Orissa Sponge Iron steps up efforts to retain iron ore mine

Debt-ladden Orissa Sponge Iron and Steel is making last ditch efforts to retain its iron ore mine at Keonjhar in Odisha as the allocation will expire on January 11 with no investment made to develop it since 2002.

Bhushan Steel, which is also reeling under debt, plans to acquire majority stake in the company to use the iron ore from the mine at its existing plant and improve its margins.

In an interesting development, OSIS has deposited ₹28.96 crore with the Orissa Compensatory Afforestation Fund Management and Planning Authority for acquiring the forest land required to start mining.

In a letter dated January 2 to the Principal Secretary, Department of Steel and Mines, Government of Odisha, PK Mohanty, Vice-Chairman and Managing Director, OSIS, has confirmed payment of ₹28.96 crore towards the compensation on NPV (net present value) of 308.52 hectares of forest land in Malangtoli iron ore mines over total mining lease area of 459 hectares in Keonjhar district.

He has requested the State government mines department to issue necessary directives for execution of the lease deed before the January 11 deadline.

In a related development, OSIL withdrew the case filed against Bhushan Steel in Securities Appellate Tribunal in conversion of warrants.

In 2009, Bhushan Steel had acquired 35 lakh warrants of Orissa Sponge Iron from the Delhi-based realtor Unitech. The warrants were to be converted into 11.5 per cent stake but was not executed before expiry despite repeated reminders by Bhushan Steel.

Both the companies fought the case at all the available forums before they were directed by the Supreme Court to approach SEBI. Unsatisfied with the SEBI ruling, a case was later filed in SAT.

With the case withdrawn, Bhushan Steel will be able to convert its warrant and enhance the Group holding to 39.60 per cent from 31.77 per cent leading to dilution of promoters holding from 23.66 per cent to 20.94 per cent and that of Monnet Ispat’s from 35.17 per cent to 31.13 per cent. By the virtue of becoming the largest shareholder, Bhushan will get to use the iron ore from OSIS mines.

While the companies are all out to protect their interest in retaining the mine, the high-level inter-departmental committee in New Delhi has turned down the Screening Committee recommendation to allow Bhushan Steel to use the iron ore mine of OSIS as it can be challenged under the recently amended Mines and Mineral (Regulation and Development) Act, sources said. The IDC, which is expected to take a final call early next week, has recommended to auction the iron ore mine with reserves worth about ₹3,000-4,000 crore, he said.

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