Mining giants making the best of adversity

Mining giants making the best of adversity

Shivakumar G Malagi | TNN

Bellary: Sweet are the uses of adversity, is how mining giants in this ore-rich region, where several mining companies have shut down owing to a slump in iron ore export trade, are looking at it. They are acquire the mining leases of small and medium players at “realistic” prices.

With iron ore prices dropping to around Rs 500 from a high of Rs 2,500 by the end of October, small and medium scale mining firms with a leased area of 25 to 50 hectares, have closed down their mining activities and major players with three or four plants are reduced to one-plant operation and oneshift working schedule.

Of the total 102 mining leases in the Sandur-Hospet-Bellary mining belt, VSL Mining Company, Baldota’s MSPL Ltd, VESCo., Sesa Goa and public sector units —- NMDC, MML and TML —- were the giants in mining industry.

Apart from the near total closure in the China-bound export trade, small and medium miners have been affected badly by the 15% export duty and huge-margin increase in rail freight charges. Now, some new entrants into mining are said to be considering transferring their leases to big players to get onetime big returns.

“We will not see the price peak again, but it will pick up. So, it is a good time to acquire mining leases. Earlier, there was hype about prices and people’s expectation were high. With the fall in ore trade, a realistic valuation will come to mining leases now,” says Rahul N Baldota, president, Federation of Indian Mineral Industries. Asked whether his Baldota Groups MSPL Ltd had joined this bandwagon, he said: “It is a continuous process.”

With the strong hope of ore prices picking up, not only the region’s mining lords, but even agents of mining barons in Gulf-countries are camping in Bellary and Hospet and giving calls to miners whom they have studied and found to have been interested in leasing out their area for big money in bad times.

Industry sources say that prior to the year 2000, a 20-hectare lease in a forest area, was valued around Rs 50 lakh to Rs 1 crore and the same lease escalated to Rs 60 crore to Rs 80 crore post-2004, with the China-created boom in iron ore mining and increase in the forest department’s Net Present Value. “Now, also the mining lease prices have not come down too much and there is only a difference of 10%-20%, as every miner knows that prices will go up in the near future,” says Nizam, a mining consultant.