Big 4 Fight For Chiria Mine Share

Published by MAC on 2005-08-19
Source: New Delhi Business Standard

Big 4 fight for Chiria mine share

Varun Sood / New Delhi Business Standard

August 19, 2005

Tata, and two other Indian steel companies are upping the ante in the tribal state of Jharkhand, though Mittal Steel has met a roadblock to its own plans.

Tata Steel, Mittal Steel, SAIL, Essar eye captive mining leases.

Located deep in the obscurity of Jharkhand, the Chiria mining belt in the West Singhbhum district is helping the five-year-old state take a flight straight into the billion-dollar world of steel magnates.

It's about 180 km from Jamshedpur, which offers the nearest resemblance to civilisation. And yet, LN Mittal, the world's biggest steel producer with a house on London's costliest street, already knows Chiria like the back of his hand.

As do Tata Steel Managing Director B Muthuraman, the Ruias of the Essar Group, and the brass of public sector Steel Authority of India Ltd.

For, Chiria has what is increasingly being regarded as one of the most precious resources in the world, iron ore of the highest grade — the iron content ranging from 62 to 65 per cent.

All the four companies have applied for captive mining leases on the mines of Chiria, whose treasure is estimated at 1.5 to 2 billion tonnes. That makes it the world's second largest deposit of high-grade iron ore after those in the Urals.

Chiria is endowed with a large number of mines, of which only eight are leased at present, all of them to Indian Iron & Steel Company, which is the only company working the mines there. IISCO used to have 10, but two of them were denotified early this year.

With every steel manufacturer worth its furnace having announced expansion plans, an assured supply of iron ore is increasingly emerging as the lifeline of their operations. More so for those like Essar that do not have captive mines.

"The cost of accessing iron ore from captive mines is $5-6 a tonne. The cost surges to $40-50 a tonne if purchased in the open market," says an executive with a steel company.

What's more, ore prices are projected to rise. Little surprise then that Mittal, who is wooing the Jharkhand government with his mega plant plans, wants to export 30 per cent of its ore allocation to feed Mittal Steel's operations outside India.

The World Steel Dynamics, at its annual ranking in June, had given high ranks to Tata Steel and Severstal of Russia partly on the ground that the duo had easy access to iron ore and coking coal mines.