India's SAIL Creates Contingency Plans for Ore Supplies to Bhilai Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--Steel Authority of India Limited (SAIL) (BSE:500113) (New Delhi) has drawn up contingency plans to link iron-ore supplies from the company's Chiria mines in the state of Jharkhand to its Bhilai Steel Plant (BSP) in the neighboring state of Chattisgarh. The company has been forced to draw up a back-up plan and supply raw material supplies from the neighboring state because the development of the Rowghat-F mines, which are close to the plant in Chattisgarh, has been affected by disruptions from left-wing extremists. The development of the Chiria mines had been planned as a raw material source for SAIL's Bokaro Steel Plant in Jharkhand.

Because production from the Rowghat mines may be delayed, thus upsetting SAIL's targets for captive iron-ore production, it is now urgent that the company quickly develop the Chiria mines so that it can feed raw materials to two of its plants simultaneously. SAIL has a target of producing 20 million tons of iron ore by 2011, from current levels of 12.94 million tons.

SAIL received a lease to develop the Rowghat mines in 2009 and had planned to produce 14 million tons from 2,028 hectares spread across the Bastar district in Chattisgarh by 2014. This iron-ore production had been exclusively earmarked for BSP, which is currently fed with 9 million tons of ore from the Dalli Rajhara mines in the vicinity. Officials in SAIL's Raw Materials Division said that reserves from Dalli Rajhara mines were being depleted quickly and would be exhausted within the next five years; hence, the urgency in either developing Rowghat-F mines or increasing the capacity of the Chiria mines.

Officials said that construction of even a small dam to regulate the flow of river water had been stalled at Rowghat by the extremists.

SAIL is spending $386.5 million to develop Chiria's iron-ore mines. In the first phase, 7 million tons of ore will be extracted, which will be ramped up to 14 million tons in the second phase. The company has 10 mining leases at Chiria, covering estimated reserves of 1 billion tons. The total iron-ore reserves in the Chiria region are estimated to be 2 billion tons. SAIL officials said that since the company was now planning to supply ore from the this region, the ongoing development program will be hastened, along with putting in new applications for mining leases across the additional 1 billion-ton reserve with the Jharkhand state government.

SAIL is implementing an expansion program to increase the capacity of its Bhilai Steel Plant from 3.7 million to 6 million tons, and that of the Bokaro Steel Plant from 5 million to 7 million tons. Officials in SAIL's RMD said that the Chiria iron-ore reserves were critical to raw material security of the company's expansion of capacity from 14 million to 23 million tons by 2013, entailing a capital expenditure of 700 billion rupees ($15 billion).

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