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Karnataka recommends restart of 8 iron ore mines

by fwire  Jul 4, 2012 23:01 IST

#Brazil   #India  

BANGALORE (Reuters) - Karnataka has recommended that eight iron ore mines be approved to resume operations with a total capacity of 5.5 million tonnes per year, including a 2.2 million tonne mine operated by Sesa Goa(SESA.NS), a mining official said.

Shares in Sesa Goa and JSW Steel(JSTL.NS) rose by as much as 5 percent after the report.

A Supreme Court-appointed Central Empowered Committee (CEC) is expected to make a decision on mine approvals later on Wednesday, said H.R. Srinivasa, director, department of mines and geology in the state.

A few other mines have also submitted environmental plans, which could be cleared in 10 to 15 days, he said.

"Everything won't become normal so soon," Srinivasa said when asked when mining would return to normal.

The apex court had banned mining operations in the state from July 2011, citing environmental violations, and then switched to a partial ban in April 2012. Among others, it allowed miner NMDC (NMDC.NS) to produce 1 million tonnes per month.

The court has capped iron ore output from Bellary mines to 25 million tonnes annually and another 5 million tonnes from Chitradurga and Tumkur districts.

The CEC has said the mining applications should not be given permission unless miners implement a rehabilitation and redevelopment plan, said Srinivasa.

Shares of JSW Steel (JSTL.NS), which has a 10 million tonne per year steel plant in Karnataka, rose 4.5 percent to close at 726.2 rupees in a flat Mumbai market. Sesa Goa (SESA.NS) shares rose 4.3 percent to 203.35 rupees.

Arcelor Mittal, which plans to invest 300 billion rupees on a steel plant in the state, withdrew a mining application calling it 'a least mineralised zone', he said.

Another plan by steel group POSCO (005490.KS), which hopes to produce 6 million tonnes per year in the state, has been delayed due to problems in land acquisition after protests from locals.

AUCTION REVENUE, EXPORT DUTIES

The CEC auctioned about 22 million tonnes of iron ore produced by NMDC and illegal ores lying in the stockyards in the fiscal year ended in March 2012 and will continue to hold auctions till April 2014, Srinivasa said, adding that about 3 million tonnes remained in stockyards.

The state collected 7.3 billion rupees in 2011/12 by claiming a share of the sales proceeds from the auction, which will be used for infrastructure development of mining areas such as Bellary, Chitradurga and Tumkur.

The government expects to collect 100 billion rupees from auction proceeds in coming years as more mines come on stream and the amount of ore increases, Srinivasa said.

On exports, he said iron ore shipments would not be economic due to high diesel prices, freight charges and with customs duty at 30 percent.

At a separate event in New Delhi, mines minister, Dinsha Patel, said he had sought a review of the 30 percent export duty on iron ore.

India raised the duty on two occasions in 2011 in an effort to reserve iron ore for local steelmakers.

"I would like to assure you that the ministry is actively considering for a review of the export duty ... A study group constituted in the ministry is reviewing the royalty state structure," Patel said.

Iron ore exports from India, previously about 100 million tonnes a year, dropped by more than half in the first 11 months of 2011-2012. Competing suppliers in Australia, Brazil, South Africa, Indonesia and other countries have jumped in to fill the gap.

(Additional reporting by Arnika Thakur in NEW DELHI, editing by Jane Baird)