Published On : Thu, Feb 19th, 2015

Coal block auction: Nagpur-based Sunflag Iron & Steel manages to retain Belgaon mine


Even as the Indian metal and cement companies have bid aggressively for coal blocks in the country’s first auctions to sell mines, Nagpur-based Sunflag Iron and Steel has managed to retain its Belgaon mine of capacity 300,000 tonne. The company won the mine for Rs 1,785 per tonne.

“We retained our earlier mine itself and in terms of pricing there was no difference for us,” Naveen Manchandier, General Manager –Mines said.

Similarly, so far, Hindalco Industries, the flagship company of Aditya Birla Group, has won two small mines, Kathautia in Jharkhand and Gare Palma IV-5 in Chhattisgarh. Vedanta Group company Bharat Aluminium Co (BALCO) on the other hand has won the Chotia mine in Korba, area from where the company earlier sourced coal from the Gevra & Kusmunda mines of South Eastern Coalfields.

“Though Hindalco is paying a high price for captive coal in auctions, almost close to landed cost via the e-auction route, the landed cost of coal from the mine allotted will still be at a 30-35 percent discount from imported coal,” said Abhisar Jain, senior analyst with Centrum broking.

Hindalco has a total annual coal requirement of 15-16 million tonne.

Though the Kathautia mine with 800,000 tonne capacity and the Gare Palma IV-5 mine of one million tonne is far from meeting the company’s large requirement, it at least assures uninterrupted coal supply for the company, said analysts.

Hindalco secured the high-grade Kathautia coal block for Rs 2,860 per tonne in forward bidding. The landed cost from this block would be Rs 3,500-4,500 per tonne which includes extraction cost, royalty, final bid price and freight, said Motilal Oswal.

Today, the company has secured the Gare Palma IV-5 coal block for Rs 3,502 per tonne.

“The Gare Palma mine is high in extractable reserves and so the company can go in for a mine plan revision at a later date,” said Jain of Centrum broking.

Allocation of coal mines to metal companies, the non-regulated sector, in the schedule-II mines certainly assures raw material security to all but the extent of benefit in terms of coal pricing varies from company-to-company.

For BALCO, the Chotia mine in Korba region has not changed much for the company in terms of coal pricing.

BALCO has recently received approval from the Chhattisgarh government to start a 1,200 MW captive power plant. The company’s new power plant is in addition to the two existing power units with a capacity of 270 MW and 540 MW.