JSW Steel’s decision to withdraw application to surrender the Jhajang iron ore mine and thermal coal mine will be a drag on the company’s financials. It will have to pay royalty as per the mine plan, even though it does not mine the ore as per the plan.
In September, the company said it had submitted a notice for the surrender of the mining lease citing uneconomic operation as the primary reason.
However, earlier this month, the company said it has decided to withdraw its application for the final mine closure plan of the Jajang iron ore block submitted before the Indian Bureau of Mines.
The firm had bagged the Jajang iron ore block in an intense bidding process to beat Adani, JSPL, Rungta Mines, Serajuddin & Co, Lal Traders and Eastern Mining. JSW Steel had committed a premium of 110 per cent for the block, with an estimated reserves of 39 million tonnes.
The decision to withdraw the surrender application underscores the company’s responsiveness to the evolving market dynamics, it said. The company had plans to set up beneficiation plant at the mine, and transport the iron ore through a 300 km slurry pipeline from to Jatadhar, Paradip.
The company gets 45 per cent of the iron ore requirement through captive sourcing through 13 operating mines, and expects to add seven mines soon.
“The mine was operated by Rungta at an annual capacity of 12 mtpa before being put on auction by the government. It currently has only pockets of high-grade reserves left in areas marked as Sabik forest,” said an analyst.
While the recent amendments to the Forest Conservation Act could facilitate access to these reserves, the high premium commitment will make it unviable to operate the Jajang mine, he added.
JSW Steel has four iron ore mining leases in Odisha all acquired through auctions in 2020.
Similarly, Jayant Acharya, Jt MD, JSW Steel, recently told businessline that the company has changed its mind on surrendering the thermal coal mine and is trying to put up a gasification plant.
The company’s consolidated royalty and mining premium payment increased 61 per cent in the first half of this fiscal to ₹4,738 crore against ₹2,943 crore. The payment for the whole of last fiscal was ₹7,457 crore.