The Orissa Minerals Development Company (OMDC), iron ore miner from the Rashtriya Ispat Nigam Ltd (RINL) stable, has scrapped the tendering process to hire contractors for the development of Kolha Roida, its third biggest mine in terms of area covered.
It will now develop the mine itself after the Union steel ministry objected to outsourcing the mining operations.
“We have been strictly asked by the steel ministry not to outsource the mining activities and do it ourselves,” said SK Panda, OMDC’s director-technical.
About 11 companies including Sesa Goa, Ramky and Adhunik Metaliks had shown interest after bids were invited in January for mining and transporting ore from the Kolha Roida mine, which is spread across 255 hectares (Ha).
The tendering was also scrapped because OMDC had crossed swords with the earlier contractor of Kolha Roida over alleged breach of the contract terms. As a result, the operations were suspended and the mine slipped into a long-drawn litigation.
Panda said there are a lot of issues when a third party is given a contract. Sometimes the third parties resort to unethical means to deliver the target, which at a later stage consumes a lot of productive time of the company, he said, adding, “the steel ministry clearly wants to avoid such situation.”
Kamehameha Rao, executive director-utilities and mining, PricewaterhouseCoopers, said world over the trend is to give contracts to third parties as it brings in faster delivery of the target, good mining practices and sustainability of assets.
He said such contracts are given by companies whose core business is not mining. “A specialist mine developer brings in real cost efficiency which is not available with companies that are cash starved or are handicapped on resources, he said, companies such as NMDC and Coal India do it themselves.
Analysts say this is a good move by OMDC as it will lead to proper capital allocation and may even increase profitability.
“OMDC is a mining company and has the requisite resources to develop its mines. Besides, now it has RINL on its board which brings in more professionalism,” said a head of a leading portfolio management services company, which holds stake in OMDC.
He said OMDC has cash reserves of `1,200 crore and therefore developing a mine by itself will not be a problem. OMDC has 206 million tonne (mt) of iron ore reserves and 44 mt of manganese ore reserves.
Almost all its mines are currently operating below potential or are at a halt due to expiry of leases and pending applications for enhancement of mining operations.
It will now develop the mine itself after the Union steel ministry objected to outsourcing the mining operations.
“We have been strictly asked by the steel ministry not to outsource the mining activities and do it ourselves,” said SK Panda, OMDC’s director-technical.
About 11 companies including Sesa Goa, Ramky and Adhunik Metaliks had shown interest after bids were invited in January for mining and transporting ore from the Kolha Roida mine, which is spread across 255 hectares (Ha).
The tendering was also scrapped because OMDC had crossed swords with the earlier contractor of Kolha Roida over alleged breach of the contract terms. As a result, the operations were suspended and the mine slipped into a long-drawn litigation.
Panda said there are a lot of issues when a third party is given a contract. Sometimes the third parties resort to unethical means to deliver the target, which at a later stage consumes a lot of productive time of the company, he said, adding, “the steel ministry clearly wants to avoid such situation.”
Kamehameha Rao, executive director-utilities and mining, PricewaterhouseCoopers, said world over the trend is to give contracts to third parties as it brings in faster delivery of the target, good mining practices and sustainability of assets.
He said such contracts are given by companies whose core business is not mining. “A specialist mine developer brings in real cost efficiency which is not available with companies that are cash starved or are handicapped on resources, he said, companies such as NMDC and Coal India do it themselves.
Analysts say this is a good move by OMDC as it will lead to proper capital allocation and may even increase profitability.
“OMDC is a mining company and has the requisite resources to develop its mines. Besides, now it has RINL on its board which brings in more professionalism,” said a head of a leading portfolio management services company, which holds stake in OMDC.
He said OMDC has cash reserves of `1,200 crore and therefore developing a mine by itself will not be a problem. OMDC has 206 million tonne (mt) of iron ore reserves and 44 mt of manganese ore reserves.
Almost all its mines are currently operating below potential or are at a halt due to expiry of leases and pending applications for enhancement of mining operations.
Next Story
