Karnataka's Dept of Mines & Geology defers e-auction of Donimalai mine

Following the Mines Tribunal order staying the Karnataka Government's decision to cancel Donimalai mining lease to NMDC, the Department of Mines and Geology of Karnataka has decided to put its schedule e-auction of the said mine on hold.

On Thursday, the Mines Tribunal, Government of India, ordered a stay on the BJP-led Karnataka government's decision to cancel the lease given to NMDC for the Donimalai iron ore mine, till the next date of hearing. The order also prohibits Government of Karnataka from taking any further action on the mining lease or initiating an auction of Donimalai mine.

Following this, on Friday, a notice issued signed by Director of Department of Mines & Geology, Government of Karnataka said, "The schedule of the auction process for the said mine is hereby deferred until further notice."

On August 17, the Karnataka government had decided to cancel the lease and put the Donimalai mine under the hammer. Meanwhile, NMDC stated that even with no production at Donimalai, it will achieve its annual target, as output from other mines has gone up.

NMDC and the state administration got into legal tangle over Donimalai after the Congress-JDS-led state government levied a premium equal to 80 per cent on the iron ore extracted from Donimalai mine, as a precondition to extending the lease. NMDC did not agree, and stopped mining operations in November 2018. It also moved to the court against the decision, and received a favourable order. While the public sector miner was planning to start the operations, the new BJP-led Government decided to cancel the lease.

While taking up the matter legally, NMDC's Chairman and Managing Director met Karnataka B S Yediyurappa and discuss the issue two days back.

Amitava Mukherjee, director finance, NMDC said the company's basic precedence is renewal of teh Chattisgarh mine under the same Act and Rules without any premium. He said, the Chattisgarh Government renewed the licence for a 10-million tonne-mine named Deposit 11, for 20 years starting 2017.

While analysts say NMDC earnings and profits may take a hit in FY21, company says despite, loosing around 0.5 million tonnes every month from Donimalai mine, the public sector miner is expected to achieve its target of 31 million tonnes for 2019-20 as it has increased production at Bacheli Complex and Kirandul Complex at Bailadila Sector, Chhattisgarh.

During the first quarter, despite Donimalai lying idle, NMDC’s production of iron ore was 8.43 million tonne (mt) against 6.98 mt in Q1FY19, registering a growth of 21 per cent. Sales of iron ore increased to 8.67 mt in Q1FY20, reporting a growth of 28 per cent over 6.78 mt in Q1FY19. The company posted a 21 per cent rise net profit to Rs 1,179.28 crore in Q1FY20 from a net of Rs 975.27 crore in Q1FY19. Total income rose to Rs 3,386.56 crore in the quarter under review, up 33 per cent over Rs 2,547.13 crore a year ago.

Iron ore deposits in the Donimalai mine are estimated at 143 million tonnes and worth around Rs 40,000 crore. NMDC had leased the mine in 1968 for a period of 50 years. The lease expired on November 3, 2018.