Engineering & Mining Journal

JAN 2019

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INDIA MINING REPORT 44 E&MJ • JANUARY 2019 www.e-mj.com tive" suggested the following to increase the financial attractiveness of the sector: • Tax holidays for exploration and mineral production in initial years of the project; • Enabling full transferability of mineral concessions acquired at the auction to another entity at a pre-determined fees to ensure that no concession is disrupt- ed in case of consolidation in the indus- try through mergers and acquisitions; • A single rate of tax subsuming all taxes payable at every stage of mining operations; • Adoption of the Canadian TSX enab- ling venture capitalists and private companies to raise funds dedicated to mineral exploration; • Aligning the effective tax rate payable by a mining company be benchmarked to the global average; and • Replacing flat rate of 15% royalty on iron ore with a graded rate depending on ferrous content of the ore mined. Iron Ore The fourth largest producer of iron ore in the world with 8% of world's depos- it has turned from a net exporter of the steel-making raw material to a net im- porter, indicating the impediments of in- creasing production from domestic mines. Meanwhile, the Indian government has set an ambitious target of domestic steel pro- duction of 300 million metric tons per year (mt/y) from 90 million mt/y at present. Indian iron ore production during 2017-2018 has been pegged at 210 mil- lion mt, but the moot point was that growth in domestic production has been ranging between 2%-5% over the past five years. During April-August 2018, Indian iron ore imports surged 190% to 6.34 million mt and forecast to cross the 12-million-mt mark during the full fiscal year. In con- trast, iron ore exports from the country fell 40% during this period at 4 million mt. "Imports would not have been a ne- cessity had iron ore been available in the domestic market, at competitive prices. That is why we are asking domestic min- ing companies to adjust the price of iron ore in line with quality of ore. At the same time, the problem is that even if iron ore is getting mined, there are transportation issues and costs of sourcing from mines and comparative logistical costs of im- ports are more competitive," Seshagiri Rao, joint managing director, of private steel producer, JSW Ltd. said. However, the present Gordion's Knot of the Indian mining sector is how does the government, both state and federal, get iron ore mines in coastal state of Goa back into operation. Goa mines accounting for an estimat- ed 50 million mt of iron ore, albeit low grade for export markets, have remained closed since March 2018. This was af- ter the Supreme Court ruled in February 2018, that renewal of lease holds of some 88 mines in Goa were done not through the now mandatory auction route and di- rected closure of all these mines until the government canceled the renewed mining leases of existing holders and conducted auction to allot the mining leases again. The seemingly intractable imbroglio before the governments entailed either amend related legislations that will grant legality to the last non-auction lease re- newals of Goa mines but then at the very least dilute the provisions of the law that entailed that all mineral resources should be allocated through competitive bidding. As things stood now, the government promise of resolving legalities and getting Goa mines operational by December 2018 is unlikely to be met. Meanwhile, the mines face uncertain closure, including large mines of Vedanta, and impacting a net loss of an estimated 2% of the resource major's consolidate annual revenues. Largest state-run iron ore producer, NMDC Ltd. has firmed up investments to the tune of $902 million over the next two years as part of its plans to increase pro- duction to 67 million mt/y against present production levels of 37 million mt/y. But the country's largest iron ore pro- ducer was unlikely to significantly increase volumes of raw materials for merchant sales to other steel producers considering that a large part of its projected incremen- tal production would go in for captive con- sumption for NMDC's 3-million-mt Green- field steel mill located in central province of Chhattisgarh and scheduled to go into commercial production next fiscal. NMDC, one of the few Indian gov- ernment-owned companies to have suc- cessfully taken a controlling stake in an overseas company, is using its ASX list- ed Legacy Iron Ore Ltd., headquartered in Perth to spearhead its foray into base metals and gold and take up exploration across Australia. Legacy had made applications to gov- ernment of Western Australia seeking three exploration tenements for tungsten to add to its existing exploration across 19 other tenements Down Under. Bauxite Ironically, even with proven bauxite re- serves of 3.5 billion mt, ranked fifth largest in the world, no mine has been developed in the country over the last sev- eral decades. And its long term impact is coming home to roost with domestic bauxite production falling over the last two consecutive years. During 2017-2018, bauxite produc- tion was estimated at 20.63 million mt, down 16%. The downtrend was clear- ly gaining momentum since production during 2016-2017 was 12% lower than previous fiscal. Most of the bauxite reserves in the country were located in predominantly for- ested areas across eastern India with pre- dominant population of indigenous people leading to classic conflict between devel- opment and protection of local culture and people. The biggest example being bauxite reserves in Niyamgiri Hills in eastern Indi- an province of Odisha, earmarked for Ve- danta's smelters in the region, but caught in political crossfire between pro-devel- opment and environmental activists with the Supreme Court finally stepping in to ban mining in the region leaving Vedanta's smelters in lurch with no raw material. Vedanta's 1-million-mt/y bauxite refinery at Lanjigarh Odisha and adjunct aluminum smelter starved of raw material since baux- ite mining at Niyamgiri Hills was banned but might see the light of day with the Odi- sha government moving rapidly to auction new bauxite mining leases and offering long term bauxite linkages based on competitive bidding for supplies from existing mines controlled by Odisha Mining Corp., the min- ing arm of the local government. In 2018, the local government had announced that 10 bauxite mining leas- es would be put up for auction but little has been heard since then. With bidding for these assets uncertain, Vedanta would therefore in all likelihood have to depend on bidding for supply linkages with OMC to ensure raw material security for its bauxite refinery. As it awaits for domestic raw materi- al resources, the Anil Agarwal controlled resource major has decided to ramp up the capacity of its alumina refinery to 6 million mt/y based on imported bauxite

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