MAC: Mines and Communities

India: Iron fists in dubious gloves

Published by MAC on 2012-03-14
Source: Economic Times, International Business Times (2012-03-09)

The Indian state of Goa has pledged to close down all illegal iron ore mines.

That's welcome news, except that some "legal" outfits - such as Sesa Goa - have also been accused of profiting from illegal operations. See: Vedanta accused of fraud - yet again!

Meanwhile, the world's second largest iron ore exporter, Rio Tinto, is set to invest US$2 billion in its Orissa iron ore project, claiming it's already "working with local communities" to secure a social license.

We will close down all illegal mines in Goa: Manohar Parrikar

Economic Times

9 March 2012

MUMBAI: The newly elected Chief Minister of Goa, Manohar Parrikar, has said his government will close down all illegal iron ore mines in the state, dealing a body blow to the Rs 1 lakh-crore industry reeling under scandals, closures and intense government and Supreme Court investigations into its practices.

The tiny, tourist paradise of Goa is the third-largest iron ore producer and exports most of its production. A dip in its production due to the closures will hurt international contracts and has the potential to hurt allied industries like financing, transport and producers of earth-moving machinery.

"We will close down all illegal mines. Let there be no doubt about that. Illegality is only permitted by a lethargic government. We will change that," the 47-year-old Parrikar told ET in a telephonic interview from Panaji on Thursday, just a day before he is to be sworn in for the second time as Goa's chief minister.

About 37% of Goa's annual iron ore production of 54 million tonnes is considered by experts and investigators to be illegal. The chief minister, who led the BJP to a thumping victory in the just-concluded elections, had campaigned as a crusader against corruption and the Congress government's lukewarm approach to curb illegal mining.

Mining in general, including coal, has a share of 10.5% in the index of industrial production, which rose by just 1.8% in December from the year-ago figure due to a 3.7% fall in the sector. A Supreme Court order suspending mining in Karnataka and a state government clampdown in Odisha have sharply cut the country's iron ore production. The Central Statistical Office said mining contracted 3.1% in the third quarter.

While the proposed closure of mines in Goa will impact ore exports from India and firm up prices marginally, it is also likely to give direction to regulators for future action in Odisha and Karnataka where investigations into illegal mining are almost complete. "Goa is different from other states. The mine leases here are small in size and they contain mostly low-grade ore, which are not used by Indian companies.

In other states, mining is done over a large area and is for the domestic market from where it is diverted," Parrikar said. Goa's low-grade ore has few takers in India and is largely exported to mineralhungry China. Goa government officials said of the total exports last year, about 34 million tonnes came from governmentapproved sources, while the legality of the remaining mines was unclear.

Large miners in Goa, who have been operating in the state for more than 50 years after being granted leases during the earlier Portuguese rule, say the illegal mining started after iron ore prices double since 2008 as steel mills in China, which is deficient in iron ore, rushed to buy low-grade ore from Goa. "This prompted small miners in the state, who are relatively newcomers, to flout norms and cash in on the demand," said the head of a large family-owned mining company in Goa, who welcomed Parrikar's efforts to close down illegal mines.

Parrikar's move largely expected

The state has about six large mining companies, including metal tycoon Anil Agarwal's cash-rich Sesa Goa, which is also the only listed mining company from the state. Other firms include Fomento Resources, VM Salgaocar, the Chowgule Group and others. "Illegality affects the operations of legal miners. It is absolutely a step in the right direction," said Glenn Kalavampara, secretary of the Goa Mineral Ore Exporters' Association.

Parrikar's move was largely expected. As the head of a ministerial panel investigating the extent of illegal mining of iron ore, he had pointed at a loss of about Rs 3,000 crore to the state government due to unaccounted mineral exports and mining beyond lease permits. He had also pointed at a criminal nexus between mine owners and various authorities.

The Public Advisory Committee had submitted the report to the previous Goa Assembly Speaker last October, but could not table it on the floor of the House due to refusal of members of the then ruling Congress party to sign on the report.

The committee, formed to investigate allegations of large-scale evasion of royalty, had also pressed for the appointment of an independent agency to investigate the criminal nexus. "We have requested the governor to pursue the Goa Lokayukta Bill, which needs the President's approval," said Parrikar.

Analysts say closing down of illegal mines will have a marginal impact on global iron ore prices. "Goa has very little say in the global trade, which is dominated by large majors," said Ravindra Deshpande of Elara Capital.

"It will likely provide a direction for future action on this front," he said.


India's Orissa Iron Ore Project Gets $2B Infusion from Rio Tinto

By Esther Tanquintic-Misa

International Business Times

5 March 2012

Australian mining major Rio Tinto Group, also the world's third biggest mining company, is set to infuse some $2 billion into its Orissa iron ore project venture in India amid reports the country's local steel demand alone will balloon by 9 per cent annually over the next five years.

Rio Tinto's foray into India has been accepted as a much welcome news as India has been struggling with an iron ore supply shortage. Apart from Orissa, India has a huge potential in low-grade ores in Jharkhand, Chattisgarh, Maharasthra, Goa and Karnataka. But exploration efforts have been highly inadequate, as well as harder to develop and sustain, because of regulatory risks and struggles involving land acquisitions, displacement of locals and environmental clearances. Almost all those major iron ore belts have been exploited for high- and medium-grade iron ores over the last six decades.

"We will go through all the processes needed to bring this project on board. We are already working with local communities," Sam Walsh, Rio Tinto's chief executive, iron ore group, told reporters on Monday on the sidelines of the Australia-India Chief Executive Officers' Forum in New Delhi.

The joint venture, touted as of the biggest overseas investments by an Australian mining company in India so far, aims to produce 15 million metric tonnes of iron ore once the project goes online. Rio Tinto majority controls the Orissa iron ore project venture at 51 per cent, while other venture partner Odisha Mining Corp. owns 44 per cent. The remaining 5 per cent is controlled by NMDC Ltd., India's biggest iron ore producer.

The Orissa iron ore project venture covers three iron ore deposits, including Sakradihi Dubna, Malangtoli and Gandhamardan. Total mineral reserve has been placed at about 3.6 billion tonnes, the Zee News Limited reported.

Data from the Indian trade ministry showed total foreign direct investment (FDI) from Australia to India from April 2000 till December 2011 stood at $486.5 million, just 0.3 per cent of the country's total FDI flows, according to www.livemint.com.

"Foreign companies are looking ahead to opportunities opening up in the Indian mining sector, especially as there is a new mining policy on the anvil," www.livemint.com quoted an unidentified Delhi-based steel and mining consultant. "Rio Tinto has been in India for many years and is engaged in exploration and reconnaissance projects and is looking for mining leases. It is not surprising, therefore, that it is seeking to strengthen its position by announcing this investment."

Very much aware of India's complex procedures in getting regulatory approvals to jump start their joint venture project, Rio Tinto said is it willing to wait to undergo what is needed to see the fruition of the project.

"We would like to see the birth of this project. We will bring the technology and environment safety system and we will obviously be using the local people in the project," Walsh said.

India's iron ore output may slid 50 per cent this year from 226 metric tonnes mined in the year ended March after the government raised levies. Date from the Indian Bureau of Mines and Federation of Indian Mineral Industries showed the country's total recoverable reserves are about 7.06 billion tonnes.

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