Output on, OMDC seeks buyers for its ore

Sleepy iron ore mines in the wilderness of Barbil in Orissa are slowly roaring back to life with the first despatch only months away. And Orissa Minerals Development Company (OMDC), the beleaguered company that owns these mines, is making sure it gets its act right this time. The Kolkata-based company, which was out of action for over three years when its mining leases in Orissa expired and approvals lapsed, announced on December 29 that it has started operations from Kolha Roida iron ore and Dalki manganese mines and shortly thereafter, sought expression of interest (EoI) from players looking to purchase iron ore from the company.

Leases for other mines are at different stages of approval.

The company has put in some strict caveats in the EoI, making sure only serious long-term buyers purchase the ore and the trading community is kept at bay. Under the terms, it would give priority to the prospective buyers if they are from the public sector, followed by plants located in Orissa and then those located outside the state. Preference would be given to companies which do not have access to iron ore mining lease and have no backward integration.

“Going by these conditions, the biggest beneficiary of this would be Rashtriya Ispat Nigam Ltd (RINL), a navratna PSU with no backward integration,” said an analyst tracking the company for the last two years.

OMDC, incidentally, is a subsidiary of RINL and is also under the Ministry of Steel.

The analyst said the riders also quash concerns that OMDC being a subsidiary of RINL will eventually be reduced to a status of offering captive iron ore to RINL.

OMDC said in the EoI that it will fix an annual base price for the ore for the whole financial year, subject to quarterly review on the basis of price declared by Orissa Mining Corporation.

“This ensures that the price of its ore will be at par with NMDC, the only variable factor being the ore content,” said the analyst.

OMDC currently has 206 million tonne of iron ore reserves and 44 million tonne of manganese ore reserves. The company has mining lease area aggregating 4365.262 hectares covering six mining leases in Barbil in the Keonjhar district.

In its heydays, OMDC was producing 3 million tonne per annum of iron ore with all its six mines fully operational.

Though largely quoted in media, the company, with a current share price of around Rs36,000 apiece, is technically not the costliest company in the Bombay Stock Exchange as its share capital is a mere Rs60 lakh against a face value of Rs10, while its counterpart NMDC Ltd has a share capital of Rs400 crore against a face value of Re 1 per share.

At Rs50, OMDC’s enterprise value per tonne too is much less than NMDC’s Rs200.

Due to dampened market sentiments, especially towards the mining sector, shares of both these companies have corrected over 50% in the last 10 months