converted into an underground mine. 

Auctions of working leases lapsing on March 31 started with two chromite blocks. TS Alloys bagged both --the Kamarda deposit (for 96.8%) currently being mined by BC Mohanty, and the Saruabil mine (for 88.5%), a leasehold of Misrilall Mines. 

Odisha’s steel and mines department had initially decided to reserve the Sukinda deposit for state-owned Odisha Mineral Exploration Corporation Ltd. The latter, a relatively new entity set up to expedite greater exploration of mineral reserves that can be auctioned, had even advertised for mining operators and new employees before the state changed its mind. The block was likely “de-reserved”, according to sources, after the Centre’s ordinance extended for two years environmental clearances to the next lessees but only for leases acquired through auctions and not those allocated through reservations. The department has offered no explanation for either reserving or de-reserving the block. 

The Guali iron ore mine, similarly reserved, has now been put up for auction and is expected to see keen competition. Bids will start from 105% floor price in the forward auction scheduled for Wednesday. 

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