India's KIOCL Seeks Captive Iron Ore Mine to Revive Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's government-owned KIOCL Limited (Bangalore, India) is seeking to acquire the Ramandurga iron ore mines in the Bellary district of Karnataka to feed the company's pellet plant in Mangalore.

In 2006, KIOCL was forced to stop all mining activities in the Kudremukh region of Karnataka by the Supreme Court for violation of environmental laws. KIOCL was founded in 1976 as an export-oriented iron ore pellet production unit. The company mined 4.5 million tons of iron ore per annum to produce 3.6 million ton of pellets for export, primarily to Iran.

Efforts to secure a captive iron ore mine is part of KIOCL's plan to revive and expand the Mangalore plant at an investment of $293 million. The project entails the addition of a 100,000-ton-per-year ductile iron spun pipemaking facility, a blast furnace, a 300,000-ton coke oven battery, and a 27-megawattgas-fired captive power plant.

As a contingency plan, India's Ministry of Steel, which owns KIOC, has decided to petition the Supreme Court to relax the mining ban. Officials in the ministry said that the new petition seeks permission for the company to lift the iron ore that is already mined, which would be sufficient to feed the Mangalore unit for the next three years. Permission will also be sought for the company to undertake underground mining of iron ore, providing a guarantee that it will not impact the biodiversity of the Western Ghat region, where the mines are located.

KIOCL is currently barely maintaining operations at its Mangalore plant and sources iron ore from NMDC Limited (BSE:526371) (Hyderabad, Andhra Pradesh).

A number of other bailout measures for KIOCL are being considered by the Ministry of Steel. A collaboration between KIOCL and Steel Authority of India Limited (BSE:500113) (SAIL) (New Delhi) for the joint mining of iron ore at the Barsua, Taldih and Kalta iron ore reserves in the eastern Indian state of Orissa. However, the Orissa government has not yet renewed the mining lease of these areas, where SAIL currently has mining operations. According to SAIL, work to commence collaborative mining in new blocks in these areas could be complete by 2012, if mining leases are renewed immediately.

A second bailout measure considered by the government did not make any headway, according to officials with KIOCL. The ministry of steel has proposed the merger of KIOCL and Rashtriya Ispat Nigam Limited (Vishakhapatnam, Andhra Pradesh), popularly known as Vizag Steel Plant. Since these two steel companies have no access to captive iron ore, no synergies were established to finalize the merger.

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