Orissa Iron Ore Briefing Note - Incept Holdings · Page 7 concentrated in the 5 districts of the...

Orissa Iron Ore Briefing Note

16.01.11

Table of Contents

1. EXECUTIVE SUMMARY ............................................................................................... 6

2. ORISSA: STATE OVERVIEW ........................................................................................11

2.1. GEOGRAPHY .........................................................................................................11

2.2. DEMOGRAPHY ......................................................................................................11

2.3. STATE ECONOMY ..................................................................................................12

2.4. INDUSTRY ............................................................................................................. 13

2.5. MINING ................................................................................................................. 13

2.6. IRON ORE MINING ................................................................................................ 14

2.6.1. LOCATION OF MAJOR IRON ORE MINING AREAS ................................................. 15

3. ORISSA: GEOLOGICAL OVERVIEW ............................................................................ 16

3.1. PRECAMBRIAN SEQUENCE ................................................................................... 16

3.1.1. NORTH ORISSA - SINGHBHUM CARTON (NOC) ................................................... 16

3.1.2. WEST ORISSA CRATON (WOC) ............................................................................ 17

3.1.3. EASTERN GHATS BELT (EGB) ............................................................................. 18

3.1.4. PROTEROZOIC PLATFORM SEDIMENTS ............................................................. 18

3.1.5. GONDWANA SEDIMENTS .................................................................................. 18

3.1.6. TERTIARY - QUATERNARY – RECENT SEDIMENTS .............................................. 18

4. IRON ORE GROUP (SINGHBHUM CRATON) ................................................................ 19

4.1 SINGHBHUM CRATON: OVERVIEW ........................................................................ 19

4.2 IRON ORE GROUP (IOG) ........................................................................................ 19

4.2.1 GEOLOGICAL SETTING ...................................................................................... 19

4.2.2 ORE TYPES, GRADES AND MINERALIZATION CONTROL .....................................21

5. IRON ORE BELTS ......................................................................................................22

5.1 BONAI – KEONJHAR BELT (JAMDA – KOIRA BASIN) .................................................22

5.1.1 GEOLOGICAL SETTING .......................................................................................22

5.1.2 MINERALIZATION CONTROL ..............................................................................22

5.1.3 ORE TYPES, RESOURCE AND GRADE ..................................................................22

5.1.4 MAJOR DEPOSITS: BONAI – KEONJHAR BELT ..................................................... 23

5.1.5 GORUMAHISANI – BADAMPAHAR - SULAIPET (GBS) BELT .................................. 28

5.1.6 GORUMAHISANI – BADAMPAHAR – SULAIPET DEPOSITS .................................. 28

5.2 TOMKA – DAITARI BELT ........................................................................................ 29

5.2.1 GEOLOGY OF BELT ........................................................................................... 29

5.2.2 MINERALIZATION CONTROL ............................................................................. 29

5.2.3 ORE TYPES, RESOURCE AND GRADE ................................................................. 29

5.3 GANDHMARDHAN BELT ....................................................................................... 30

5.4 HIRAPUR BELT ..................................................................................................... 30

5.5 IRON ORE POTENTIAL: ORISSA ............................................................................. 30

5.6 SUMMARY ............................................................................................................. 31

6. ORISSA IRON ORE MINING ....................................................................................... 33

6.1 MINING POLICY .................................................................................................... 34

6.2 INDUSTRY STRUCTURE AND MAJOR PRODUCERS OF IRON ORE ............................ 35

6.3 IRON ORE MINING IN ORISSA ............................................................................... 37

6.4 MINERAL BENEFICIATION .................................................................................... 39

6.5 OPERATIONAL RISK IN IRON ORE MINING IN ORISSA ............................................ 44

6.6 RECENT MINE CLOSURES IN ORISSA ..................................................................... 46

6.7 GREENFIELD TYPICAL MINING COST IN ORISSA ..................................................... 47

6.8 MINING OPERATION ............................................................................................. 49

7. OVERVIEW OF STEEL PRODUCTION IN ORISSA .......................................................... 51

7.1 INTEGRATED STEEL PLANTS ..................................................................................52

7.2 PIG IRON ...............................................................................................................52

7.3 SPONGE IRON ....................................................................................................... 53

7.4 ROLE OF GOVERNMENT OWNED IRON ORE MINING COMPANIES IN ORISSA .......... 54

8. ORE TRANSPORT AND LOGISTICS – RAIL AND ROAD ................................................. 55

8.1 VALUE CHAIN OF IRON ORE FROM MINES TO PORT / STEEL PLANT ......................... 55

8.2 RAIL LOGISTICS ..................................................................................................... 57

8.3 ROAD LOGISTICS .................................................................................................. 60

8.4 PORT INFRASTRUCTURE ...................................................................................... 63

8.5 LOGISTICS COST FOR IRON ORE – RAILWAYS /ROADS ........................................... 66

9. COMPARISON OF MINING COSTS – ORISSA AND WESTERN AUSTRALIA .................... 68

10. EPILOGUE ............................................................................................................ 74

REFERENCES: .................................................................................................................. 75

List of Tables

Table 1: Generalized stratigraphic sequence of North Orissa - Singhbhum Craton .......................... 20

Table 2: Iron ore resources of Orissa ................................................................................................ 31

Table 3: Major iron ore resource bearing districts ............................................................................ 32

Table 4: Working and non working mining areas, forest land* ........................................................ 34

Table 5 : Mining leases in major iron ore producing districts, Orissa* .............................................. 36

Table 6: Capital cost estimates ....................................................................................................... 49

Table 7 Operating cost estimates .................................................................................................... 50

Table 8: Steel companies operating in Orissa ...................................................................................51

Table 9 Steel capacity and production in Orissa .............................................................................. 52

Table 10: Integrated Steel Plants in Orissa ...................................................................................... 52

Table 11: Pig Iron Producers in Orissa .............................................................................................. 53

Table 12: District wise distribution of sponge iron capacity (%) ....................................................... 53

Table 13: Sponge iron producers in Orissa ....................................................................................... 54

Table 14: Iron Ore Volume- Paradip Port (Mt) ................................................................................. 64

Table 15 : Logistics cost summary ................................................................................................... 66

Table 16: Greenfield and Brownfield capital cost-Orissa ................................................................. 69

Table 17: Karara Iron ore mine project ............................................................................................. 72

Table 18: FOB cost Orissa Greenfield and Brownfield ...................................................................... 73

List of Figures

Figure 1: Orissa ……………………………………………………………………………………………………………….8

Figure 2: District map of Orissa ....................................................................................................... 12

Figure 3: Major iron ore districts of Orissa (haematite) .....................................................................15

Figure 4: Geological Map of Orissa (Source: Geological Survey of India) .......................................... 17

Figure 5: Geological Map of North Orissa – Singhbhum Craton showing Iron Ore Group (Source:

Beukes et al., 2003) ......................................................................................................................... 23

Figure 6: Geological Map of the Horse-shoe shaped synclinorium (Jamda – Koira basin), Western

Iron Ore Group. (Source: Ghosh and Mukhopadhyay, 2007) ............................................................ 25

Figure 7: Generalized Geological map of the eastern limb of Horse-Shoe synclinorium (Source:

Acharya, S., 2008) ........................................................................................................................... 26

Figure 8 : Cross sections (not to scale) from the eastern limb of synclinorium along the lines shown

in the previous figure. (Source: Acharya, S., 2008) .......................................................................... 27

Figure 9: Generalised geological map of the Tomka – Daitari belt from Southern Iron Ore Group

(Tomka – Daitari basin) showing spread of BIF with fault bounded Iron Ore deposits. (Source:

Acharya, S. 2008) ............................................................................................................................ 30

Figure 10: Major iron ore producers in 2010, Orissa ......................................................................... 36

Figure 11: Domestic consumption vs. Exports .................................................................................. 37

Figure 12: Manual mining ................................................................................................................ 38

Figure 13: Mechanized iron ore mining ............................................................................................ 38

Figure 14: Dry Screening process, Iron ore ...................................................................................... 41

Figure 15: Wet screening process, iron ore ...................................................................................... 42

Figure 16: Wet screening with scrubbing, iron ore ........................................................................... 43

Figure 17 : Washing and gravity separation, iron ore ....................................................................... 44

Figure 18: General process flow of Iron Ore Supply Chain ............................................................... 55

Figure 19: Flow of Iron Ore in and around Orissa ............................................................................. 56

Figure 20: Value Chain Analysis- Rail Logistics ................................................................................ 58

Figure 21: Railway Map of Orissa .................................................................................................... 59

Figure 22: Value Chain Analysis- Road Logistics .............................................................................. 61

Figure 23: Road Map of Orissa ......................................................................................................... 62

Figure 24: Paradip Port- Satellite View ............................................................................................ 64

Figure 25 Paradip Port Layout ......................................................................................................... 65

Figure 26 : Gindalbie project map .................................................................................................... 71

1. Executive Summary

Orissa is known for its rich mineral deposits and abundant source of water (both in the form of rivers

as well as an extensive coast line). In fact the state boasts of 16.92% of the total mineral reserves of

the country. However, there is fairly heavy concentration of Bauxite, Chromite, Graphite,

Manganese, Nickel ore, Coal and Iron ore in particular.

Industries in Orissa can grossly be divided in to four categories- cottage, medium, large scale and

large scale heavy industries. Since the state is rich in forest resources, it prompts the growth of

forest based industries. The cottage industry of Orissa includes- sericulture industry, cotton textile

mills, sugar mills and rice mills.

While the rich reserves of minerals in Orissa have led to establishment of several mineral based

industries in the state including- aluminium plants, charge chrome plants, sponge iron plants,

cement plants and coal based thermal power plants. With over 25% of India's iron ore reserves,

Orissa accounts for over 10% of India's steel production capacity and has a crucial advantage in the

iron & steel industry. Further, the presence of seaports in the state makes exports and imports cost

effective and more competitive. The state government has signed Memoranda of Understanding

(MoUs) with 45 companies for setting up steel plants of various capacities in the iron-ore rich parts

of the state.

India’s richest and biggest deposits are mostly confined to Banded Iron Formations (BIF) of

Precambrian age. The Iron Ore Group covers the Mayurbhanj, Keonjhar, Sundargarh and Jajpur

districts of Orissa and is exhibit the major and high grade deposits of Eastern India.

The Iron Ore deposits from Orissa are divided into five geographic belts: 1. Bonai – Keonjhar belt, 2.

Gorumahisani – Badampahar –Sulaipet belt, 3. Tomka – Daitari belt, 4. Gandhamardhan belt and 5.

Hirapur belt. The Iron Ore from these deposits are of various types as hard massive, soft laminated

and powdery blue dust though lateritic ore occur at places in the upper profile. Gradational or sharp

transition may occur from one type of ore to other type both vertically and laterally.

Mayurbhanj, Keonjhar, Sundargarh and Jajpur districts from Orissa bear the major high grade

(+60% Fe) hematitic deposits from these belts and contribute to the 60% of total Indian iron ore. As

per the information available from Director of Geology and Director of Mines, Orissa, the state has

5306 MT of iron ore deposits of which 3000 MT belong to leasehold areas and the rest 2306 MT

belongs to freehold areas thus making it worth to explore and workout for iron ore in the state.

Because of the abundant mineral resource base, its strategic proximity to major iron ore consumers

in the world market, Orissa offers an excellent investment opportunity for mining companies and

iron and steel manufactures.

As per the recent estimate of Directorate of Geology,Government of Orissa, the total iron ore

resources in the state is around 5306 Mt which is predominantly in the form of hematite and

concentrated in the 5 districts of the state. Koenjhar being the leading district with a resource base

of around 3574 Mt.

The Government of Orissa is under the process of finalizing a separate mining policy and the draft

Orissa Mining Policy will be announced very soon. As per the press release, the new mining policy

will focus more on non-ferrous sector rather than on ferrous minerals.

The existing mineral based industries have been covered under Orissa Industrial Policy 2007. Its

salient features pertaining to Mineral based industries are:

- Promotion of development of infrastructure via Public Private Partnership (PPP)

mode to support sustainable investment in the field of mining and mineral

processing.

- Strengthening of regulatory and institutional arrangement for implementation of

environment laws, formulation of Rehabilitation & Resettlement Policy by

adopting a holistic livelihood approach for rehabilitation and resettlement of

project affected families.

- Strengthening of arrangement for industrial promotion and investment

facilitation at various levels

- Creation of SEZs and more thrust on human resource development and

employment

As a matter of policy only low and medium grade ore (up to 64% Fe), fines and temporary surplus

high grade iron ore (+67 % Fe), particularly from Bailadila (Chattisgarh) is being exported to

importer countries.

Iron ore industry in Orissa is vastly fragmented. Except for few industry giants, mining in these areas

are dominated by small and marginal players with a leasehold area of as low as 1.2 hectares. These

small players generally cater the need of domestic industry and export surplus iron ore to China

mainly via Paradip port. Across districts, Koenjhar has maximum number of small mining players

particular in the region of Barbil while Jajpur has the least. Production wise Essel mining is the

biggest producer of iron ore Calibrated iron ore lumps and Iron ore fines.

Mechanization of iron ore mining was pioneered by Tata Steel, which is prevalent across the various

mines in the state. Manual mining is gradually phasing out but still some area in Orissa particularly

Barajamada region it persists. In most of the highly mechanized mines more than 50-60% fines are

being generated.

Most of the mineral deposits in the states are located in the forest land which are inhabitated by

tribal population, who heavily depends on forest land for their live hood and are least adaptive to

social and economic changes. This has resulted in significant protest and several social hurdles in

land acquisition activity. The forest cover in the State constitutes 31.38% of the geographical area.

Besides this, there exists tree cover outside the forest over 2.85% of the geographical area of the

State. While some mining activities are confined to non-forest areas, substantial portion of the

remaining mining zones come under degraded and open forest areas.

Sourcing of skilled human resources in these remotely located sites can also be a potential

showstopper for the project in the absence of local skilled population.

Another major hurdle is to obtain all the regulatory approval for commencement of on- site

activities. This whole process is often arduous and time consuming causing major delays in project

commission resulting huge cost implication to the project proponents. However, the Government

of India has made amendments in existing Mines and Mineral Regulation and Development act

(MMDR) by way of stipulating time frame in order to minimize time elapsed in grant of mineral

concession. The Proposed MMDR Bill 2010 (expected to get approved by parliament of India) has

gone one step further and stipulates an independent mining regulator in the form of Mining

tribunal. This will not only smoothen the process flow but also bring transparency in the grant of

mineral concession.

Apart from above mentioned risks, there are also minor operational and regulatory risks involved

with iron ore mining in Orissa.

Till November 2010, government of Orissa has so far suspended the operation of 246 mines for

violation of statutory norms. This has been considered a step taken to crack down prevailing illegal

mining activities. The operation of these mines has been suspended due to various reasons

including pending environmental clearance, pending forest clearance, non-approval of Mining Plan

by IBM, non-payment of Net Present Value (NPV) for diversion of forest land for mining activities

and want of no-objection certificate from the State Pollution Control Board (SPCB).

Despite of all odds, domestic consumption of iron ore for the period of 2005-2009 grew at

compounded annual growth rate of 13.96% while the exports for the same period grew at

compounded annual growth rate of 10.33%. The pace of growth of the steel industry in Orissa is

likely to be faster in coming years.

Iron ore Supply Chain

After crushing, screening and beneficiation process iron ore fines and lumps are transferred to the

mine stocking area; thereafter it is transferred to the trucks/ trailers either to the nearest railway

siding or directly to the destination. However, most of the iron ore transits from mine area to port/

steel plants take railway route.

Rail, road connectivity and bottlenecks

Districts of Sundargarh, Keonjhar and Mayurbhanj are well connected with Paradip port and steel

plants in Durgapur, West Bengal. Most of the iron ore mines in the district have their own railway

siding and most of the transportation takes railway route, except for the smaller mine owners which

use roads for inland logistics.

In order to curb export of iron ore and to boost domestic production of downstream steel products,

rail freight for exporting iron ore is charged higher making logistics cost sometimes significantly

high compared to road. It does not only disturb iron ore pricing for short term, but also deters mine

owners from long term planning.

Lower axle load and the heavy penalty on overloading the rakes are other pain areas in rail

transportation. Also freight traffic has low average speed leads to longer lead times, while

preference of passenger trains over cargo train creates congestion and reduces throughput at port.

Orissa is well connected by national and state highways to the various strategic points. However,

road does not constitute significantly to the coal transportation as compared to rail transportation.

Most of the highways are narrow and congested while some of the state highway or connecting

roads are not even two lanes. Apart from number of lanes, overall conditions of roads are also poor.

Due to these reasons lead time increases and safety get jeopardized.

Fragmented transportation industry in India lacks organized fleets and show no or poor

professionalism.

Port infrastructure, bottlenecks and expansion plans

Orissa has a long coast line of 480 km, with Paradip as the major all weather port. The port has its

own railway system and connected to East Coast Railways. It is also connected to NH-5A and State

Highway 42.

However, mmodernization of all machinery and mechanization of jetty is the need of the hour. As

cargo handling systems are obsolete and hence reduces overall port productivity. Also the draft at

Paradip port is 12.5, which is not sufficient to accommodate cape size vessels.

Plan is to deepen the approach channel to 18.7m and to extend the existing iron ore berth from 155

m to 205 m to be completed with dredging project above. There are also plans to install two 20

tonnes shore cranes.

Dhamra and Gopalpur are the Greenfield port projects in Orissa, which will shift some of the

existing iron ore traffic from Paradip port. Whereas Dhamra has just commenced its trial operation

in September 2010, Gopalpur is expected to be operational in 2012.

Port of Dhamra is developed by Tata and L&T on 50:50 joint ventures. It is among few of the deep

draft port of India which can handle cape size vessels. With these modern port infrastructure in

place and development of Paradip port, existing bottlenecks in the logistics will be a thing of past.

State is endowed with a range of high-grade minerals. But, these are not exploited properly. With

around 85% of its population living in the rural areas and mostly depending upon agriculture and

allied activities for their livelihood, it is imperative to alleviate its status quo. However, over a recent

past a lot of positive changes in the rural pocket have been observed. Be it literacy rate (both for

male as well as female), Gross State Domestic Product, State income, per capita income or the

development of roads, transport and communication networks; substantial improvement is evident

in all spheres. If more stress could be put on proper maintenance and supervision of different service

infrastructures, it will be easier for Orissa to accelerate its pace of economic development.

The iron and steel industry of Orissa has played a major role in bringing the industrial boom in the

state. The state government of Orissa has invited and signed various ‘Memorandum of

Understanding’ (MoUs) with major industrialists and investors. It has achieved a considerable

amount of success and several prime companies have set up their plants in the state.

With only two steel plants till 1995, marginal growth was achieved between 1995 and 2000. But

from 2000 onwards the steel industry in the state witnessed a rapid growth in iron and steel sector.

Today Orissa hosts around 143 iron and steel plants with a combined capacity of 12.3 Mt which is

nearly 16% of the total steel capacity in India. The steel industry in Orissa consumes nearly 11 Mt of

iron ore. Nearly all the requirement of iron ore is sourced from the mines located in Orissa only.

With a planned investment of USD $ 456 billion on the infrastructure development in the current

five year planning period (2007-12) and projected 10 % growth in domestic demand in near future,

Iron ore mining in Orissa is set to achieve new industry heights in coming years. The mining scenario

in Orissa compares very favorably with Western Australian mining industry. Low cost of operation

and infrastructure costs enable mines in Orissa to operate very profitably.

2. Orissa: State Overview

2.1. Geography

Orissa is a coastal state in the eastern region of India. It is adjacent to four other states, West Bengal

and Jharkhand to its north, Chhattisgarh to its west and Andhra Pradesh to its south. It is bounded

by the Bay of Bengal on the east and has an extensive coast line of 482 Km.

Figure 1 : Orissa, India

Source: Salva

The state is rich in mineral resources such as coal, iron-ore and bauxite, chromite amongst others.

Bhubaneshwar is the capital of Orissa. Cuttack, Rourkela, Berhampur, Baleshwar and Puri are the

other important cities of the state. With 4.74% of India's landmass Orissa coastal plains are the

depositional landforms of recent origin and geologically belong to the Post-Tertiary Period.

2.2. Demography

The population of Orissa is 36.8 million as per the 2001 population census. Orissa has an area of

155,707 sq. km giving a population density of 236 per sq km and the density is much lower than the

all-India average of 313 per sq km. Nearly 85% of its population lives in the rural areas and mostly

depend on agriculture and allied activities for their livelihood.

Figure 2: District map of Orissa

Orissa has 30 districts which are further subdivided into 314 blocks and 316 tehsils. The districts are

marked out in the map above.

2.3. State Economy

The Gross State Domestic Product (GSDP) at constant prices (1999-2000) of Orissa registered an

annual average growth rate of 9.5% for the 10th Five Year Plan (2002-07) as compared to 5.3%

achieved in the 9th Plan (1997-2002). In the first three years of the 11th Plan (2007-12), the state has

recorded an annual average growth rate of 8.7% in spite of the challenges of global financial crisis

and as per the advance estimates; it grew by 8.3% during 2009-10 to INR 902 bill (US $19bill). The

standard of living in Orissa has been below average since Independence. But the falling trend in real

per capita income has not only been arrested in 2004-05, but reversed as well, thus reducing the gap

of per capita income between Orissa and the all India average. The per capita net national product

of Orissa was INR 19,456 (US $410) in 2009-10. The number of people below poverty line is now

39.9% as against 47.2% in 1999-2000.

The structure of Orissa’s economy has also witnessed radical shift from being an agrarian economy

to a service economy, mirroring the transformation occurring to the Indian economy as a whole.

Service sector which used to contribute just 37% of the state GDP in 1989-90, now contributes 55%,

while the share of agriculture has come down to just 20% in 2008-09 as compared to 49% in 1989-

90. Notable development has been achieved in the share of industry which has increased from 15%

in 1989-90 to 25% in 2008-09 mainly driven by growing mining, aluminium and steel sectors.

2.4. Industry

While agriculture remains the principal occupation of the majority of the state's population, the

state has witnessed an industrial upsurge due to the favourable industrial atmosphere, political

stability and abundance on natural resources in the state. The state government of Orissa has

invited and signed various Memorandae of Understanding (MoU) with major industrialists and

investors. It has achieved considerable amount of success and several major companies have set up

their plants in the state with a large number of projects being in the pipeline.

Industries in Orissa can be grossly divided in to four categories- cottage, medium, large scale and

large scale heavy industries.

The state is rich in forest resources, which has prompted the growth of several forest based

industrial plants. The cottage industry of Orissa includes- sericulture industry, cotton textile mills,

sugar mills and rice mills

The small scale industries of Orissa include- brass industry, tobacco industry, beverage, molasses

and aluminium utensil making plants.

The large scale medium and large scale heavy industries include- cement industry, ceramic glass

plants, refractory units, ferro manganese plants, aluminium industry, fertilizer plants, agro based

industries, chemical industries, tyre factories and aeronautical industry.

The iron and steel industry of Orissa has played a major role in bringing the industrial boom in the

state. There are several steel and sponge iron plants operational in Orissa. The Rourkela Steel Plant

of SAIL is one the best in the country.

2.5. Mining

The state is a treasure trove of minerals and natural resources. With reserves of bauxite, chrome,

iron ore, coal, manganese, Orissa has been blessed with major industrial minerals. Vast and diverse

mineral deposits make Orissa one of the largest minerals bearing states in India. In fact the state

boasts of 16.92% of the total mineral reserves of the country. Mineral reserve of Orissa in respect of

chromite, nickel ore, graphite, bauxite, iron ore, manganese and coal is about 97.37%, 95.10%,

76.67%, 49.74%, 33.91%, 28.56% and 27.59% respectively of the total deposits in India.

The rich reserves of minerals in Orissa have led to establishment of several mineral based industries

in the state including the Rourkela Steel Plant (RSP), aluminium plants by National Aluminium

Company (NALCO), and ferro chrome plants at Bahmanipal, Bhadrak and Choudwar by Orissa

Mining Corporation (OMC), Ferro Alloys Corporation (FACOR) and Indian Charge Chrome Ltd.

(ICCL) and others. At Theruvalli in Rayagada district, Indian Metals and Ferro-Alloys (IMFA) have set

up a plant for production of charge chrome / ferro chrome. The other important mineral based

industries established include two sponge iron plants in Keonjhar district, a refractory in Dhenkanal

district and mineral sands separation and synthetic rutile plants of Indian Rare Earth Ltd. at

Chhatrapur in Ganjam district. Several cement plants have been set up in the State and four coal

based thermal power plants have been set up at Talcher, Kaniha, Ib Valley and Banharpalli. In

addition NALCO, RSP, ICCL, INDAL etc. have set up their own coal based captive power plants.

There are several ferro alloy plants in operation in the state.

Aluminum

Orissa is the largest producer of aluminum in India. In 2005-06, it produced over 415,000 tonnes of

aluminum, representing around half of India's total aluminum production, Orissa's key advantage

for aluminum industry is the fact that the state accounts for half of India's bauxite reserves. Its

location makes it close to the Chinese and South East Asian markets and the presence of large ports

makes it easier to access large export markets.

Ferro-Alloys

There are two big Ferro Manganese plants in operation in the State. First Ferro-Manganese plant

located at Joda in Keonjhar District is run by The Tata Iron & Steel Co. Ltd. The second plant at

Rayagada in Koraput District is managed by Jeypore Sugar Co. Ltd. There are several other smaller

ferro alloy plants in operation in the state.

2.6. Iron ore mining

With about 32.9% of India's iron ore reserves, Orissa accounts for over 10% of India's steel

production capacity and has a crucial advantage in the iron & steel industry. Further, the presence

of seaports in the state makes exports and imports cost effective and more competitive.

The state government has signed Memoranda of Understanding (MoU) with about 45 companies

for setting up steel plants of various capacities in the iron-ore rich parts of the state.

These include:

POSCO signed a MoU with Government of Orissa to set up a 12 Mt integrated steel plant at

Paradip with an investment of INR 510 bill (US $ 11.3 bill).

ArcelorMittal signed a MoU to set up a 12 Mt integrated steel project at Patna in Keonjhar

District with an investment of INR 400 bill (US $ 8.9 bill).

Tata Steel plans to develop a 6 Mt steel plant at Duburi with an investment of INR 154 bill

(US $ 3.4 bill).

Vedanta Resources Plc plans to set up a 5 Mt steel plant in Keonjhar district of Orissa at an

approximate cost of INR 125 bill (US $ 2.8 bill).

Essar Steel Plans to set up a Greenfield steel plant in Orissa with a capacity of 4 Mt with a

likely investment of over INR 68.5 bill (US $ 1.5 bill).

Jindal Stainless Ltd. is setting up a Greenfield stainless steel complex in Jajpur district with

an investment of around INR 16.1 bill (US $ 357.8 mill).

2.6.1. Location of major iron ore mining areas

Figure 3: Major iron ore districts of Orissa (haematite)

Sundergarh, Keonjhar and Mayurbhanj are the three districts where large scale iron ore mining is

being carried out. These districts have rich reserves of high and medium grade iron ore which are

being mined for domestic consumption and export to China.

3. Orissa: Geological overview

Orissa forms an integral part of Indian Peninsular Shield and portrays a complete geological

sequence ranging from Archaean to Quaternary. The complex geological history of Orissa is

attributed to Precambrian sequences which occupy most of the northern, western, central and

southern part of Orissa. Proterozoic platformal sediments cover the extreme western fringe directly

overlying the Cratonic assemblage. Gondwana Group of rocks were laid in Mahanadi Graben along

the North Orissa Boundary Fault (NOBF). Coastal part of the Orissa is covered by the Tertiary –

Quaternary - Recent sequence (Fig.4; Source: Geological Survey of India).

3.1. Precambrian Sequence

Precambrians of Orissa are discussed in three different tectonic terrains as: 1. North Orissa Craton

(NOC), 2. West Orissa Craton (WOC) or Bastar Craton and Eastern Ghats Granulite Belt (EGB)

(Fig.1). NOC occupy the northern part of Orissa and is separated from WOC and EGB by a North

Orissa Boundary Fault (NOBF). WOC occupy the western part while EGB covers the central and

southern part of Orissa separated by West Orissa Boundary Fault of Mahalik (1996).

3.1.1. North Orissa - Singhbhum Carton (NOC)

North Orissa Craton or North Orissa - Singhbhum Craton covers the Mayurbhanj, Keonjhar,

Balasore, Dhenkanal, Deogarh, Sambalpur and Sundergarh districts of Orissa along with part of

Jharkhand (previously Bihar).

Archaean Supracrustal sequence, Older Metamorphic Group (OMG), is considered as oldest unit in

the geology of Orissa. OMG comprises of meta-sedimentary and meta-basic rocks and are

synkinematically intruded by the tonalite gneisses designated as Older Metamorphic Tonalite

Gneiss (OMTG). The OMTG marks the earliest granitoid event and is considered as an anatectic

product of OMG which were later intruded into OMG at a greater depth. Both OMG and OMTG

occur as enclaves within the Singhbhum Granite (SBG) and show two phases of deformation. SBG,

which belongs to granodiorite-adamellite-granite suite, is believed to have emplaced in three

different phases designated as SBG-I, SBG-II and SBG-III. Chakradharpur granite gneiss, Nilgiri

granite and Bonai granite are considered as equivalent to the Singhbhum granite and fringe the

northern, eastern and western margin of Singhbhum granite respectively. Mahadevan (2002)

designated Singhbhum granite complex, earliest continental segment to get cratonised, together

with Archaean supracrustals as Archaean Cratonic Core Region (ACCR).

Emplacement of Singhbhum granites (SBG-I and SBG-II) and equivalent granites was followed by

the deposition and subsequent deformation of Iron Ore Group (IOG) consisting of Banded Iron

Formations (BIF), metasedimentary and metavolcanic rocks. IOG is believed to have deposited into

three major basins over OMG: 1. Gorumahisani – Badampahar basin, 2. Tomka – Daitari basin and 3.

Jamda – Koira basin, along eastern, southern and western margin of ACCR respectively. The Jamda

– Koira basin bears the abundant BIFs which display horse-shoe shaped syncline plunging gently (8°

to 10°) towards NNE. Jamda – Koira basin host the rich deposits of Iron and Manganese. The third

phase of Singhbhum granite (SBG-III) is dated younger to IOG (Fig.5).

The volcano-sedimentary sequence of the Dhanjori group rest unconformably over Singhbhum

granite and IOG and in turn are overlain by Singhbhum Group composed of metamorphosed

psammo-pelitic and pelitic rocks. Singhbhum Group is classified into Lower Chaibasa and Upper

Dhalbhum Formation separated by an unconformity. Kolhan group of rocks were deposited in a

narrow elongated depression to the west of Singhbhum Granite and are made of shale, limestone,

sandstone and intruded granites.

Gangpur Group of rocks were laid in the Gangpur basin, described as an anticlinorium by M. S.

Krishnan (1937), is now interpreted as a reclined fold refolded into antiform by Banerji (1968). The

stratigraphic status of the Gangpur Group is disputed and was correlated with Koira Group,

Singhbhum Group and the Kolhan Group. It is made up of carbonaceous metapelites, dolomite,

limestone and gondites.

3.1.2. West Orissa Craton (WOC)

The West Orissa Craton, bounded by Mahanadi rift in the north, Godawari rift in the south and EGB

in the east, is dominantly composed of granite and granite gneisses which are overlain by the

Archaean Bengpal Group and Paleoproterozoic Bailadila group of supracrustal rocks. Bengpal group

is composed of granite, gneisses and metasedimentary rocks. Both Bengpal and Bailadila group

cover part of western Orissa and extend into state of Chhattisgarh where BIF bearing Bailadila

group bears the rich deposits of Iron Ore.

Figure 4: Geological Map of Orissa (Source: Geological Survey of India)

3.1.3. Eastern Ghats Belt (EGB)

The Proterozoic EGMB follows the East coast of India in an arcuate fashion over 1000 km from the

Brahmani River in the north to Ongole in the south. It is crossed by two Mesozoic rift valleys,

namely Mahanadi rift in the north and Godavari rift in the south, interrupting its continuity. It is

surrounded on three sides by Archaean cratons, namely the Dharwar, Bhandara and Singhbhum

Cratons.

Ramakrishnan et al. [1998] classified the rocks of the EGMB into four zones, namely the Western

Charnockite Zone (WCZ), Western Khondalite Zone (WKZ), Central Migmatite Zone (CMZ) and the

Eastern Khondalite Zone (EKZ). WCZ consists of charnockites, mafic granulites and banded iron

formation where WKZ is dominated by typical metapelite called khondalite, with intercalations of

quartzite and calc silicate rocks and high Mg-Al granulites intruded by charnockites, enderbites and

massive anorthosite. CMZ is dominated of migmatitic gneisses, mafic granulites and calc-silicate

rocks intruded by charnockite-enderbite, granites and anorthosites. EKZ is made of khondalites.

Quartzite can be seen in all zones but occur dominantly in area north of Mahanadi lineament. They

occur in association with the diopside – garnet bearing calc-silicate rocks in several parts of the belt

especially in WKZ and EKZ.

3.1.4. Proterozoic Platform Sediments

Mesoproterozoic to Neoproterozoic platformal sediments were laid down in the different small

isolated basins named as: Abujhmar, Ampani, Khariar, Indravati and Sukma basins. These basins

occur in the western part of Orissa and bear undisturbed sequence of shale, limestone and

sandstone.

3.1.5. Gondwana Sediments

Predominantly Continental freshwater sediments belonging to Gondwana Supergroup,

accumulated during the Late Carboniferous to Early Cretaceous period, are found to occur in

number of small and isolated basins of Mahanadi rift traversing across the northern Orissa as shown

in the figure 1. These sediments bear the coal measures in Orissa.

3.1.6. Tertiary - Quaternary – Recent Sediments

Quaternary geology of the state is portrayed by the laterites of both high and low level formed

under the arid and humid climatic conditions. Laterites form a capping over the older formations

and cover a major portion of Eastern part of Orissa.Recent to subrecent sediments, charaterized by

the cyclic sedimentation of gravel, sand along with clay, occur as narrow and disconnected pockets

along the coastal plains. Over the Eastern Ghats belt, plateau capped bauxite are found over the

granulitic rocks.

4. Iron Ore Group (Singhbhum Craton)

4.1 Singhbhum Craton: Overview

Singhbhum Craton, the Archaean nuclei, is a triangular crustal block spread over approximately

40,000 km2 and covers the part of Orissa and Jharkhand states. The Singhbhum Craton shows the

geological events ranging from Archaean to Mid-Proterozoic (Fig.2). Though there prevails

numerous controversies over the status of different groups, a generalized stratigraphic sequence of

Singhbhum Craton is given as below in Table 1.

4.2 Iron Ore Group (IOG)

4.2.1 Geological Setting

The Archaean Iron Ore Group (IOG), a well known and significant stratigraphic unit from

Singhbhum Craton, hosts the rich deposits of Iron Ore (Fig.2) of Sundergarh, Mayurbhanj, Keonjhar,

Jajpur, Nawrangpur and Sambalpur districts of Orissa along with the part of the Jharkhand state.

Iron Ore Group is a collective term coined for three discrete greenstone belts composed of

metasedimentary and metavolcanics rocks bearing extensive BIF units with subordinate banded

chert and carbonate beds. IOG is believed to have deposited over OMG in three different basins: 1.

Gorumahisani – Badampahar basin, 2. Tomka – Daitari basin, 3. Jamda – Koira basin. These three

basins fringe the Singhbhum Craton (precisely ACCR); while Tomka – Daitari basin occur to the

south, Gorumahisani – Badampahar basin and Jamda – Koira basin occur to the east and west of

ACCR respectively. They are also called Eastern, Western and Southern IOG (Fig.2). While Sarkar

and Saha (1983) include all the three basins in a single IOG, Banerji (1974) proposed two fold

classification and divided them into older Badampahar Group and younger Koira Group separated

by Jagannathpur Volcanics. Badampahar Group includes the Gorumahisani – Badampahar and

Tomka – Daitari basins while younger Koira Group includes the western Jamda – Koira basin.

Table: Generalized Stratigraphic sequence of the North Orissa – Singhbhum Craton

Newer Dolerites

Kolhan Group

---------------------Unconformity------------------------

Jagannathpur Lava

Singhbhum Group

Dhanjori Group

----------Unconformity, Disconformity and Angular unconformity------

Jamda – Koira Basin (Western IOG)

---------------------Unconformity------------------------

Tomka - Daitari Basin (Southern IOG)

---------------------Unconformity------------------------

Gorumahisani – Badampahar Basin (Eastern IOG)

-------------------Non-conformity------------------------

Singhbhum Granite (SBG) Phase I and II

Older Metamorphic Tonalite Gneiss (OMTG)

Older Metamorphic Group (OMG)

No

rth

Ori

ssa

- S

ing

hb

hu

m C

rato

n

Pre

-IO

G S

eq

ue

nce

Ir

on

Ore

Gro

up

(IO

G)

Table 1: Generalized stratigraphic sequence of North Orissa - Singhbhum Craton

Badampahar Group

Badampahar group, also called as Gorumahisani Group by some authors, is a 120 km long belt

trending NNE to NW with a maximum width of 10 km. The group is chiefly composed of mafic to

ultramafic, metabasics, metapelites, BIF, quartzite and calcareous sediments.

Koira Group

Koira Group, deposited in the Jamda – Koira basin, exhibits the most spectacular BIF defining a well

known broad Horse Shoe shaped synclinorium plunging gently towards NNE. Though, all three

basins hosts the Iron Ore deposits, Jamda – Koira basin (Koira Group) or Western Iron Ore Group

bear the major Iron Ore deposits of India.

4.2.2 Ore Types, Grades and Mineralization Control

Banded Iron Formations represented by Banded Hematite Quartzite (BHQ) / Banded Hematite

Jasper (BHJ) host the high grade Iron Ore from the IOG. The Iron Ore from IOG are dominantly of

stratabound type while detrital colluvial and recent alluvial deposits also can be found at some

places. Beukes et al., (2003) have suggested supergene-modified hydrothermal processes for the

origin of these Iron Ores deposits.

Iron Ore from IOG can be classified broadly into massive, laminated and powdery ore. Massive ore is

hard, compact and may vary in grade from 64% to 68% Fe. High grade massive ore bodies grade

into partly mineralized BIF to completely unmineralized BIF, vertically as well as laterally.

Laminated Iron Ore, which is porous, soft and friable, sometime occurs in close association with

massive ore with Fe content varying from 62% to 65%. Powdery Ore is fine, grayish blue colored

and occurs as small pockets or bands and may vary in grade from 65% to 68% (Fe). Hematite,

Magnetite, Goethite, siderite and maritite are the ore minerals which make the varieties of Iron Ore

though Hematite and Magnetite are dominant ore minerals along with subordinate amount of

goethite and martite as alteration product. High grade Iron Ore deposits from Koira Group or

Western IOG are chiefly composed of Hematite while those from Badampahar Group are

dominated by Magnetite along with subordinate amount of other iron ore minerals. Hard massive

variety of Iron Ore may bear mainly Hematite along with subordinate amount of magnetite and

martite; this massive variety at places grades along with depth into soft blue dust variety chiefly

composed of Hematite with small amount of goethite and martite. Upper levels of deposits

generally bear the oxidation product and are chiefly composed of goethitic ore.

The mineralization in the IOG is more or less controlled by the Structural patterns developed by the

three phases of deformation that the area has undergone. Different generation of folds and faults

play important role in disposition of the ore bodies, their size, shape and their subsurface extent.

Superimpositions of different generations of folds give rise to different interference patterns and

thus form the suitable locale for the migration of ore material. While tight and isoclinal folds of later

generation superimposing over the earlier generation give rise to minor faults which dislocates the

ore body forms the isolated pockets enriched in iron ore. It is believed that the different sets of

faults marks the pathway for the mobilization of ore material which is further evidenced by the rich

iron ore deposits bounded by fault sets.

5. Iron Ore Belts

Iron Ore deposits of Orissa, which occur in three isolated but interconnected basins belonging to

IOG, are divided geographically into five belts or zones as follow: 1. Gorumahisani – Badampahar -

Sulaipet Belt, 2. Tomka – Daitri Belt, 3. Bonai – Keonjhar or Jamda – Koira Belt, 4. Gandhamardhan

Belt and 5. Hirapur Belt.

5.1 Bonai – Keonjhar Belt (Jamda – Koira basin)

Bonai – Keonjhar Belt occurs to the west of ACCR covering Keonjhar and Sundargarh district of

Orissa. The BIF from Bonai – Keonjhar belt display spectacular form of horse shoe and hence the

term was coined by Jones in his pioneer work as Horse – shoe synclinorium. Bonai – Keonjhar belt is

the most significant belt and bear the major iron ore deposits of Eastern India (Fig.3)

5.1.1 Geological Setting

The rocks from Bonai – Keonjhar belt, laid in a Jamda – Koira basin, overlie the OMG to the East and

Bonai granite to the west. Jamda – Koira basin bear essentially three units: Lower shale, BIF and

Upper shale where BIF host the high grade iron ore deposits of the belt (Fig.3).

5.1.2 Mineralization Control

The mineralization in the deposits from Bonai – Keonjhar belt is structurally controlled. The entire

belt is described as northeasterly plunging synclinorium by Jones (1934). The western limb of the

synclinorium has got overturned while eastern limb (Fig.4) has been folded into several anticlines

and synclines as shown in the cross section along the section line AB, CD and EF (Fig.5). The basin

has undergone three phases of deformation leading to three generation of folds. The tight to open,

upright and NS (gently) plunging folds of F1 generation are superimposed by tight to open, upright

and EW (gently) plunging folds of F2 generation resulting into type -1 interference pattern or dome

– basin patterns. The D2 phase of deformation gave rise to E-W to WNW – ESE striking minor faults.

D3 deformation has resulted into NS to NNE-SSW trending reverse faults dipping moderate to

steeply towards west. This later set of faults affected the F1 and F2 folds.

The western limb of the Horse-shoe synclinorium is isoclinally folded dipping steeply towards west

and control the depth of the ore bodies in the deposits from the western limb. In the eastern limb,

the major deposits are located in the shallow dipping strata from the hinge part of asymmetric

anticline. The dome and basin structure produced by the superimposition of F2 over F1 controls the

extension of ore bodies. In general, the entire belt is traversed by at least seven faults trending

NNE-SSW running almost parallel to each other. These faults control the shape and depth of the

localized small basins hosting the iron ore deposits.

5.1.3 Ore Types, Resource and Grade

Bonai – Keonjhar belt host the high grade and huge size deposits each having a strike length of

more than 1 km. The belt exhibit the various types of ore bodies ranging from hard – massive, to

soft laminated and powdery – blue dust composed chiefly of hematite, magnetite with subordinate

amount of goethite and martite. Soft laminated varieties of iron ore may grade into powdery blue

dust along depth at places. Lateritic ore also can be found in the upper part of the deposit at places.

The grade of ore increases along the depth and may vary from 58% to 65% (Fe). Total indicated

resource of the major deposits from the Bonai – Keonjhar belt estimates to approximately 2300 MT

estimated by Geological Survey of India, Indian Bureau of Mines, Directorate Geology and Mining

(Orissa).

Figure 5: Geological Map of North Orissa – Singhbhum Craton showing Iron Ore Group (Source: Beukes et al., 2003)

5.1.4 Major Deposits: Bonai – Keonjhar Belt

Thakurani Deposit

The deposit is located over the northern most tip of the eastern limb of horse-shoe shaped

synclinorium and covers an area of 19.95 km2. BHQ host the high grade hematitic ore of massive,

laminated and powdery types. BHQ, underlain by tuffs and shale, are capped by lateritic soil. GSI

estimated indicated resource of 395 MT up to a depth of 55 m with an average grade 63%.

Malangtoli Deposit

Malangtoli is a big sector comprising of 19 deposits with a total covering area of approximately 200

km2 located over the southern tip of the horse-shape synclinorium. Schists, shale, tuffs, phyllites,

basic rocks, BHQ and BHJ make the lithological assemblage of the deposits with BHQ and BHJ as

host for laminated iron ore with small patches of massive iron ore. GSI estimated indicated resource

of 608 MT with an average grade of 63% from the entire sector.

Bolani Deposit

Bolani deposit is part of NNE-SSW trending ridge extending for about 5 km along the strike length

and lies over the central northern part of the western limb of the horse-shoe synclinorium. Shale,

metavolcanics,BHQ, phyllites and tuffs . BHQ hosts the massive, soft friable, powdery and lateritic

types of ore with Fe content varying from 58% to 65%. Mineralization is controlled by extensively

folded and faulted structural setup of the area.

Hormoto – Guali Deposit

Located near Barbil the deposits cover an area of approximately 137 km2 and bear phyllite, chert,

sandstone, dolomite and BHJ with a regional trend varying from NNE-SSW to NE-SW dipping

gently to moderately towards NW. Deposits exhibit massive iron ore grading into soft lateritic

variety. Total reconnaissance resource estimated by DGM comes to 27.7 MT with an average grade

of 63% (Fe).

Joda and Khondbandh deposits

The deposit, occurring on the NS trending hill, belongs to the eastern limb of the horse-shoe

synclinorium consisting of phyllitic shale, BHJ and shale with basic lava in the upper part. The

deposit bears soft laminated iron ore with an average Fe content of 64%. GSI has estimated 252 MT

of indicated resource up to depth of 100 m.

Jhilling – Langalotta deposit

Jhilling and Langalotta deposit occur over Jhilling and Langalotta hills from the eastern limb of

broad Horse-shoe synclinorium. Sandwitched between the upper and lower shale units, BHJ hosts

the massive iron ore chiefly composed of hematite with small amount of goethite which occur as

alteration product by replacing the hematite. The total indicated resource, with an average grade of

62% Fe, was estimated by GSI comes to 96.7 MT up to a depth of 25 m from the surface.

Figure 6: Geological Map of the Horse-shoe shaped synclinorium (Jamda – Koira basin), Western Iron Ore Group. (Source: Ghosh and Mukhopadhyay, 2007)

Figure 7: Generalized Geological map of the eastern limb of Horse-Shoe synclinorium (Source: Acharya, S., 2008)

Figure 8 : Cross sections (not to scale) from the eastern limb of synclinorium along the lines shown in the previous figure. (Source: Acharya, S., 2008)

Bamebari, Gorubera, Jolohuri and Palsa deposits

This group of iron ore deposits occur in the central part of the asymmetric anticline developed over

the Horse-shoe shaped synclinorium. BHQ / BHJ, locally overlain by sandstone and capped by

lateritic soil, host the soft laminated iron ore composed chiefly of hematite with subordinate

amount of goethite. Total reconnaissance resource estimated by GSI accounts to 29 MT with Fe

content varying from 63% to 66%.

Balia Pahar, Kherjurdihi and Badamgarhpahar deposits

This cluster of deposits extending over a strike length of 2.5 km, lie in the SE part of eastern limb of

Horse-shoe synclinorium and to the east of Malangtoli. Ferruginous shale, BHJ and chert makes the

litho assemblage of the deposits and exhibit the iron ores of massive, soft laminated and blue dust

type with small upper part bearing the lateritic iron ore. Hematite occurs as the chief ore mineral

with goethite as alteration product along the fractures. Total indicated resource, estimated by GSI,

comes to 169 MT with Fe content varying from 58% to 62%.

Barsuan, Taldihi and Kalta Deposits

The Barsuan, Taldihi and Kalta deposits lies over the western limb of Horse-shoe synclinorium

comprises NE-SW trending ferruginous shale and BHQ / BHJ units and exhibit the hard massive and

soft laminated iron ore with occurrence of blue dust at places. Total inferred resource estimated by

IBM and DGM accounts to 232 MT with Fe content varying from 58% to 63%.

Jumka – Pathiriposhi Deposits

Jumka Pathiriposhi deposits, lying in the eastern limb of Horse-shoe synclinorium, comprises of

volcanics, tuffs and BHQ / BHJ overlain by upper shale. BHQ / BHJ makes the prominent ridges in

the area and host soft laminated iron ore along with the blue dust at depth. Hematite is the chief

ore mineral along with goethite and limonite along the fractures. Total resource potential estimated

by DGM accounts for 5.0 MT with Fe content varying from 50% to 60%.

5.1.5 Gorumahisani – Badampahar - Sulaipet (GBS) Belt

GBS belt, located in the NE part of the North Orissa – Singhbhum Craton, extends from

Badampahar in the south to Gorumahisani in the north through Sulaipet in an arcuate pattern. The

belt bears the well known deposits of Gorumahisani, Badampahar and Sulaipet.

5.1.6 Gorumahisani – Badampahar – Sulaipet Deposits

Gorumahisani – Badampahar and Sulaipet deposits of GBS belt lies in the Mayurbhanj district of

Orissa and run as three parallel bands over a strike length of 2.3 km, 1.0 km and 1.8 km respectively

with width varying from 100 – 250 m.

Geological Setting

The belt comprises chiefly Banded Magnetite Quartzite along with Banded Hematite Quartzite,

Banded Magnetite Grunerite Quartzite and Banded Chert Quartzite. This assemblage is intruded by

the ultrabasics and dolerite dykes. Though, magnetite is dominant ore mineral in this belt,

hematite, goethite and martite occurs in small quantity.

Mineralization Control

The Iron Ore bearing Banded Iron Formations from the GBS belt were laid in a fault bounded basin

and show a general NE-SW trend in the south while N-NNW trend in the northern part. The GBS

belts exhibit three phases of deformation represented by the three generation of folds: F1, F2 and

F3. The tight – isoclinals folds of F1 generation are coaxially folded by F2 generation of folds giving a

general NE-SW trend. F3 generations of folds are locally developed represented by local warps. The

mineralization in the belt is controlled by the pattern of faults and the discontinuous – lenticular

pattern of the iron ore bodies is attributed to the different generation of folds.

Ore Types, Resource and Grade:

The Gorumahisani, Badampahar and Sulaipet deposits, in general, exhibit the hard massive and

laminated varieties of Iron Ore which may grade some time into blue dust at deeper level. Total

indicated resource from these three deposits comes to 61 MT with major contribution from the

Gorumahisani and Badampahar deposits. The Fe content of deposits generally varies from 58% to

66%.

5.2 Tomka – Daitari Belt

Tomka – Daitari Iron Ore Belt (Fig.6) is located in the southern part of the North Orissa –

Singhbhum Craton and covers the part of Jajpur and Keonjhar districts of Orissa. The 50 km long

Tomka – Daitari belt extends from Tomka in the East to Madhyapur in the NW through Ghotang

and Pongaposhi. The Tomka – Daitari belt exhibits the well known deposits of Tomka, Daitari,

Ghutang, Pongaposhi and Madhyapur deposits.

5.2.1 Geology of Belt

Tomka – Daitari belt, once considered as part of Gorumahisani – Badampahar – Sulaipet Belt, is

now kept as separate entity due to its different metamorphic history, mineralogical and structural

style from the former. The belt is dominated by mafic – ultramafic rocks, metapelites, BIF,

quartzites and calcareous sediments. BIF host the high grade hematite iron ore deposits of this belt.

5.2.2 Mineralization Control

The BIF units from E-W trending Tomka – Daitari Belt form a tightly folded syncline with its

southern limb overturned. This synclinal structure is traversed by N-S, NNE-SSW and NW-SE

trending faults. It is believed that these deposits have formed by the ore material supplied along

these faults from depth as enrichment of Iron Ore occurs within the areas bounded by these faults.

The occurrence of iron ore deposits in the form of isolated pockets is attributed both to tight folding

and faulting (Fig.6).

5.2.3 Ore Types, Resource and Grade

The iron ore from Daitari deposit exhibit the high grade hematite ore of laminated and blue dust

variety with Fe content varying from 60% to 63%. On contrary, Tomka, Ghutang, Pongaposhi and

Madhyapur deposit are chiefly composed of magnetite with subordinate amount of goethite and

martite and ranges in grade from 55% to 58% Fe. Total indicated resource for Tomka deposit was

estimated to 40 MT by IBM and DGM while GSI and IBM has estimated 10 MT of total indicated

resource for Daitari deposit. Ghutang, Pongaposhi and Madhyapur deposits collectively were

estimated to 0.048 Mt as total resource potential by independent bodies.

5.3 Gandhmardhan Belt

The Gandhmardhan deposit from the Gandhmardhan belt is located to the SE of broad

synclinorium from Jamda – Koira valley. Gandhmardhan deposit with an aerial extent of 3 km2,

occur as isolated unit, it is interpreted as continuation of asymmetric anticline hinge from the

Jamda – Koira valley. BHQ, BHJ, phyllite and shale with intercalation of lava flows and dolerite

made the litho-assemblage. The deposits bear massive, laminated and powdery iron ores with

grades generally above 63%.

Figure 9: Generalised geological map of the Tomka – Daitari belt from Southern Iron Ore Group (Tomka – Daitari basin) showing spread of BIF with fault bounded Iron Ore deposits. (Source: Acharya, S. 2008)

5.4 Hirapur Belt

Hirapur Iron Ore Belt, which is located in Nawrangpur district of the Orissa, belongs to the

stratigraphic units within the Western Orissa Craton and equivalent to the Bailadila group. The

litho- assemblage of this belt comprises of BHQ, ferruginous schist, shale and is capped by lateritic

cover. Hirapur and Umrakot iron ore deposits from this belt show hard massive and laminated

varieties of iron ore with Fe content ranging from 50% to 62%.

5.5 Iron Ore Potential: Orissa

Iron Ore in India occur in different geological settings belonging to different groups and formations

but the major deposits are confined to Precambrian banded iron formations of greenstone belts. In

India, hematite and magnetite are the prominent Iron Ores of which high grade Hematite Ore

occurring as massive, laminated, friable and in powdery form are the major source. Major Iron Ore

of deposits of India are demarcated geographically into five zones from I to V. Deposits of Orissa

and adjoining areas belong to Zone – I which contribute to 60% of high grade Hematite Iron Ore (>

60 wt% Fe) of India. Orissa bear the largest resource of Iron Ore followed by Jharkhand. Iron Ore

Group, bearing dominantly Banded Iron Formations, hosts the rich and major deposits of

Mayurbhanj, Sundargarh, Keonjhar and of Jajpur districts of Orissa. As per the information available

from Director of Geology, Orissa, IOG bears 5306 Million Tonnes (MT) of Iron Ore Resource out of

which 3000 MT belongs to Leasehold areas while 2306 MT belongs to Freehold areas. The detail of

district wise distribution of Iron Ore Resources is as follow, as per the data updated till 2007:

Sr.

No.

District Leasehold Resource

(MT)

Freehold Resource

(MT)

Total Resource

(MT)

1 Keonjhar 2316 1258 3574

2 Sundergarh 574 1031 1605

3 Mayurbhanj 28 07 35

4 Jajpur 82 0 82

5 Jaipur 0 10 10

Total 3000 2306 5306

Table 2: Iron ore resources of Orissa

Source: Director of Geology, Orissa and Director of Mines, Orissa. (Year: 2007)

5.6 Summary

Iron Ore occurs in different groups and formations of different geological settings but the India’s

richest and biggest deposits are mostly confined to Banded Iron Formations (BIF) of Precambrian

age. Major Iron Ore deposits of India are distributed into five distinct geographic zones from Zone –

I to Zone - V. Major high grade Iron Ore deposits from Eastern India are located in the North Orissa

and part of Jharkhand corresponding to Zone – I. The Archaean Singhbhum Craton comprises the

well known Iron Ore Group (IOG) deposited in the three isolated basins namely: Gorumahisani –

Badampahar basin, Tomka – Daitari basin and Jamda – Koira basin. All three basins are made up of

volcano-sedimentary sequence and comprises of Banded Iron Formations that host the iron ore.

The Iron Ore Group covers the Mayurbhanj, Keonjhar, Sundergarh and Jajpur districts of Orissa and

is exhibit the major and high grade deposits of Eastern India.

The Iron Ore deposits from Orissa are divided into five geographic belts: 1. Bonai – Keonjhar belt, 2.

Gorumahisani – Badampahar –Sulaipet belt, 3. Tomka – Daitari belt, 4. Gandhamardhan belt and 5.

Hirapur belt. The Iron Ore from these deposits are of various types as hard massive, soft laminated

and powdery blue dust though lateritic ore occur at places in the upper profile. Gradational or sharp

transition may occur from one type of ore to other type both vertically and laterally. Hematite and

magnetite are the chief ore minerals while goethite and martite also occur as alteration product

along the fractures and other weak planes. Hard massive varities are mostly composed of hematite

along with subordinate amount of goethite and martite. Powdery blue dust is chiefly composed of

hematite. The high grade deposits from the different belts are structurally controlled. The region

show three phases of deformation and display the different generation of folds and faults. The

superimposition of the folds from different generation creates the repository for the ore material

while transecting faults creates the path for the ore material to get mobilised. Tight isoclinal folds

and different sets of faults thus control the size, shape and subsurface extent of the ore bodies.

Table 3: Major iron ore resource bearing districts

Source: Directorate of Geology, Government of Orissa

Mayurbhanj, Keonjhar, Sundargarh and Jajpur districts from Orissa bear the major high grade

(+60% Fe) hematitic deposits from these belts and contribute to the 60% of total Indian iron ore. As

per the information available from Director of Geology and Director of Mines, Orissa, the state has

5306 MT of iron ore deposits of which 3000 MT belong to leasehold areas and the rest 2306 MT

belongs to freehold areas thus making it worth to explore and workout for iron ore in the state.

3574

1605

82 35 10 0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Keonjhar Sundergarh Jajpur-Koenjhar Mayurbanj Jajpur

Iron ore resource (Mt)

6. Orissa Iron ore mining

Orissa, a major producer and exporter of Iron ore occupies an important position on the mineral

map of India. It is endowed with high grade haematite, and other essential minerals for the steel

making like coal, dolomite, limestone and manganese. Because of the abundant mineral resource

base, its strategic proximity to major iron ore consumers in the world market, Orissa offers an

excellent investment opportunity for mining companies and iron and steel manufacturers. As per

the recent estimate of Directorate of Geology, Government of Orissa, the total iron ore resources in

the state is around 5306 Mt which is predominantly in the form of haematite and concentrated in

the 5 districts of the state, Keonjhar being the leading district with a resource base of around 3574

Mt. However, the official estimated figure provided by GSI is 4760.67 Mt (as on 1:4:2005, detailed

information dossier, 2010). GSI has estimated iron ore reserve on the basis of Fe cut off grade of

55%. Because of recent development of lean ore beneficiation technology, iron ore of Fe 45% -50%

can also be upgraded and utilized for steel making process, Government of India has reduced the

cut off grade for iron ore to Fe 45%. However, the additional Iron ore resources have not been

officially included in the total iron ore reserve base.

Except for a few industry majors, iron ore mining in the state is dominated mainly by small and

marginal players with a leasehold area of as low as 1.2 hectares. These small players generally cater

the need of domestic industry and export surplus iron ore to China mainly via Paradip port.

As per the report of the Forest Survey of India, the forest cover in the state is 48,855 sq. km of which

7,073 sq. km is very dense forest. The moderately dense forest extends over 21,394 sq. km while

open forest is over 20,388 sq. km. The forest cover in the state constitutes 31.38% of the

geographical area. Besides this, there exists tree cover outside the forest over 2.85% of the

geographical area of the State. Thus the forest and tree cover in the State is 34.23% of the

geographical area. While some mining activities are confined to non-forest areas, substantial

portion of the remaining mining zones come under degraded and open forest areas.

Because of afforestation taken up by the mines and their concern as organized sector for forest

conservation, in and around of these mining areas forest cover exists today which has been

confirmed even by satellite imagery of mining belts of Koraput, Keonjhar Sundergarh & Angul.

Deforestation and degraded forest areas are much more in the districts or parts of the state, where

there are no mining activities. While about 10% of the forest area has been lost in the last 50 years,

only 0.09% forest area comes under mining lease and 0.01 % under active mining operation.

(Source: Ministry of environment and forest, Government of Orissa)

Working mining lease hold areas

(Ha)

Non Working mining lease hold areas (Ha)

Districts Forest Area Non Forest

Area

Forest Area Non Forest Area

Jajpur 190.2 0.0 0.0 0.0

Keonjhar 21,924.5 89,167.3 2,756 1,542.9

Sundergarh 34,033.2 98,767.1 686.4 12.9

Total 56,147.9 187,934.4 3,442.4 1,555.8

Table 4: Working and non working mining areas, forest land*

* As on April 2010 Source: Department of Steel and Mines, Government of Orissa

6.1 Mining policy

Till date, the state of Orissa does not have any separate mining policy. However, the Government of

Orissa is under the process of finalizing the same and the draft Orissa Mining Policy will be

announced very soon. As per a recent press release, the new mining policy will focus more on non-

ferrous sector rather than on ferrous minerals. It will be emphasized on development of low volume,

high value non-ferrous minerals like gold, nickel, platinum, beach sand as the state has a reserve of

174 million tonnes of Nickel ore and 82 million tonnes of beach sand. The preliminary mineral

investigation has also indicated occurrences of gold and diamond bearing minerals in the western

part of Orissa. In the ferrous sector, more emphasis will be given on promotion of beneficiation,

pelletization, sintering, and calibration of minerals so that low grade ore can be utilized. The policy

will promote state-of-the-art technology and good management practices in mining of minerals in

the state with a view of protecting human and natural resources.( source: press release,

Government of Orissa). This is being done primarily to increase employment opportunities in the

state.

The existing mineral based industries have been covered under Orissa Industrial Policy 2007.

The salient features of Orissa Industrial Policy pertaining to Mineral based industries have been

elucidated below:

Promotion of development of infrastructure via Public Private Partnership (PPP) mode

to support sustainable investment in the field of mining and mineral processing.

Planning and Coordination Department has been designated as the nodal department

and the Orissa Industrial Infrastructure Development Corporation (IDCO) as the

technical secretariat for promoting PPP Projects. In context of the above, three (3) new

ports are being promoted, Dhamra and Kirtania in the north and Gopalpur in the south

on PPP mode. Similarly, Gopalpur port is being developed in Southern Orissa, which is

expected to have a cargo handling capacity of over 40 mtpa in the long run. Gopalpur

would serve the industrial corridor of Southern Orissa, especially for the mining and

mineral processing zone covering Kalahandi, Rayagada and Koraput District and

special economic Zone at Gopalpur itself.

Maximum emphasis will be given on process and industries which have sound

management practice. To achieve this objective the State Government among other

things is actively promoting investments in new cement plants based on blast furnace slag and fly ash, which would be available in abundance due to the large number of steel and power plants coming up in the state.

Strengthening of regulatory and institutional arrangement for implementation of

environment laws, formulation of Rehabilitation & Resettlement Policy by adopting a holistic livelihood approach for rehabilitation and resettlement of project affected families.

Strengthening of arrangement for industrial promotion and investment facilitation at

various levels including District Industries Center (DIC) as District Level Nodal Agency, Corporation of Orissa Limited (IPICOL) as the State Level Nodal Agency (SLNA) Team

Orissa as the Common Focal Point for extending single window and A high level clearing authority chaired by Chief minister.

Creation of SEZs and more thrust on human resource development and employment

6.2 Industry Structure and major producers of Iron ore

Iron ore mining players in Orissa can be categorized into two main types;

Industrial houses like Tata , Essel mining ,SAIL, OMC ,OMDC catering to domestic as well as export market

Small players mainly catering to smaller firms and export market

Across districts, Keonjhar has the maximum number of small mining players particular in the region

of Barbil while Jajpur has the least. Maximum number of 85 mining leases (including multiple leases

for same agency/ persons) has been executed in the district of Keonjhar while in the Jajpur district

only one mining lease has been granted to Orissa Mining Corporation (OMC).

Table 5 : Mining leases in major iron ore producing districts, Orissa*

* As on April 2010 Source: Department of steel and mines, Government of Orissa

Production wise Essel mining is the biggest producer of iron ore calibrated iron ore lumps (inputs for

steel making through the DRI/BF process) and Iron ore fines (inputs for sinters and pellets, used for

making steel). Across the government sector Orissa Mining Corporation is largest producer of iron

ore lumps and fines (producing approximately 8 Mtpa). Other notable producers of iron ore include

SAIL, Patnaik group, Rungta. The figure below depicts the major producer of iron ore in the

financial year 2009-10.

Figure 10: Major iron ore producers in 2010, Orissa

44 10 21

41

1

20

2

-

10

20

30

40

50

60

70

80

90

Koenjhar Mayurbhanj Sundergarh

Number of Mining leases

Iron and Bauxite Iron and Maganese Iron

10

9

8

4 4 3 3 3 3

2

0

2

4

6

8

10

12

Esse

l

Tata

Ste

el

OM

C

SAIL

Pat

na

ik

OM

DC

Ah

luw

alia

Siaz

ud

din

JSP

L

Ru

ngt

a

M

t

Major Iron ore producers (Mtpa -2010)

For the period of 2005-09 domestic consumption of iron ore grew at a CAGR of 13.9% while the

exports for the same period grew at a CAGR of 10.3%. The maximum quantity of iron ore exported

(mainly to China) was in the year 2008 which subsequently came down by 18.5% in year 2009

(mainly due to financial slow down). In the same period domestic consumption grew by

approximately 8% mainly attributed to increasing government expenditure on infrastructure

development. With a planned investment of USD $ 456 billion on the infrastructure development in

the current 5 year planning period (2007-12) and projected 10 % growth in domestic demand in near

future, iron ore mining in Orissa is set to grow in the coming years.

Figure 11: Domestic consumption vs. Exports

Source: Ministry of Mines, Government of Orissa

6.3 Iron ore mining in Orissa

In Orissa, the relative amount of top cover / waste material to be removed (called as overburden in

mining terminology) to expose off the iron ore body is very less compared to western region of

India (particularly Goa). These overburden material are mainly composed of some laterite and

some below cut off grade ferruginous shales. In India and throughout the world iron ore are

generally mined by open cast mining method and Orissa is not an exception. On the basis of level

of mechanization, iron ore mines are generally of two types:

Manual Mining: This form of mining is generally carried out to mine out float and reef ore on small

scale basis. The area containing float ore is dug up manually using hand picks, crow bars and

spades. The material obtained is manually screened to separate + 10 mm size which in turn is

stacked up in the form of ore heaps. The waste is dumped back into the pits. In this process, the

recovery of float ore ranges from 30 to 50%. In case of reef working generally holes of 0.6-1 m deep

and 30-40mm diameter are drilled with hand held jack hammer drills and each hole is charged with

suitable gun powder or special galantine cartridges. The blasted ore is manually loaded on to trucks.

In this whole process the finer material (-10 mm) is rejected at site even if it contains more than 60

10.0 14.3 17.0 20.1 16.4

29.6

36.1

44.4 50.2 53.9

-

10

20

30

40

50

60

70

80

2005 2006 2007 2008 2009

Iron Ore - domestic consumption and exports (Mt)

Domestic consumption Exports

% Fe. Gradually this method of mining is being phased out but still some areas in Orissa particularly

Barajamada region, this method of mining is still in vogue.

Figure 12: Manual mining

Picture source: public domain

Mechanized mining: Mechanization of Iron ore mine operation was pioneered by Tata Steel by

setting up a mechanized mine at Gorumohisani in Mayurbhanj district in late 1950’s. In the later

years when integrated steel plants were established and mechanized captive iron ore mining took

off, these regions were mainly confined to the lease hold areas in the vicinity of Tata steel’s iron ore

mine site.

Mechanized mining consists of by

systematic unit operation viz. drilling,

blasting, loading and hauling and in all

of the stages the working is more or

less mechanized and latest state of the

art technology is being used .The

mining starts by forming step like

structure called “benches”. Generally,

benching starts from the top of the hill

and moves downwards as the ore at

the top gets exhausted. Generally the

desired grade is achieved by in-pit

blending (by working simultaneously at

more than one benches) or by stock pile (by blending at stockpile). The height of bench is

determined by several factors such as output requirement, shape of body and geological

intrusions, hardness and type of machinery. In Orissa, the bench height in fully mechanized

mine are generally varying from 5 m to 12-13 meters.

The part of bench where the work is confined is called ‘working face’. The width and length

of width of working face is also dependent of type of machine deployed, level of production,

Figure 13: Mechanized iron ore mining


slope stability and geological condition of the deposits etc. To a large extent the width of

bench is governed by the width of the largest machinery deployed. Generally the face width

is 3-4 times of the widest machinery plying on it. The drilling is carried out in staggered and

square pattern which is chosen on the basis of desired fragmentation and blast results. The

drill and pattern also depends on the bench height, hole diameter, the drill machinery

deployed, nature of rock and the types of explosives used. These blast holes are vertical but

can be inclined also for obtaining better blasting results. The blasting is carried out by using

conventional explosive as well as NG based explosives, ANFO, Slurry, Emulsions. Use of

most advanced computer aided blast models are already being in practice at some of the

big mechanized iron ore mines in Orissa. The use of these technologies has yielded

significant improvement in productivity and reduction in blast induced environmental

hazards.

For loading and hauling of blasted ore generally shovel and dumper combination of appropriate

capacity is being used mechanized iron ore mines. In countries like Australia where use of 200 ton

trucks and 40 cubic meter shovel is very common, Iron ore mines in India predominantly uses

smaller shovels of capacity ranging from 3.5 cubic meters to 10 cubic meters. Similarly, trucks of

smaller capacity are being used for iron ore mining operations.

The GPS based truck dispatch systems, modular mining and other modern mining techniques are

also being utilized in very few mines in Orissa. Over all the mining industry in Orissa is still at a very

nascent stage in terms of technology adoption. Hence large scale mine modernization / technical

advancement are largely absent. Most of the mines are privately held and hence there is limited

availability of data regarding resources / reserves. Valuation and geological reporting standards like

JORC are not known at all.

6.4 Mineral beneficiation

With fast depletion of resources of high grade, it has become necessary to ensure conservation and

sustainability of operation by adoption of techniques of lean ore beneficiation. As a matter of policy

only low and medium grade ore (up to 64% Fe), fines and temporary surplus high grade iron ore

(+67 % Fe), particularly from Bailadila (Chhattisgarh) is being exported to countries. In most of the

highly mechanized mines in Orissa, more than 50-60% fines are being generated. The blue dust also

needs to be utilized to larger extent. This can be achieved by using it as an additive up to extent of

20-30% in iron ore fines. At iron ore processing plant where wet processing is used, around 10-20%

of ROM (Run of mine) is lost as slimes which can be reduced by using hydro-cyclones and slow

speed classifiers.

The iron ore processing flow sheet depends on the type of ROM ore feed, its fractional sieve

analysis and product specification. The high quality ore and blue dust can be converted as direct

feed material by screening it into lumps and fines (10mm-40mm size, and (-)10 mm size

respectively). These materials if treated by wet process can result in rejection of significant good

quality material as slime. The generally occurring beneficiable iron ore are subjected to crushing

and grinding- wet screening- classification- magnetic separation- treatment in wet cyclone etc.

These parameters and equipments are selected on the basis of type of operation and input/ output

specifications. The conceptual flow sheets for beneficiation of several types of ore are given below

Dry Screening Process

Figure 14: Dry Screening process, Iron ore


Wet Screening Process

ROM

Crushing

Dry

Screening

Lumps

Fines

Figure 15: Wet screening process, iron ore


Wet Screening Process with scrubbing

ROM

Crushing

Wet

Screening

Lumps

Fines

Classification

Fines

Slimes

Figure 16: Wet screening with scrubbing, iron ore

Picture source: public domain Washing and gravity separation (Jigging)

ROM

Crushing

Wet

Screening

Lumps

Fines

Classification

Fines

Slimes

Wet

screening scrubbing Crushing

ROM

Figure 17 : Washing and gravity separation, iron ore


6.5 Operational risk in iron ore mining in Orissa

Most of the mineral deposits in the states are located in the forest land which is inhabited by tribal

population, majority of which are primitive tribal groups. These tribal groups are heavily dependent

on forest land for their live hood and they are least adaptive to social and economic changes

resulting significant protest and several social hurdles in land acquisition activity. In the recent past

it has been revealed that majority of land acquired for open cast mining operation were previously

used for cultivation of various types of crops. The land belonging to these areas were forcefully

acquired and very few displaced people were offered employment in the mining company. It has

ROM

Wet

Screening

Lumps

Fines

Classification

Fines

Slimes

Wet

screening scrubbing

Crushing ROM

Jigging Fines

Slimes

been also found that fertility of the lands surrounding the mining areas have come down

significantly due to air, land and water pollution. These all factors resulted in mass scale unrest and

now pose a significant threat called often termed as “naxalite problem”. Most of the rivers in the

state originate from the rich mining belts. Rampant mining activity in the upper catchment area of

these rivers particularly in the regions of Joda, Koida and Kuraput has lead to effect of flow of small

springs which supplies water to river thereby affecting flow of the main river. In the coming year

these issues will also come into picture and it will pose a significant risk for water security for

indigenous people as they are heavily dependent on these river for their water requirement.

The major risk and possible mitigation majors in the project life cycle and operational stage has

been depicted below:

Project Planning phase:

The major hurdle in this phase of the mining project is to obtain all the regulatory approvals for

commencement of on- site activities. For commencement of mining operations in India, a mining

company has to obtain consent from various statutory bodies starting from approval of mine plans,

forest clearance, environment clearance, clearance from state pollution control board, approval of

mine plans by Indian Bureau of Mines, grant of mining lease by state government, land acquisition,

magazine clearance, permission for using heavy earth moving machinery (HEMM) from DGMS. This

whole process is often arduous and time consuming causing major delays in project commission

resulting in huge cost blowouts to the project proponents. With a view of promoting investments

and sustainable mining, the Government of India has made amendments in the existing Mines and

Mineral Regulation and Development act (MMDR) by way of stipulating time frame in order to

minimize time elapsed in grant of mineral concession. The Proposed MMDR Bill 2010 (expected to

get approved by Parliament of India) has gone one step further and stipulates an independent

mining regulator in the form of Mining tribunal. This will not only smoothen the process flow but

also bring transparency in the grant of mineral concession.

The problem of land acquisition is being aggravated day by day particularly in the areas in which

majority of indigenous population resides and they depend on the land for their livelihood.

Although Government of India and respective state governments have made higher allocation in

their budget for social welfare but still very active actions from the project proponent is required to

overcome this hurdle. The approach to tackle this issue can be by employing displaced people in

mining operations, promoting skill enhancement, offering equity participation in the operation,

taking welfare measures and increasing thrust on corporate social responsibility.

Project execution phase:

Most of the mining sites are located at remote places which may not be connected to nearest rail

network. All the facilities needing to be built at site might require initial capital expenditure.

However, the capital expenditure needed to build the same is far less than that of developed

countries, where mining site is located at remote places and “fly in fly out” mode of working is

preferred. Sourcing of skilled human resources can also be a potential showstopper for the project.

Mine operational phase:

The operational risk includes variable production and variable production specification. This will

significantly impact iron ore supply chain and in turn will adversely affect the cash flow. Other

operational risks include poor shift management, poor inventory management and others. These

risks can be mitigated by proper planning and proper execution. These risks are essentially different

from operational uncertainty; that is, output variability which relates to other risks such as

geotechnical, geological or environmental risks. Over past few years environment risk has increased

tremendously and regulators have increased their frequency of monitoring and control of mining

operations. Non-compliance could result in anything from a minor sanction (for example, a cash

penalty) to a major shut down. This will have a considerable negative impact on shareholder value.

Environmental risks often strike the least suspecting and usually have a significant impact on value.

The recent closure of iron ore mines and temporary suspension of Bauxite mining leases rights in

Orissa is mainly owing to non compliance to environment norms.

6.6 Recent Mine closures in Orissa

Till November 2010, the Government of Orissa had reportedly suspended the operation of 246

mines for violation of statutory norms. This has been considered a step taken to crack down on the

prevailing illegal mining activities. The operation of these mines has been suspended due to various

reasons including pending environmental clearance, pending forest clearance, non-approval of

Mining Plan by IBM, non-payment of Net Present Value (NPV) for diversion of forest land for mining

activities and lack of no-objection certificate from the State Pollution Control Board (SPCB).

One of the major violators in the list is state run Orissa Mining Corporation. Mining activities in at least 18 mines was suspended for the want of forest and environmental clearances. For the same reasons, mining operations of bigger government owned enterprises including SAIL, Nalco and OMDC were also suspended.

Major mining areas where operations are suspended

Khandadhar iron ore mines of Orissa Mining Corporation (OMC) spread over 1212.4 hectares have

been suspended by the IBM for violation of approved mining plan on 24th August ‘10.

Nishikhal manganese ore mine of OMC with a lease area of 501.6 hectares in Koraput district has

been suspended by the circle mining officer on May 14 due to non-approval of Mining Plan and want

of environmental clearance from the Union Ministry of Environment and Forests (MoEF).

The other two mines of OMC, whose operation was suspended in August this year by IBM, are

Khandbandh iron ore mine (leasehold area of 366.31 hectares) at Joda, Keonjhar and Balda-Palsa-

Jajang iron ore mine (leasehold area of 861.52 hectares ). The operations of the Khandbandh iron

ore mine has been suspended due to want of forest clearance while reasons attributed for the

suspension of Balda-Palsa-Jajang iron ore mine was want of forest clearance, non-approval of

Mining Plan, pending environmental clearance from the MoEF and lack of No-Objection Certificate

(NOC) from the SPCB.

Industrial majors from the private sector also figure on this list. The Malda manganese ore mines of

Tata Steel (spread over 822 hectares) has been suspended by IBM on August 30th this year for

deviation from the approved Mining Plan.

Essel Mining and Industries Limited, Rungta Sons (P) Limited and Sirrajuddin and Co had not secured forest and environment clearances for their operations. All those operations in which environment and forest clearance had not been obtained, has been closed by Government of Orissa.

In the coal sector, the work at IB River Valley coal mine of Mahanadi Coalfields Ltd has been suspended by the circle mining office on 24th July this year for failure to pay the NPV for diversion of forest land.

6.7 Greenfield Typical Mining Cost in Orissa

Conceptual Capital cost estimate for mining and processing of 5 Mtpa Iron ore.

The estimated capital cost for ore mining, processing, transportation to port /nearby industries and infrastructural facilities are based on cost and prices as prevailing during 3nd quarter of 2010. Taxes and duties have not been considered in this estimate. The exchange rates considered for the estimate is as follows: 1 USD = INR 45.39 (RBI reference rate dated 19th Dec, 2010)

The capital cost estimate of the project is presented under the following heads:

Pre-Operative Expenses: The pre-operative expenses include expenses to be incurred

during pre operational phase of the project. The major subhead under this will include cost

associated with exploration and feasibility, Regulatory charges and others.

Land Acquisition: This is the cost of land for the total mining lease hold area.

Infrastructure cost: The infrastructure cost includes costs of site development, civil work

and structural steelwork, plant and equipment and supervision of erection and construction,

facilities for the power supply, water supply and others.

Plant and equipment: The cost estimates are based on cost of similar equipment from

reputed suppliers and information available in our data base and public domain with

suitable adjustments. It has been considered that major equipment will be procured by

major global equipment suppliers. The balance equipment will be sourced locally. The cost

referred here is inclusive of corresponding cost of design, engineering, consultancy,

administration during construction and contingency.

Transportation: The cost to be incurred in establishment of facilities from mine site to

nearest railway station, construction of railway siding and its facility has been taken under

this head.

Contingencies: A provision is made at 20 per cent of the plant cost and other fixed costs to

cover the cost of unforeseen items, and included in capital cost estimate. However this

amount does not include any provision for forward escalation and exchange rate variation.

Capital cost estimate (for mining 5 Mtpa)

Particulars In USD Mill

Exploration & Feasibility 1.2

Site Preparations 6.3

Environmental Clearance 0.2

Forest Diversion 10.7

R&R Provision 2.7

Administrative Overheads 3.2

Pre-Operative Expenses ( Total) - I 24.3

Land Acquisition 1.5

Mining Equipment 15.2

Processing Plant 14.2

Processing Plant and associated costs (Total) - II 30.9

Civil Constructions 3.1

Access Roads 5.1

Power Supply 8.1

Water Supply 2.1

Tools, Communication and spares 2.1

Infrastructure ( Total) - III 20.3

Mine to Siding (mine road and ancillaries) 6.1

Siding Facilities ( iron ore load out – railway) 14.2

Transportation (Total) - IV 20.3

Gross Total 95.8

Contingencies (20%) 19.2

Grand Total 115.0

Table 6: Capital cost estimates

Note: These costs are illustrative and tentative only. The actual costs may vary depending upon mine

location, size, type of ore deposit, method of mining, equipment employed and several other factors.

The above costs cannot be taken as actual costs associated with the expansion and have been provided

here to illustrate an example.

Conceptual production cost estimate

The annual production expenses are estimated under the following heads:

Mining Operation

Crushing and screening cost

Rail Transportation/ Road Transportation and port handling

Administration Cost

6.8 Mining operation

Operating costs for mining operation are developed on the basis of fleet calculations and desktop

studies for similar mines located in the similar region. The estimated operating expenses are based

on the total operating hours for the mining equipment and desired operating hours to achieve

required product.

The operating parameters are described below:

Fuel: Diesel is used as fuel for the mining equipment. Cost of diesel is based on specific fuel consumption for different mining equipment as taken from equipment suppliers/in-house database including support equipment and at a unit rate of 0.90 USD per litre.

Lube: Cost of lube oil is based on lube consumption, calculated on normative basis in relation with fuel consumption.

Repair and maintenance: Repair and maintenance has been estimated on the basis of cost incurred in maintaining items like filters, major overhaul, and ground engaging tools like blades and track chain etc for the mining equipments. A provisional value of 3% of the equipment cost has been taken as towards repair and maintenance for other equipments.

Salaries and wages: The referred expenditure is estimated based on the category wise annual salary including all fringe benefits and other benefits like bonus, leave salary, overtime etc. and the category wise manpower required for the operations.

Power: The power cost include cost associated with the power consumption for mine illumination, pumping, power consumption in crushing and screening plant and other utilities.

Blasting: The estimated value of explosive cost is based on use of Site mixed emulsion explosive in conjunction with non electric detonator.

Transportation cost: This includes costs for transporting the crushed and screened ore from pit top to the nearest railways station and from railway station to nearest port or iron ore based industries in neighbouring state of West Bengal. An alternative for the logistic cost using road network is also presented in the logistics section of this report.

Administration cost: This includes salaries of personnel for administration and other major overheads like expenses towards community development.

Production expenses

The estimated production expenses for the optimum capacity utilization have been summarized below.

Particulars In USD / tonne

Salary and wages 0.71

Diesel and lubes 1.15

Spares, repair and maintenance 1.65

Blasting 0.17

Power 0.90

Transportation from mine to nearest railway station* 1.65

Administrative overhead 0.71

Total excluding contingencies 6.94

Contingencies (@20%) 1.39

Grand Total 8.32

Table 7 Operating cost estimates

* the figure has been taken to transportation of ore to Barajamada Railway station from a mine located at a distance of 35 km.

Note: These costs are illustrative and tentative only. The actual costs may vary depending upon mine

location, size, type of ore deposit, method of mining, equipment employed and several other factors.

The above costs cannot be taken as actual costs associated with the expansion and have been provided

here to illustrate an example.

7. Overview of Steel Production in Orissa

Along with the growth of Indian steel industries, the eastern state of Orissa has emerged as an

important place on the Indian steel map. The state had only two steel plants till 1995. Marginal

growth was achieved between 1995 and 2000. But from 2000 onwards, the steel industry in the

state witnessed a rapid growth in iron and steel sector. Today Orissa hosts around 143 iron and steel

plants with a combined capacity of 12.3 Mt which is nearly 16% of the total steel capacity in India.

Types of Industries Number of Industries

Large Medium Small Total

Integrated Iron and Steel 2 -- -- 2

Pig Iron 4 -- -- 4

Sponge Iron * 82 11 -- 93

Secondary Steel Melting Like Induction

Furnace etc. (Stand alone)

6 35 3 44

Total 94 46 3 143

Table 8: Steel companies operating in Orissa

*Out of 93 Sponge iron plant 13 plants also have steel making facilities through DRI-IF/EAF route

Source: Orissa Pollution Control Board

Over the years the steel making route has also witnessed a structural change from the conventional

Blast Furnace - Basic Oxygen Furnace (BF-BOF) route to Direct Reduced Iron - Electric Arc Furnace/

Direct Reduced Iron – Induction Furnace (DRI-EAF/DRI-IF) route. The details of production capacity

and actual production in during FY 2009-10 in Orissa are compiled in the following table.

Iron and Steel Capacity (Mtpa) Production (Mtpa)

Integrated Iron & Steel 3.59 2.00

Pig Iron 1.90 0.85

Sponge Iron 6.78 4.41

Total 12.28 7.25

Table 9 Steel capacity and production in Orissa

Source: Salva

7.1 Integrated Steel Plants

There are two integrated steel plants (ISPs) in Orissa, who have the facilities right from the iron

making to the downstream finished steel making. One of them is Rourkela Steel Plant (RSP) which

is owned by the state run Steel Authority of India (SAIL) having hot metal capacity of 2.3 Mt. During

FY 2009-10 the plant produced 2.0 Mt of total saleable steel. Bhushan Steel Ltd is the other ISP

which has recently started operation in Orissa with the hot metal capacity of 1.3 Mt.

Companies Plant Location Capacity (Mt) Production (Mt)

Rourkela Steel Plant (RSP,SAIL) Rourkela 2.30 2.00

Bhushan Steel Ltd Meramandali 1.29 -

Total 3.59 2.00

Table 10: Integrated Steel Plants in Orissa

Source: Salva

7.2 Pig Iron

There are four major pig iron producers in Orissa with a total capacity of 1.9 Mt. The total

production of pig iron in the state was 0.85 Mt in FY 2009-10, which is mainly headed by Neelachal

Ispat Nigam Ltd (NINL), producing 0.57 Mt in FY 2009-10. NINL has pig iron plant at Kalinganagar

with the capacity of 1.1 Mt. The other pig iron producers in the state are Visa Steel, Kalinga Iron

Works and MESCO Steel Ltd, the details of which are tabulated below.

Companies Plant Location Capacity (Mt) Production (Mt)

Neelachal Ispat Nigam Ltd (NINL) Kalinganagar 1.10 0.57 MESCO Steel Ltd. Jajpur 0.40 - VISA Steel Ltd. Kalinganagar 0.23 0.14

Kalinga Iron Works Barbil 0.18 0.14

Total 1.90 0.85

Table 11: Pig Iron Producers in Orissa

7.3 Sponge Iron

In recent years steel making has seen a shift in technology preference. The current trend is to

produce steel through DRI-EAF route. Because of availability of sponge grade iron ore, thermal coal

and booming market, sponge iron has grown exponentially during last few years. There are 93

sponge iron plants already operating and some more are in the pipeline. Details of district wise

distribution of sponge iron capacity have been depicted in the following graph.

Table 12: District wise distribution of sponge iron capacity (%)

Source: Orissa Pollution Control Board, Salva

The total installed capacity in sponge iron sector is about 6.8 Mtpa. This sector alone consumes

about 11 Mt of iron ore and about 9.5 Mt of coal annually. The sponge iron industry in the state is

highly fragmented with only 7 plants having capacity of more than 200,000 tpa. The largest is

Rungta Mines Ltd with annual DRI capacity of 0.33 Mt followed by Adhunik Metaliks, Bhushan Steel,

Visa Steel etc. The list of major sponge iron producers and their capacity in Orissa is enumerated

below.

Sundargarh 34%

Keonjhar 28%

Jharsuguda 9%

Angul 3%

Jajpur 3%

Mayurbhanj 1%

Sambalpur 12%

Dhenkanal 4%

Cuttack 6%

Companies Plant Location Capacity (Mt)

Rungta Mines Limited Barbil/Sundergarh 0.33 Adhunik Metaliks Rourkela 0.30 Bhushan Steel Ltd Meramandali 0.30 Visa Steel Ltd Kalinganagar 0.30 Action Ispat & Power Pvt. Ltd. Jharsuguda 0.25 Orissa Sponge Iron & Steel Limited Keonjhar 0.25 Shyam DRI & Power Ltd. Sambalpur 0.21 Others 4.84 Total 6.78 Table 13: Sponge iron producers in Orissa

Source: Salva

The pace of growth of the steel industry in Orissa is likely to be faster in coming years. Getting

attracted by its vast and quality deposits of key steel making raw materials like iron ore, coal and

manganese, around 45 companies have signed Memorandum of Understandings (MoU’s) with the

Orissa Government. The total capacity under these MoUs is around 77.16 Mt with the total

investments of INR 2139.69 Bill (nearly US $47 Bill). The prominent names who have lined up for

building steel mills in Orissa include ArcelorMittal (12 Mt), POSCO (12 Mt), Tata Steel (6 Mt), JSPL (6

Mt) etc. But due to the problems of land acquisition, environmental clearance and forest clearance

most the projects could not take off as yet crippling the growth potential of steel industry in Orissa.

7.4 Role of government owned iron ore mining companies in Orissa

The steel industry in Orissa consumes nearly 11 Mt of iron ore. Nearly all the requirement of iron ore

is sourced from the mines located in Orissa. There are two government owned iron ore mining

companies in Orissa, namely, Orissa Mining Corporation Ltd (OMC Ltd) and Orissa Minerals

Development Company Ltd (OMDC Ltd).

OMC produces nearly 8 Mt of iron ore through its Daitari, Gandhmardhan, Barbil and Koira mines.

The OMC Ltd was established in 1956 as a joint sector with the Government of India and

subsequently in 1962, it became a wholly state owned corporation of Government of Orissa. OMC

has been reported to possess reserves of 400 million tonnes of iron ore, 19 million tonnes of

manganese, 28 million tonnes of chromite, 220 million tonnes of bauxite, 19 million tonnes of

limestone and other minerals. OMC operates 11 iron ore mines, five chrome ore mines, three

manganese mines and one limestone mine. OMC supplies high grade iron ore to domestic

consumers and also exports the fines generated during the mining process.

OMDC, one of the oldest iron ore mining companies in India and the second largest iron ore

producer after NMDC in India, was incorporated in the year 1918. Its mines are located around

Barbil in Keonjhar District of Orissa. During FY 2009-10 it produced 0.56 Mt while it sold 0.64 Mt

iron ore. It has six mines in total of iron ore and manganese. It has been reported to have over 206

million tonnes of iron ore reserves and 44 million tonnes of manganese ore reserves in its leasehold

mines.

These two organizations provide iron ore to the consuming industries like steel, sponge iron and

ferro alloy plants in Orissa and export ore both to domestic users in other Indian states and also

export to countries like China.

8. Ore transport and logistics – rail and road

8.1 Value chain of iron ore from mines to port / steel plant

Figure 18: General process flow of Iron Ore Supply Chain

The process of Iron ore movement from mine to port (for export) or plant (for steel production) can

be sub divided into three legs- In mine movement, Rail/ Road transit and Port/ Plant movement.

Inside Mine movement

•Excavation and storage at pithead

•Moved to siding by tipper/ dumper

•Unloaded at railway siding

•Loaded to wagon/ trucks by pay loader

Mine movement

•Rail/ road movement of rakes/ trucks to the stockyard of port or steel plant

Transit •Unloading of wagons at stockyard

by wagon tippler

•Stacked by stacker- reclaimers

•Transferedto tipper by payloaders

•Intercarted to wharf by tippers

•Loaded on vessel by mobile harbour crane

Port movement

After crushing, screening and beneficiation processes, iron ore fines and lumps are transferred to

the mine stocking area by dumpers, tippers or conveyor belt. In most of the cases railway siding acts

as a temporary stocking area, from where ore is loaded on to railway wagons with the help of pay

loaders. In case there is no dedicated railway siding at the mine, stocked ore is transferred to the

trucks/ trailers (with the help of pay loaders) either to the nearest railway siding or directly to the

destination (port or steel plant).

Rail/ Road transit

Most of the iron ore transits from mine area to port/ steel plants take railway route. Especially in

case of export, iron ore rakes reaches port while it brings back imported coal as return load. Road

transportation has other limitation also like- absence of multiple lanes in highways, unsatisfactory

condition of roads and multiple toll gates while transiting different states.

Plant/ Port movement

In port/ plant stocking area, iron ore can either come by rail (wagons) or through roads (trucks/

trailers). In both cases activities will be more or less similar after stocking. While the ores through

rails gets unloaded by wagon tipplers, truck loads require manual handling which is cumbersome.

Diagram below gives an overview on material flow of iron ore in Orissa.

Figure 19: Flow of Iron Ore in and around Orissa

Source of all figures: Ministry of Mines, Govt. of Orissa (for FY 2009)

Out of 77 Mt of total production, around 79% of iron ore gets consumed domestically in the steel

plants of West Bengal and Orissa. Remaining 21% is exported to China. These iron ore take railway

and road route when transferred from mines to port or steel plants.

The majority of the iron ore as can be observed from above is consumed domestically in India. This

is calibrated lump ore, sized for use in both blast furnace and sponge iron plants. This forms the

majority of the iron ore that is being consumed. Iron ore fines which are generated during mining,

processing and beneficiation are exported to China. Iron ore miners generally have long term

Orissa Iron Ore Production- 77 Mtpa

Domestic consumption: 61 Mtpa

(steel plants of West Bengal , Jharkhand, Chhattisgarh and Orissa)

Export: 16 Mtpa

(mainly to China through Paradip & Haldia ports)

arrangements with domestic buyers from the steel plants to source iron ore and hence there is a

dependency built in for these miners on these sponge iron /steel plants. The fines which are not

usable in India are exported and this is again dependent upon various external factors which include

demand for iron ore from China and overall steel growth.

It is also important to note that West Bengal does not have any iron ore and is totally dependent

upon Orissa iron ore for its complete requirements.

8.2 Rail logistics

Railways are the most commonly used mode of transportation for iron ore in India. Iron ore is the

second largest commodity moved by rail accounting for 16% of total traffic. In order to curb export

of iron ore and to boost domestic production of downstream steel products, rail freight for

exporting iron ore is charged higher.

1 Value chain analysis

Figure 20: Value Chain Analysis- Rail Logistics

As is apparent from the figure above, ore after being crushed screened and beneficiated gets loaded

to the tippers with the help of pay loaders or shovel (1). Then tipper takes it to the top of mine (2)

where it is dumped and reclaimed by dozers (3). Thereafter it is shifted to railway wagons with the

help of pay loaders (4) and moved by rail to port/ plant (5). At the destination ores get unloaded by

wagon tipplers (6) and are stacked in storage area (7). From stockyard required amount of iron ores

get shifted to wharf or steel plant by tippers/ trucks (8-a/b).

Overall Rail scenario in Orissa and connectivity with mines

1 2 3 4

5 6 7 8a

9 8b

The Orissa railway network is a part of the East Coast Railway, which is the largest carrier of

commercial load in both freight as well as passenger traffic in the country. As on 31.03.2003 Orissa

had rail lines of 2,287 km including 91km of narrow gauge. Districts of Sundergarh, Keonjhar and

Mayurbhanj are well connected with Paradip port -the only gateway to export iron ore from Orissa-

and steel plants in Durgapur, West Bengal. Bisra, Panposh and Raj Gangpur are the major railway

stations of Sundergarh district, while Baripada and Betnoti connect Mayurbhanj from Paradip (in

Jagatsinghpur district). Most of the iron ore mines in the district have their own railway siding and

most of the transportation takes railway route, except for the smaller mine owners which use roads

for inland logistics.

Figure 21: Railway Map of Orissa

Source: http://www.orissaminerals.gov.in/Images/Orissa_Railways.gif

District of Sundergarh is connected to Paradip port by main railway network from Bimalagarh and

Bisra stations and is around 550 km from the port railway siding. Keonjhar has two main stations

Kendujahgarh and Banspani and is connected to the port by main network. Distance between

Kendujhargarh and the port is 269 Km while from Banspani it is 325 Km. Badampahar and Baripada

in Mayurbhanj district connects to Paradip port by main network. Similarly railway connectivity to

the Durgapur steel mills are in place. Badampahar of Mayurbhanj is nearest of all, only 296 Km,

while Baripada is farthest at around 402 km from Durgapur.

Potential bottlenecks

Iron ore for export is targeted most of the time for rail freight, making logistics cost significantly

high compared to road. As a result of which there have been massive cancellation of rake indents

for iron ore export, when export price of iron ore has fallen drastically as a backdrop of global

financial crisis. It does not only disturb iron ore pricing for short term, but also deters mine owners

from long term planning.

Lower axle load restricts quantity of iron ore to be loaded in a rake which increases demand for

more rakes while several times Indian Railways has faced acute shortage of wagons.

Another pain area in rail logistics is the heavy penalty on overloading of the rakes, which leads to

under loading and hence opportunity cost lost. In normal circumstances there are no weighing

facilities at the time of loading. Rakes are loaded as per the weight to volume ratio, which might not

be accurate hence there is always a risk of over/ under loading of rakes.

Railway line in India is being shared by both passenger as well as goods, which results in priority for

passengers hence delay and congestions for goods traffic. Also freight traffic has low average

speed, which leads to longer lead times and reduces throughput at port as time taken for cargo

assimilation takes time.

8.3 Road logistics

Due to above mentioned shortfalls in railway system and lack of adequate infrastructure at the mine

side, many mine owners take road route for evacuating their ores to the port or plant. However, it

does not constitute significantly as compared to rail transportation.

Value chain analysis

Figure 22: Value Chain Analysis- Road Logistics

As a typical process flow of iron ore supply chain through rail, ore are firsts treated (crushed

screened and beneficiated) in the pithead. After all these processes, it gets loaded to the tippers

with the help of pay loaders or shovel (1). Then tipper takes it to the top of mine (2) where it is

dumped and reclaimed by dozers (3). Thereafter it is shifted to trucks/ trails with the help of pay

loaders (4) which takes highway route to port or plant (5). At the port/ plant ores get unloaded

manually and are stacked in stockyard (6). From stockyard required amount of iron ores get shifted

to wharf or steel plant by tippers/ trucks (7-a/b).

Overall road scenario in Orissa and connectivity with mines

1 2 3 4

5 6 7a 8

7b

Orissa is well connected by national and state highways to the various strategic points, i.e. mines,

ports and steel plants within as well as connecting states. Total length of road network in Orissa as

on 31.03.2003 was 238,034 km.

Figure 23: Road Map of Orissa

Source: http://www.orissaminerals.gov.in/Images/Orissa_Roads.gif

Nearest to the port of Paradip is Mayurbhanj district (261 Km), which is connected to the port

through SH 61, NH 60, NH 5 and NH 5A. Keonjhar is connected to the port by NH 6, NH 23, NH 42

and SH 12, while SH 10, NH 200, NH 6, NH 23 and SH 12 connect Sundergarh to Paradip port.

Connectivity to the steel mills in Durgapur in West Bengal is also very good. Again Mayurbhanj is

nearest to Durgapur (245 Km) and is connected through SH 61, SH 19, NH 5, NH 6, SH 4, SH 9, SH 2

and NH 60. Where NH 6, SH 4, SH9, SH2 and NH 60 connects Keonjhar to the steel mills,

Sundergarh which is farthest among these three district is connected to Durgapur by SH 10, SH 24,

NH 78, NH 23, NH 75, GT Road, NH 2 and NH 98.

Potential bottlenecks

Major challenge with road transportation is that most of the highways are narrow and congested.

As for example NH-5, which is a major highway in Orissa leading to Paradip port, has two lanes. In

case of any mishap or accident which causes hindrance, the traffic shuts down on the affected lane

and the highway becomes one lane. While approaching Paradip port, long lines of 45-50 km of

waiting trucks full of iron ore is a normal phenomenon. That was the case for National Highway,

some of the state highway or connecting roads are not even two lanes. Apart from number of lanes,

overall conditions of roads are also poor. Due to these reasons, lead time increases and safety gets

jeopardized.

In India, there is also a general concern regarding the logistics service providers. As this industry is

fragmented and in a great need of consolidation, fleet owners show no or poor professionalism.

Technologies like GPS tracking of trucks are still not wide spread. These factors raise the concern of

reliability and integrity of cargo.

8.4 Port infrastructure

Orissa has a long coast line of 480 km, with Paradip as the major all weather port. Tata and L&T has

developed another deep drafted all weather port on the coast of Orissa which is situated between

Haldia port, West Bengal and Paradip, Orissa. Another port; Gopalpur is coming up to the south of

Paradip port and is expected to be operational by 2012.

Existing port infrastructure in Orissa- Paradip port

Figure 24: Paradip Port- Satellite View

Source: Google Earth

Total volume of iron ore handled in 2008

Particular Volume in Mt

Export 11.9

Coastal movement 1.8

Total 13.7

Table 14: Iron Ore Volume- Paradip Port (Mt)

Iron ore facilities in Paradip:

Minimum available draft at port is 12.8m which can handle vessels of size up to 75,000 DWT. It is

well connected to Sundergarh, Keonjhar and Mayurbhanj by road as well as rail.

It has 14 berths out of which nine handles and one is dedicated for iron ore cargo. All berths are for

multi-user purpose and

hence there are not captive

jetties. Average turnaround

time for vessels carrying iron

ore will be around 6 days,

while pre berthing time is 71

hr. The internal movement of

iron ore is mainly through

conveyor belt or by tippers.

Total storage capacity is

1,736,100 Sq m, which is

around 500 m from railway

siding, while the distance

between railway siding and

wharf is around 2 Km.

The port has its own railway

system and connected to

East Coast Railways. It is also

connected to NH-5A and

State Highway 42.

Bottlenecks

Cargo handling systems are more than 25 years old and need replacements to improve productivity.

Therefore frequent breakdowns / repairs delay the turn round of the vessels which lead to

congestion.

No suitable cranes are available at port; hence geared grabber vessels are prevalent which in turn

increase average turnaround time and reduces port productivity.

Paradip port has draft of 12.5m, which is not sufficient to accommodate cape size vessels hence

reduced output level.

Modernization of all machinery and mechanization of jetty is the need of the hour. Port should also

develop higher drafts to take advantage of handling vessels of higher capacity with lower unit

freight costs. Matching port capacities with rail-road infrastructure to remove bottlenecks is also

another area of improvement.

Figure 25 Paradip Port Layout

Expansion plan

Planning has been agreed for the deepening of the approach channel from 12.8m to 18.7m and

entrance channel, handling vessels up to draught of 16m, 125,000DWT. There are also plans to

enhance the draught at existing docks to 14 m, to accommodate Panamax vessels and to extend

the existing iron ore berth from 155 m to 205 m to be completed with dredging project above. There

are plans to build two bulk berths at the port for Capesize Bulk Carriers, one for exports of iron ore

(PPT) and the other for imports of coking coal. After dredging of the channel to 17m is completed,

both berths will have a capacity for 16m draught and 125,000/185,000DWT vessels. There are also

plans to install two 20 tonnes shore cranes. The Indian Government has plans to improve national

rail links to many ports including Paradip.

Iron Ore Berth: The Port Trust has announced plans to build a 10 Mtpa deep draught iron ore berth,

which is expected to be completed by 2012.

Upcoming port projects in Orissa- Dhamra and Gopalpur port

Dhamra and Gopalpur are the Greenfield port projects in Orissa, which will shift some of the

existing iron ore traffic from Paradip port. Whereas Dhamra has just commenced its trial operation

in September 2010 and still due its commercial operation early in January 2011, Gopalpur has done

with financial closure and awaiting a final nod for environmental clearance. It is expected to be

operational in 2012.

Port of Dhamra is developed by Tata and L&T on 50:50 joint ventures. It is among few of the deep

draft port of India which can handle cape size vessels. It has 18m draft and situated between Haldia

and Paradip port. It is connected to its hinterland by railway network.

With these modern port infrastructure in place and development of Paradip port, existing

bottlenecks in the logistics will be a thing of past.

8.5 Logistics cost for iron ore – Railways /Roads

Costing is based on the general industry trend and prevailing price, which was validated by primary

research. However these costs are tentative and subject to change without notice. These are for

illustrative purposes only.

Logistics cost (USD per tonne)

Railways Roadways Iron Ore Mines Paradip port Durgapur,WB Paradip port Durgapur, WB Keonjhar 50.1 21.9 55.6 40.0 Sundergarh 52.2 21.9 40.0 35.6 Mayurbhanj 51.4 21.2 38.0 35.5

Table 15 : Logistics cost summary

Source: Salva Research and Primary data

The above table illustrates the average cost per tonne for shipment of ore from the mines to port

and also to steel plants in West Bengal. Majority of the movement is generally by road to both the

port and also to the sponge iron plants. Primary reasons for this are twofold. The sponge iron plants

generally do not consume large quantities of iron ore. They consume smaller volumes and these

volumes are easily transported by truck /road. Also these plants do not have the equipment to

unload rakes. These plants depend upon manual unloading to unload trucks and as a result there is

limited demand for railway rakes. Secondly, there is a huge demand for railway rakes from the iron

ore exporters and also coal importers. Under this circumstance there is limited availability of rakes.

As a result, the iron ore exporters, especially the smaller players depend upon trucks for

transportation of ore from their mines to plants and to the port also.

As illustrated in the above example, generally rail transport charges are comparatively similar for

the three districts. There is a difference in the road transport charges from the mine to either the

port or to plants in Durgapur, West Bengal.

9. Comparison of mining costs – Orissa and Western Australia

While there are some similarities in terms of geology of Orissa and Western Australia, the situation

is completely different when it comes to iron ore mining. Australia is the world leader in iron ore

mining, expected to produce about 398.4 Mill tonnes in 2010-11. Iron ore is also Australia’s biggest

export, worth almost USD 29.04Bill in 2010-11.

In comparison, iron ore production in Orissa is not even expected to touch 100 million tonnes in

2010-11.Exports will also be comparatively lower at about 17 million tonnes.

The differences continue with the scale of the industry also. Iron ore mining industry in Australia is

highly organized. The industry is concentrated along a few large players like BHP Billiton, Rio Tinto

and Fortescue Minerals. There are some junior mining companies also who contribute to the overall

iron ore mining in Western Australia. However the top three producers alone produce in excess of

200 million tonnes. In comparison, the mines in Orissa are comparatively smaller producing on

average less than a million tonnes each annually. The largest producer in Orissa is Essel Mining

which produces about 10 Mtpa of iron ore for sale.

The following section presents the case to case basis comparison of mining cost in different

scenarios.

We have considered an iron ore mine operating at a capacity of 1 Mtpa and it is being expanded to 5

Mtpa. The estimated minable remaining reserve of the mine is around 45 million tons with

estimated life of 10 years. During initial year of operation stripping ratio is assumed as 1:1 ore waste

ratio which subsequently reduces to 1:0.85 ore waste ratio.

As the mine is operating so it can be assumed at a fair degree of certainty that:

Mine lease is available for the life of mine operating @ 5Mtpa.

Infrastructure is available, only refurbishment of existing facilities and up gradation to accommodate additional capacity is required.

Power line is available and extra power ( to be incurred mainly in crushing and screening ) can be easily drawn

Water and land is available.

Skilled manpower is available and can be sourced from local market.

Considering the above, the major cost to be incurred in expansion will be under the head of

Procurement of additional mining equipment of larger capacity

Establishment of a new crushing and screening plant including civil and structural work , as the existing stream might not have addition buffer capacity to accommodate 5Mtpa

Up-gradation of existing infrastructure

Some statutory approvals like environment clearance etc are required.

Capex associated with Mine operation: In consonance with mechanized mining, unit operation like

drilling (150mm), blasting ( using SMS/ SME , Loading by 5 m3 diesel operated hydraulic shovel and

hauling by 50 T rear dump truck is considered. Assuming average speed for dump truck (empty 25

km/h and loaded 20km/h) and cycle time of 50 sec, number of Heavy earth moving equipment has

been estimated. After making allowances for capital expenditure associated with ancillary

equipment and other facilities the comparative capital cost for the peak level of production is

presented below.

Particulars Greenfield (USD Mill)

Brownfield (USD Mill)

Exploration & Feasibility 1.2 0.5

Site Preparations 6.3 2.0

Environmental Clearance 0.2 0.1

Forest Diversion 10.7 0.0

R&R Provision 2.7 0.0

Administrative Overheads 3.2 2.5

Pre-Operative Expenses ( Total) – I 24.3 5.6

Land Acquisition 1.5 0.0

Mining Equipment 15.2 12.0

Crushing and screening plant 14.2 12.8

Mine equipment and associated cost (Total) - II 30.9 24.8

Civil Constructions 3.1 2.4

Access Roads 5.1 2.5

Power Supply 8.1 7.0

Water Supply 2.1 1.5

Tools, Communication and spares 2.1 2.0

Infrastructure ( Total) – III 20.3 15.4

Mine to Siding (mine road and ancillaries) 6.1 4.0

Siding Facilities ( iron ore load out – railway) 14.2 14.2

Transportation (Total) – IV 20.3 18.2

Gross Total 95.8 64.0

Contingencies (@20%) 19.2 12.8

Grand Total : USD Million 115.0 76.8

Table 16: Greenfield and Brownfield capital cost-Orissa

Once an operating mine is acquired, the risk associated for the variance in future cash flow is lesser

in comparison to venturing into unknown greenfield project. However, the upside potential is also

limited in case of brown field project. In the above table, the estimated cost has been compared.

The peak through put capacity has been taken as 5Mtpa. The cost associated with the infrastructure

and load out facilities has been adjusted downward as some existing infrastructure has been

assumed to be present. However, the capital expenditure towards railway siding has been kept

unchanged as new siding capacity might be required to built.

Iron ore in Western Australia mined out by Open cut mining method. The ore from mines is hauled

from the pit to crushing and screening plant by means of trucks of capacity in the range of 300 tons.

After crushing and screening, these ore are transported for further treatment and blending to port

sites in trains consisting of up to three locomotives and over 250 wagons. Trains of this size are over

2 kilometers long containing loads in excess of 25,000 tonnes being used to transport ore to port

sites. For port these ore are exported mainly in two forms – Direct Shipping Ore (DSO) and

concentrates.

The operation in Western Australia is profitable mainly because of following reasons

Higher scale of operation, very large mine size with massive production capacities

Highly mechanized mines with latest mining, processing and blending technologies

Rich mineral resource base

Contrary to Iron ore mining in Orissa, the iron ore operation in Western Australia is highly capital

intensive. Absence of infrastructure like rail lines and roads from mine to port site is makes it more

capital intensive. Prior to commencement of operations, these facilities needs to be developed

which may cost very high to mining companies as these rail lines are owned and operated by

mining companies/ infrastructure operators. At the port also, the facilities for equipment like

stacker reclaimer, ship loaders etc has to be built by these operators.

However, in state of Orissa the rail and infrastructure is already present. Rail network is owned and

managed by government and ore can be transported to port site on a pay and use basis. Port is also

owned and operated by Port Trust of India and export can be made after payment of port handling

and ship loading charges.

On the operating expenditure front, operating a mine which is nearer to port in Australia is cheaper

than India. Although manpower is very expensive there and “fly in fly out” mode of working is

preferred but incremental saving on operating expense (because of lesser transportation cost on per

ton basis, economics of scale etc) offsets the mine site operating expenditure.

It’s very difficult to compare mining capital expenditure and operating expenditure between mining

operation in Orissa and Western Australia, as mine of comparative operating capacity ( 5 Mtpa and

less) are relatively uncommon in Western Australia.

However, because of similar scale of operation, and similar resource base Mungada hematite DSO

deposit of Karara Magnetite and Hematite project has been chosen for comparison.

Brief description of project:

Gindalbie, together with Anshan Iron and Steel Group Corporation (Ansteel), China’s second‐large

steel maker, are jointly developing the Karara Project (primarily magnetite concentrate), located

225kilometres east of Geraldton in Western Australia’s Mid West region. In September 2007, a

Bankable Feasibility Study (BFS) into the development of the Karara Project was completed. Based

on the outcome of the BFS, on 6 September 2007, Gindalbie and Ansteel entered into a joint

venture development agreement for the construction and development of the Karara Project. In

November 2009, on‐site construction started on the Karara Project following the receipt of the final

environmental approvals from the State and Federal governments.

Gindalbie and Ansteel have so far invested approximately $600 million into the development of the

Karara Project. A further US$1.2 billion has been borrowed, at commercial lending rates, to

complete the project development.

Figure 26 : Gindalbie project map

The total estimated reserve base of Mungada deposit is approximately 9.6 Mt hematite DSO grade

and approximately magnetite resource base is 110Mt of concentrate feed ore and DSO grade. The

total life of project is 10 years which is divided into two phase. Two open pit mine located at Blue

hill north and Tarapod has been planned which will produce approximately 3Mtpa Hematite ore

and 8Mtpa magnetite concentrate.

The snapshot of capital and operating expenses has been presented below.

Capital Cost Estimate (USD Million) Mungada

Hematite

Mungada

Magnetite

Pre Operative Expenses 45 846

Mining, Processing and associated equipment costs

Infrastructure costs 36 290

Transportation costs 13 195

Gross Total 94 1373

Contingency @ 20% 18.8 275

Grand Total 112 1648

Mine site operating cost(excluding contingency) 23.5 30.60

Transport Mine to port 12.75 34.05#

Royalties 4.77 4.44

Capital charge 11.54 14.98

FOB cost at Geraldton Port USD / tonne 52.6 84.07*

Table 17: Karara Iron ore mine project

Source: Investor presentation

#- Includes freight charges to China.

*C&F Cost of ore at Yingkou Port

The following table provides an illustrative example. These are the costs associated with a

conceptual iron ore mine in Orissa having a production capacity of 5 Mtpa.

Orissa Operations in USD Mill Greenfield Brownfield

Pre Operative Expenses 24.3 5.6

Mining, Processing and associated equipment costs 30.9 24.8

Infrastructure costs 20.3 15.4

Transportation costs 20.3 18.2

Gross Total 95.8 64.0

Contingency @ 20% 19.2 12.8

Grand Total 115.0 76.8

Mine site operating cost(excluding contingency) 5.29 5.29

Transport Mine to port 50 50

Royalties 3.00 3.00

Capital charge 2.61 1.74

FOB Paradeep / tonne 60.9 60

Table 18: FOB cost Orissa Greenfield and Brownfield

The primary difference that emerges between operations in Orissa and Western Australia relates to

scale of operation, complexity of operation, processing of ore and transportation. Western Australia

generally has large scale mine operations where operations are in the region of several million

tonne per annum. As a result this provides economies of scale for the iron ore mining companies to

utilize to provide economic cost of mining ore. The iron ore mines in Orissa on the other hand are

comparatively smaller and majority of them are in the range of 100, ooo tonnes and less per annum.

The economies of scale are not present in this case but are made up by lesser mechanization and

lower operating cost as a result of local manpower, cheap labour and very low level of technology

penetration. The mines in Australia generally have to process and blend ore to ensure that the the

specified grade is maintained. Blending operations in Orissa are not carried out generally as the ore

is of on average 62% Fe and above for the export fines. This reduces over all capital costs for

blending and processing plants that are not required in Orissa. The ore is then transported to the

port through public infrastructure in the form of National Highways and exported through the

Paradip Port. The iron ore export infrastructure in Western Australia is generally owned and

controlled by a few mining and infrastructure companies and as a result small operators either have

to buy into the infrastructure (if at all possible) at very high charges or build up the infrastructure

from scratch. These impose massive costs on the mines and make small scale mining of iron ore

(less than 1 Mtpa) uneconomic. Developing a transport infrastructure for iron ore transport in the

form of a rail and port network is prohibitively costly and makes small scale operations very difficult.

The advantage with Orissa is that small scale mining is economic and if the operation is run

efficiently then sustainable for the long run also.

10. Epilogue

Orissa is one of the largest producer and leading exporter of iron ore. The iron ore mined over here

is used domestically in Indian steel mills and the fines generated are exported, mainly to China.

Orissa’s iron ore mines are of generally high grade with large reserves located in the three districts

of Mayurbhanj, Keonjhar and Sundergarh. These three districts constitute the major iron ore

producing regions of Orissa and produce the majority of the ore mined in the state.

The mines in these areas are mainly small scale operations producing on average less than a million

tonnes each. In fact, the majority of mines are much smaller, producing about 100,000 tonnes

annually. These mines operate with very low levels of technology thus being able to manage

overheads and keep costs down. Another advantage that these mines are able to utilize is that

through selective mining, they mine high grade areas for direct shipping thus reducing blending and

processing costs. Only crushing and screening are the operations that need to be carried out post

mining. These mines generally are not listed on the stock exchange and are financed through

internal accruals and export earnings. As a result these mines do not have international level

resource statements.

Orissa has several advantages compared to Western Australia mining environment. Firstly, small

scale mines are economically viable in Orissa as these mines can operate with low levels of

mechanization and high levels of labour. The labour costs are very low when compared to Western

Australia as the labour force does not have to be flown in and out. Secondly infrastructure like rail,

roads, ports, airstrips needed for the effective operation of mines in Western Australia are not

required in Orissa, thereby reducing operating and capital costs significantly.

The mines in Orissa may be profitably operated at a very low cost base as a result of the above.

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