Post regulatory clearances ore to flow in: Kalyani Steel

The Supreme Court had last month allowed mining in some category-A mines in Karnataka. The order was based on the recommendation of the Central Empowered Committee (CEC) of the apex court and yesterday, the Supreme Court has asked for refunding the amount taken from some category-B mines after deducting certain penalties.

The ore-starved steel industry has suffered due to the ban on mining and RK Goyal, MD of Kalyani Steel clarified that the refund that the apex court is talking about is related to the reclamation and rehabilitation (R&R) programmes of mines. R&R plans are currently being implemented for category-A mines and post regulatory clearances, ore from the category-A mines are going to flow into the business, he added.
Similarly, category-B mines will also have to obtain clearances before being operational, said Goyal. He also expects 4.5 million tonne of ore to come from category-A mines in the next 12 months.
In order to secure all the necessary approvals and start mining, it will take another six to twelve months, opined Goyal. He also informed that at present inventories in Karnataka basically rely on NMDC and it is currently producing 0.7 million tonne of iron ore per month. Here is the edited transcript of the interview on CNBC-TV18. Q: If you can tell us what actually the Supreme Court order said and what are we to understand in terms of what it means to the ore availability in Karnataka? Should we assume that category B mines will be opened in due course?
A: Yesterday's order is based on the report submitted on September 27, 2012. Almost similar report was also submitted by Comptroller & Auditor General (CAG) long time back. Now, the Supreme Court has given its judgment based on this report which was submitted and it has paved the way forward regarding how and in what manner category B mines are to be opened.
First of all, the supreme court in its earlier judgment had said that R&R plan has to be in place for category B mines like category A mines. At the same time, all the permissions are to be obtained whether it is mining scheme, mining plant, forest clearance or environmental clearance. So all the approvals need to be in place.
At the same time, the irregularities in category B mines, whether it is concerned with illegal mining outside the sanctioned area or illegal dumping of over burden or use of roads, office etc they have to pay the fine and Supreme Court has accepted the recommendation that Rs 5 crore per hectare is to be paid as fine for illegal mining and Rs 1 crore per hectare for dumping or over burden.
This money has to be paid in addition to the estimated expenditure for implementation of R&R plan. Once R&R plan is implemented by the miner then this money will be paid to him or it will get adjusted. Q: We want to know when is the next hearing and when will the first category B mine be opened?
A: R&R plan for almost 18 mines for category A is already approved and that is under implementation. For category-B mines the R&R plan is under approval. A fairly large number of people have submitted their report to Sebi and to ICFRE which ICFRE has yet to approve or recommend. It will then go to CEC and then to the supreme court.
Hence, the first stage is the approval of R&R plan and for the implementation of R&R plan, miners have to simultaneously deposit these fines and obtain all the approvals which are required and then start the mine. To me, it will take anything between six months to one year because most of the approvals have already expired and it takes that much time for completion of the process. Q: Can you give us a status check on what exactly is the iron ore inventory in Karnataka right now on where exactly the sourcing is taking place from?
A: Currently in Karnataka inventories use ore that is mined by NMDC. Most of the auctions for the metals are the product of this ore, whether it is fine or calibrated ore that is mined by NMDC. It is close to 0.7 million per month.
_PAGEBREAK_ Q: The inventory will allow this auction to continue for some time now, what is the inventory available?
A: There is no inventory. Whatever NMDC is mining that is put to auction and that has been auctioned. Q: What are the prices at which this auction is currently taking place for example what are you shelling out?
A: If we talk of calibrated ore of around 62-63 percent FE, the base price is around Rs 5,400 to Rs 5,500 and the landed in our factory is around Rs 7,800 to Rs 8,000. In addition to this, the ore quality is very poor, whether we are getting lower FE or what is informed at the time of auction. It has 25-35 percent or higher moisture content or higher silica. If we add the losses because of this, the latter part comes to almost Rs 9,000. Q: What about the category A mines, you said 18 of them have already applied for R&R?
A: R&R plan is already approved. Q: When do you think the first mining in category A mines may start?
A: One mine has already started but their approvals are expiring by October 10. So this mine may have to be shut down again and all other mines had given an estimate in one of their reports that over a period of next twelve months, the total mining capacity will be around 4.5 million tonne. Q: How quickly do these permissions expire, are they given for a year or even less?
A: These permissions are given for various period of time but, normally before it expires, you apply again and you obtain permission. There is a continuity in the permission but, since last year all the mines were closed so people could not apply and they could not get these permissions in continuation. Q: What is your current capacity utilization on the plants?
A: Our current capacity utilization is around 30 percent. Q: You said 4.5 million tonne should be mined at the end of 12 months so should we assume that in six months half of that will be onstream or it is not like that?
A: 2.25 million tonne or around 2.50 million tonne capacity will be available in next six months time, which means only 200,000 tonne per month. It is a very small amount against the industry’s requirement of 2.5 million tonne per month. If we take 0.7 million tonne from NMDC and 0.2 million tonne, the supply is only 0.9 million tonne.