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India’s largest iron-ore merchant miner, NMDC – a Central Public Sector Enterprise (CPSE) under the Steel Ministry – is eyeing a possible merger or acquisition of Kudremukh Iron Ore Company Ltd (KIOCL) – another CPSE of the Ministry – following the latter’s inability to start mining operations at Devadiri in Karnataka, a senior Ministry official told businessline.
Detailed proposals are being worked out and would be presented for approval “soon”.
“So, there are some discussions on the merger of KIOCL with NMDC. And NMDC is keen on it too as per our initial understanding,” the official said.
According to him, detailed proposals which are currently in the works will determine if NMDC needs to make any payment to the Steel Ministry or the Centre for this merger. Viability of the merger will also be covered in this report.
NMDC is yet to respond to queries by businessline.
- Also read: NMDC Steel gets four ISO licences
The Mini Ratna company, KIOCL was set up in 1976 for iron-ore mining and beneficiation at Kudremukh. For FY24, its pellet production was at 1.90 million tonnes while revenue from operations was ₹1,854 crore. However, the company reported a net loss of over ₹83 crore for the year. Last fiscal its borrowings were at ₹64 crore while lease liabilities were approximately Rs 116 crore. Its average net worth was pegged at ₹1,960 crore and earnings per share was – 1.37 (because of the losses).
Absence of Mines for KIOCL
According to the official, KIOCL is yet to get permission for re-starting iron ore mining at Devadiri; and its pellet plans are lying un-utilised. The company has been buying iron ore from the market – mostly indigenous sources, but these are the bare minimum required to keep the units running.
Recently, KIOCL had floated tenders for securing hematite (high grade iron ore).
As an alternative, it leased out operations of one of its pellet plants to NMDC.
“If the pellet plants lie unused for a long time, it becomes difficult to re-start operations. So in order to keep the plants afloat and also keep the company running, KIOCL has leased out a pellet plant to NMDC. If NMDC takes over the plant, then it also makes sense since the miner will be using its own iron ore and cost of operations for the plant will be lower,” the Ministry official said.
KIOCL Conundrum
KIOCL’s ₹1,500 crore mining project at Devadiri was halted since it failed to obtain clearances from the Congress-run Karnataka state government. In June this year, the state government directed officials to stop transfer of forest land in Bellary’s Sandur taluk to KIOCL for mining operations, amid protests from environmentalists.
The withdrawal of permission was initiated just days after Kumaraswamy signed the file – his first project as Union Minister – to operationalise the iron ore mining project.
- Also read: Govt directs major steel players to use iron ore fines also for steel making
In January 2017, the then Karnataka state government issued a notification for reserving an area of 470.40 hectares (Ha) for the CPSE. A modified mining plan was necessitated due to change in land use pattern because of reduction in mining lease area during forest clearance. Approval was for 388 Ha.
The project involves setting up a 2 MTPA captive iron ore mine and a beneficiation plant of 2 MTPA capacity.
Devadiri was supposed to be operational by December 1, 2024 as per dashboard timeline, the company said in its Annual Report.
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Published on October 27, 2024
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