Steel Authority of India, or SAIL, will outsource the mining of its 2 billion tonne iron ore reserves at Chiria mines in Chattisgarh. It will float a global tender inviting mine developers and operators, chairman CS Verma said.
The Chiria reserve is a treasure trove that would sustain SAIL’s growth plans for the next two decades for iron ore. A contract miner would also be appointed to operate the Rowghat iron ore mine near Bhilai, home to SAIL’s 4 million tonne plant.
Depending on which takes off first, it will be the first iron ore mine to be given to contract miner. A fresh tender for the SAIL’s 4 million tone Tasra coal block in Jharkhand will also be put out soon. What will be of interest here is the PSU’s experiment to have land and relocation and rehabilitation (R&R) also outsourced.
“We are tendering this on a turnkey basis, bidders whether individually or as a consortium, will also take up the land and R&R issues,” said Verma. SAIL’s proposed FPO is scheduled to open on June 14. The board will meeting on May 23 to finalise the red herring prospectus.
Concerns have been raised about market conditions and the timing of the first tranche of the issue, which dilutes 5% of government stake and offers 5% in fresh equity.
“We think the stock is under-performing and not reflective of the growth story and inherent strengths of SAIL,” said Verma who estimates to raise Rs. 6,000-7,000 crore through the issue. Rehabilitation is particularly expensive for a PSU on account of higher wages.
SAIL has called and cancelled the Tasra tender twice because the bids came in high. Miners who pitched for it, say landowners want to be compensated for the loss of the PSU job and the perks and security that come with it, and that comes at a price.
Contract mining seems to be catching on, particularly with the coal ministry threatening to take away undeveloped leases. NTPC’s Pakri Barwadih coal block in Jharkhand was awarded to Australian miner Thiess last year.
It had similar plans for Chatti Bariatu and Kerandari blocks but now the coal ministry is threatening to take back the two very blocks on account of delay in development.
Lease owners are counting on professional miners to get their mines running before they lose them. India Resources, a contract miner for Hindustan Copper, turned around Surda mines in three years to produce a record 300 tonnes of copper concentrate.
SAIL plans to invest in new ports, terminals
In its bid to have captive cargo handling facilities on the east coast, SAIL is mulling, among other things, investments, including equity participation, in the construction of a new port or berths, terminals or creation of any similar facility to cope with the projected rise in its the import of dry bulk cargo.
In fact, SAIL has already invited Expressions of Interest from firms keen to provide total logistics solutions to handle the imports, covering discharge, handling and storage and finally evacuation of the materials out of the port to steel plants.
SAIL’s import of coking coal is projected to rise to 11.7 mt in 2011-12, 14.3 mt in 2012-13 and further to 18.5 mt in 2014-15 from 10.2 mt in 2010-11. In 2014-15, the production of hot metal is estimated to go up to 23 mt, up from 14 mt in 2010-11.
Currently, coking coal accounts for more than 90 per cent of SAIL’s import of raw materials. However, in future, the imports of dolomite and coke are indicated to meet the requirements of plants located at Bhilai, Bokaro, Burnpur, Durgapur and Rourkela.
Apart from equity participation in the construction of a new port, berths and terminals, SAIL, it is learnt, may consider other options such as long-term arrangements in any existing port for an exclusive use of berth without investment but supported by minimum guaranteed throughput, have a stake in SPV, develop facility and be the end users, build a new berth in a new port and pay the port the common dues and transloading facilities.
Right now, SAIL uses ports at Haldia, Paradip and Visakhapatnam for routing its raw materials as its plants are mostly located in the east.
In 2010-11, Visakhapatnam port handled 4.8 mt of coking coal on SAIL account, Haldia 4.3 mt and Paradip 1.1 mt. At present, coal is imported mostly in Panamax vessels and some times in Handymax vessels.
SAIL, it is felt, has to reorient its port operations policy, keeping in view the projected increase in imports of raw materials, particularly, coking coal. It has to bring the materials in larger vessels to obtain the full benefits of transportation economies.
The Chiria reserve is a treasure trove that would sustain SAIL’s growth plans for the next two decades for iron ore. A contract miner would also be appointed to operate the Rowghat iron ore mine near Bhilai, home to SAIL’s 4 million tonne plant.
Depending on which takes off first, it will be the first iron ore mine to be given to contract miner. A fresh tender for the SAIL’s 4 million tone Tasra coal block in Jharkhand will also be put out soon. What will be of interest here is the PSU’s experiment to have land and relocation and rehabilitation (R&R) also outsourced.
“We are tendering this on a turnkey basis, bidders whether individually or as a consortium, will also take up the land and R&R issues,” said Verma. SAIL’s proposed FPO is scheduled to open on June 14. The board will meeting on May 23 to finalise the red herring prospectus.
Concerns have been raised about market conditions and the timing of the first tranche of the issue, which dilutes 5% of government stake and offers 5% in fresh equity.
“We think the stock is under-performing and not reflective of the growth story and inherent strengths of SAIL,” said Verma who estimates to raise Rs. 6,000-7,000 crore through the issue. Rehabilitation is particularly expensive for a PSU on account of higher wages.
SAIL has called and cancelled the Tasra tender twice because the bids came in high. Miners who pitched for it, say landowners want to be compensated for the loss of the PSU job and the perks and security that come with it, and that comes at a price.
Contract mining seems to be catching on, particularly with the coal ministry threatening to take away undeveloped leases. NTPC’s Pakri Barwadih coal block in Jharkhand was awarded to Australian miner Thiess last year.
It had similar plans for Chatti Bariatu and Kerandari blocks but now the coal ministry is threatening to take back the two very blocks on account of delay in development.
Lease owners are counting on professional miners to get their mines running before they lose them. India Resources, a contract miner for Hindustan Copper, turned around Surda mines in three years to produce a record 300 tonnes of copper concentrate.
SAIL plans to invest in new ports, terminals
In its bid to have captive cargo handling facilities on the east coast, SAIL is mulling, among other things, investments, including equity participation, in the construction of a new port or berths, terminals or creation of any similar facility to cope with the projected rise in its the import of dry bulk cargo.
In fact, SAIL has already invited Expressions of Interest from firms keen to provide total logistics solutions to handle the imports, covering discharge, handling and storage and finally evacuation of the materials out of the port to steel plants.
SAIL’s import of coking coal is projected to rise to 11.7 mt in 2011-12, 14.3 mt in 2012-13 and further to 18.5 mt in 2014-15 from 10.2 mt in 2010-11. In 2014-15, the production of hot metal is estimated to go up to 23 mt, up from 14 mt in 2010-11.
Currently, coking coal accounts for more than 90 per cent of SAIL’s import of raw materials. However, in future, the imports of dolomite and coke are indicated to meet the requirements of plants located at Bhilai, Bokaro, Burnpur, Durgapur and Rourkela.
Apart from equity participation in the construction of a new port, berths and terminals, SAIL, it is learnt, may consider other options such as long-term arrangements in any existing port for an exclusive use of berth without investment but supported by minimum guaranteed throughput, have a stake in SPV, develop facility and be the end users, build a new berth in a new port and pay the port the common dues and transloading facilities.
Right now, SAIL uses ports at Haldia, Paradip and Visakhapatnam for routing its raw materials as its plants are mostly located in the east.
In 2010-11, Visakhapatnam port handled 4.8 mt of coking coal on SAIL account, Haldia 4.3 mt and Paradip 1.1 mt. At present, coal is imported mostly in Panamax vessels and some times in Handymax vessels.
SAIL, it is felt, has to reorient its port operations policy, keeping in view the projected increase in imports of raw materials, particularly, coking coal. It has to bring the materials in larger vessels to obtain the full benefits of transportation economies.
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