NMDC’s iron ore mining lease cancelled, shares drop

Wednesday, 21 August 2019 11:27:27 (GMT+3)   |   Kolkata

The government of the southern Indian state of Karnataka has issued a letter cancelling the mining lease of state-run miner NMDC Limited for the Donimalai iron ore mines, government officials said on Wednesday, August 21. The company’s share value fell by nearly 12 percent following the cancellation of the license.

The move to cancel NMDC’s mining lease came contrary to expectations that the miner would resume operations at Donimalai following a court order issued in favor of the company in July this year. It is understood that the Karnataka government will put the Donimalai iron ore block up for auction and allocation to a new miner.

The Donimalai iron ore block has an estimated reserve of 143 million mt, while the mining lease was granted to NMDC but expired on November 3, 2018. The Karnataka government set a condition for renewal of the lease to NMDC that the miner would have to pay 80 percent premium on the average sale price of iron ore from the block as lease rental, but this was not accepted by the miner which subsequently stopped operation of the mine last year.

NMDC on its part has filed a revised application against the order of the state government and the central Ministry of Mines and a formal hearing between the parties is scheduled for today, August 21, and the mining company has sought that the letter cancelling the mining lease issued by the Karnataka government be kept in abeyance.

During the June quarter, the company produced 8.43 million mt of iron ore, up 21 percent, while its iron ore sales increased by 28 percent to 8.67 million mt, both year on year. In the same period, the company’s net profit amounted to INR 11.8 billion ($164.87 million), up 21 percent, compared to the same period of the previous year.

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