Goa's sixth mining auction draws tepid response

In a bid to expedite evacuation of mines for exploration after the monsoon season, the government of Goa conducted its sixth auction of low grade iron ore for one million tonne on May 19.

Despite the auction being conducted after a gap of over six months and amid hopes of participation from domestic steel mills and ore exporters, the state received bids only for 0.4 million tonne. Over 60% of the offered quantity remained unsold.

The response was similar to the fifth auction conducted on November 11, 2014, which received bids only for 0.88 million tonne of the total 2.29 million tonne.

Evacuation of mines is significant because of the recent Supreme Court guidelines which prevents mine owners from stocking minerals outside the lease area. This means that until mines are evacuated completely, a majority of miners would not be able to re-commence operations even after receiving necessary approvals from the state government.

"The sixth auction of iron ore was an attempt by the government to evacuate minesites and re-commence mineral excavation possibly by September (after the monsoon season). Miners are awaiting environment and other statutory clearances which should be in place in the next few months," said a senior official in the Department of Mines and Geology, government of Goa.

There are over 90 iron ore miners in Goa, most of whom have received lease renewals from the state government. But the pending environmental clearances have held them back for re-commencing mining activities.

The state government has sold nearly 5 million tonne of iron ore through last five auctions. It held around 14 million tonne at the time of mining suspension in 2013.  But looking at the response generated by the latest auction, clearing inventory before re-commencement of excavation looks impossible.

"The timing of the auction was not the most appropriate. With the onset of monsoon in May-end/early-June, the shipping season in Goa will come to an end. And with markets being very volatile, it's too risky to bid for ores now for shipments post monsoon in October," said Shivanand V Salgaocar, managing director of the VM Salgaocar group of companies and president of the Goa Mineral Ore Exporters Association (GMOEA).

Before the ban, Goa was India's largest exporter of low grade iron ore, with over 90 million tonne of shipments being released annually to feed a large number of tiny steel mills in China. But with the Chinese government's decision to discourage imports of low grade ore, selling of below 55 Fe content has become difficult. To add to the woes, domestic steel mills do not purchase such low grade ore due to high transportation cost.

In the latest auction, however, Vedanta (earlier known as Sesa Sterlite) purchased over 0.2 million tonne for its captive consumption.