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JSW Steel surrendered one of the four iron ore mines it had won through competitive bidding in Odisha last year due to commitment of high premium for poor quality ore.
The company, which makes 14 million tonnes per annum (mtpa) of steel without any captive iron mine, bid aggressively and won four mines in Odisha with a long-term plan to set up 12 mtpa greenfield steel plant entailing an investment of ₹50,000 crore.
The Gonua iron ore block, which is being surrendered by JSW Steel, was won with the committed premium of 130 per cent and has estimated reserves of 118 million tonnes (mt). Currently, the company mines about 0.5 mtpa.
The company is believed to have paid stamp duty of ₹110 crore and performance guarantee of about ₹50 crore for the Gonua mine, sources said.
With iron prices shooting through the roof, JSW Steel has to pay 130 per cent premium to the State Government for every tonne of ore mined. Moreover, as per the agreement signed, the company has to mandatorily mine a minimum quantity of iron ore from the mine annually to ensure assured revenue for the State government.
In a letter written to Directorate of Mines last month, JSW Steel said, “We intend to surrender the entire area of Gonua iron ore mining lease under Rule-12 of the Mineral Concession Rules, 2016 with effect from August 12, 2022 and we will submit the final mine closure plan before the Indian Bureau of Mines (IBM).”
The company had signed the mining lease deed last June and commenced mining operation in July, 2020.
‘Economically unviable’
The mining operation has become economically unviable due to high shale in bottom benches, low grade mineral in top benches and serious logistics issues due to space constraints, said the letter.
JSW Steel, which has enhanced its production capacity to 18 mtpa now, has three mines in Odisha including Nuagaon iron ore with reserves of 793 mt, Narayanposhi iron ore block with 190 mt deposits and Jajanga block with reserves of 39.42 mt.
Several successful bidders of working mines, whose mining leases expired last March, have not started production even after 7-8 months of auction and execution of mining leases in their favour.
Many of the successful bidders who have started production, have not maintained the production and dispatch quantity up to the level required under Rule 12A of the Mineral Concession Rule, 2021.
As part of pre-legislative consultation draft proposed to the State government and stakeholders, the Centre has mandated successful bidders to make payment equivalent to the revenue share and other statutory levies that would have been payable at the prescribed level of minimum production/dispatch targets on quarterly basis.
“In case lessee does not maintain minimum dispatch prescribed in the rule for three consecutive quarters, State government may terminate such lease after giving a reasonable opportunity of being heard,” the draft Bill said.
Of the 46 operating mines, whose leases expired last March, 24 mines are in Odisha.
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