Sample

2,153 views

Published on

Published in: Business, News & Politics
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,153
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
40
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Sample

  1. 1. 1 Project Report on Feasibility study of setting up an Iron Ore Pellets project in Orissa Submitted by: S. Saatvik Summer Intern Sara International Ltd. Guided by: Mr. Tushar Singh Director, Strategy Sara International Ltd.
  2. 2. 2 TABLE OF CONTENTS 1.0 ACKNOWLEDGEMENT................................................................................ 3 2.0 EXECUTIVE SUMMARY ............................................................................... 4 3.0 IRON ORE – A COMMODITY PROFILE IN INDIAN CONTEXT ...... 5 4.0 SARA GROUP – A SNAPSHOT................................................................... 9 5.0 SARA INTERNATIONAL LIMITED – IRON ORE DIVISION .......... 10 6.0 A SNAPSHOT OF ORISSA FROM IRON ORE PERSPECTIVE......... 13 6.1 PORTS IN ORISSA…………………....................................................14 7.0 GLOBAL PELLET INDUSTRY - AN OVERVIEW.................................. 15 7.1 INDIAN SCENARIO…………………………………………………..15 8.0 ORISSA - A CASE FOR PELLETS.............................................................. 17 8.1 WHY ORISSA………………………………………………………….17 8.2 WHY PELLETS - UNDERSTANDING PELLETIZATION……….....18 8.3 PELLETS - BENEFITS……………………………………………….. 22 8.4 EXISTING PROJECTS………………………………………………...22 9.0 RECOMMENDATION - PELLETS PROJECT FOR SIL ........................ 24 9.1 SIL - 360◦ CAPABILITY……………………………………………....24 9.2 COST MATRIX………………………………………………………...25 9.3 BARBIL - SUPPLIER AVAILABILITY ……………….……………..26 9.4 GOPALPUR - PORT INFRASTRUCTURE …………..………………28 9.5 FINANCIAL CALCULATIONS - SIL………………………………...30 9.6 KEY CONSIDERATIONS………………...…………………………...32 10.0 ANNEXURE..................................................................................................... 33 10.1 MINES IN ORISSA………………………………………………….....33 10.2 COMPARISON BETWEEN PELLETS AND SIZED ORE………….. 35 10.3 FIGURE - IRON ORE DEPOSITS OF INDIA ……...….……………..36 10.4 MINES IN BARBIL SECTOR………………..………..………………37 10.5 SPONGE IRON MANUFACTURERS…....…………………………...38 11.0 REFERENCES.................................................................................................. 43
  3. 3. 3 1.0 ACKNOWLEDGEMENT The success of any project depends largely on the encouragement and guidelines of many others. I take this opportunity to express my gratitude to the people who have been instrumental in helping me complete this project report. I would like to show my greatest appreciation to Mr. Tushar Singh. I can’t say thank you enough for his tremendous support and help. I feel motivated and encouraged every time I attend his meeting. Without his encouragement and guidance this project would not have materialized. I am highly indebted to Mr. Gitesh Singh for his guidance and supervision as well as for providing necessary information regarding the project & also for his support in completing the project. I would like to express my gratitude towards the team at Sara International Ltd.’s Barbil office for their kind co-operation and encouragement which helped me in completion of this project. I would like to express my special gratitude and thanks to industry persons especially Mr. BM Pattnaik from Mitra SK and Mr. CS Patial from East India Minerals Ltd., for giving me attention and time. My thanks and appreciations also go to Mr. Subho Mukherjee and Mr. Debendra Pati for sharing valuable information for the project. Finally, a special thanks to Mr. Pranay Prakash, Mr. Sanjay Ahuja and Mr. Preetpal Singh from SIL’s Noida office for their constant support and help.
  4. 4. 4 2.0 EXECUTIVE SUMMARY Feasibility study of setting up an Iron Ore Pellets project in Orissa The Union of India budget of 2011 has made many Iron ore exporters to realign their strategic goals to be more in sync with the turbulent times ahead. Consequently, this project is aimed at exploring the option of entering the Iron Ore Pellets business for Sara International Limited. This project endeavors to assess the Iron Ore Trading and Export business in India. The potential growth in the Iron Ore Segment especially in the beneficiated Ore in the form of Pellets is explored along with the rationale for SIL to venture in to the business. The intent of this project is to understand the Supplier network for securing raw material [Iron Ore Fines] availability for the Iron Ore pellets project; the feasibility of having an establishment near the customer base, also leveraging on the existing infrastructure advantage that SIL enjoys by its captive port at Gopalpur, Orissa. It also attempts to give an overview of the technologies that would make the best and cost effective option for such a project. An analysis of current financial status of SIL is undertaken and various modes of investments required to fund the project are outlined. To understand the intricacies involved and to gain a first-hand experience, this project included a field visit to Barbil, a town and municipality in the Keonjhar district of the state of Orissa, India with the region around Barbil having the fifth largest deposit of Iron Ore and Manganese Ore in the World.
  5. 5. 5 3.0 IRON ORE – A COMMODITY PROFILE IN INDIAN CONTEXT India is the fourth-largest producer of iron ore, possessing the richest iron ore deposits. Accessible and high grade iron ore reserves – free from impurities like phosphorous and sulphur and considered good for smelting – account for almost two thirds of the total iron ore reserves in the country. Reserves: India possesses 6% of global iron ore reserves and ranks fifth in the world in iron ore reserve ownership. The Indian Bureau of Mines estimated the country’s total iron ore reserves at 25.2 billion tonnes. The principal iron ores are hematite (70% iron) and magnetite (72% iron). Hematite accounts for 58% of the total iron ore reserves, mainly in Orissa (33%), Jharkhand (28%), Chhattisgarh (19%), Karnataka (11%) and Goa (5%). Magnetite accounts for 42% of the total iron ore reserves, mainly located in Karnataka (74%), Andhra Pradesh (14%), Rajasthan (5%) and Tamil Nadu (4%). The remaining 3% is accounted for by Kerala, Assam, Jharkhand, Nagaland, Bihar and Maharashtra. At the current domestic production levels of 230 million tonnes of ore in 2009-10, the country’s available reserves are expected to last around 90 years. Fines and concentrates make up about 90% of iron ore exports. Demand: The demand for Indian iron ore is increasing; through 2006 to 2009, China imported 74.78 MT, 79.53 MT, 91.04 MT and 107 MT ores from India, marking annual increases of 9.08%, 6.36%, 14.47% and 18.08%. Although India’s iron ore exports are increasing, India’s share of total Chinese iron ore imports declined from 22.92% in 2006 to 20.73% in 2007 to 20.51% in 2008 and to 17.71% in 2009, indicating that India’s iron ore appetite is increasing (Source: steelorbis.com, 09 April 2010) consequent to an increasing steel output of 42.78 MT, 53.08 MT, 55.05 MT and 54.6 MT through 2006-09. Since low- quality grades accounted for about 70% of the 2008-09 ore output of 222 million tonnes, a number of miners invested in pellet plants to use lower grade powdery iron ore fines to make higher grade nodules, ideal for feeding blast furnaces in steel mills leading to improved downstream input-output efficiency (Source: Reuters, 11th March 2010). Production: India’s iron ore production grew at a CAGR of 11.12% over the five financial years up to 2008-09 to reach 222 million tonnes (Source: Indian Infrastructure, March 2010). In 2009-10, the country produced 230 million tonnes of iron ore and exported close to 106 million tonnes of iron ore to China. About 90% of its exports are to China in the form of fines, while the remaining s10% is iron ore lumps transported to countries like Korea and Japan (Source: Business Standard, 28 April, 2010). Moreover, the Steel Ministry set a steel production target of 124 million tonnes per annum by 2012-13, more than double the
  6. 6. 6 current production capacity of around 54 million tonnes per annum in 2009 (Source: Business Line, 28 April, 2010), widening the market for iron ore. Exports: India is the world’s third largest iron ore exporter after Australia and Brazil, with most of its exports to China, the world’s largest steel industry hub. India’s iron ore export in 2009-10 was around 106 million tonnes as against 105 million tonnes in 2008-09 (Source: Business Line, 23 April, 2010). To curb ore exports and ensure adequate material for the country’s steel industry, the Indian government raised the export duty on iron ore lumps from 5% to 10% and imposed a 5% duty on fines (bulk of iron ore exports) in 2010. The Indian Railways also increased freight on iron ore exports by `300 a tonne from March 2010. It is expected that iron ore exports will be around 100 million tonnes in 2010-11. Outlook: India’s iron ore demand outlook is optimistic as India’s steel production – growing at a compounded annual growth rate of more than 8.2% from 38.7 MT to around 60 MT from fiscal 2005 to fiscal 2010 – is expected to sustain. The supply scenario appears optimistic owing to growing mine commercialisation and investments. 0 20000000 40000000 60000000 80000000 10000000 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Industry-wise Consumption of Iron Ore All Industries
  7. 7. 7
  8. 8. 8 A brief history of Iron Ore trading in India will elucidate the fact that iron ore trade in India is heavily affected by governmental regulations and norms. Following is a chronological snapshot of the changes: 2008 - December - India cut duty on lumps to 5 percent, zero on fines as exports started tapering sharply after the end of the Olympic Games in biggest consumer China. - November - Imposed a duty of 8 percent on iron ore fines to cushion the impact of the flat rate earlier. - October - It set a flat rate of 200 rupees ($4) per tonne on fines to separate them from high duty on higher grade ores. - June - It imposed a duty of 15 percent on exports of both lumps and fines as part of measures to curb inflation. 2009 - December - Increased duty on iron ore lumps to 10 percent and imposed a 5 percent duty on fines as prices rallied and moved above a psychologically key level of $100 a tonne. 2010 - January - Raises duty on iron ore lumps to 15 percent.
  9. 9. 9 4.0 SARA GROUP – A SNAPSHOT Sara Group is India’s leading business conglomerate with interests in commodities, textiles, infrastructure development and ports. With a dedicated team of over 1500 employees and offices in Beijing, Dubai, Zagreb, Belgrade, Cleveland and Johannesburg, the company is continually identifying new business opportunities in India and the world over. Over the years the group has built on its strengths and transformed itself into a powerful commodities trader. Today specialized and professional teams manage its portfolio ranging from ores and minerals, steel and metals, coal and energy to agriculture. Having had a sizeable presence in the textiles business for over 15 years, it is today one of the top three terry towel producers in India. Under Sara Textiles Limited, the group is a dominant exporter of home furnishings to Eastern Europe, making it one of the group’s key markets. Infrastructure is one of the core areas of growth for the group as it is for India, and it plans to be a key driver in the industry through the development of world-class ports and rail infrastructure. Under a special purpose vehicle (SPV) namely Gopalpur Ports Limited, the group is modernizing, expanding and operating Gopalpur Port on the Eastern coast of India. The Group has its roots firmly planted in India but has always aspired to take Indian expertise to take Indian expertise to the world; and bringing the best in class products and services back home. It is organized in to three verticals, given below: Commodities Infrastructure Textile
  10. 10. 10 5.0 SARA INTERNATIONAL LIMITED – IRON ORE DIVISION Sara Groups commodities business operates under the flagship company Sara International Limited (SIL) and is structured into four verticals namely SIL is one of India’s premium non-mining iron-ore suppliers. With year-on-year growth topping 25 percent, ores and minerals is its fastest growing vertical. In 2005, it ventured into chrome-ore trading, sourcing chrome from Turkey and Albania to sell to its customers in China. It has now established enduring links with its Turkish partners to achieve long-term targets of moving cargo volumes. In 2007 SIL forayed into the bauxite and Lumenite industry, sourcing from Indian miners, consolidating the cargo and exporting in bulk to China. SIL also manages a successful ore logistics division. The company has two railway rakes leased from the Indian under the WIS [Wagon Investment Scheme] which run exclusively for its own business between the mine head and the port, allowing the movement of much larger tonnages of iron-ore compared with other industry participants. This not only gives a competitive edge to the group’s pricing capability but also greater speed at which it is able to move cargo. Ores and Minerals Coal and Energy Steel and metals Agriculture
  11. 11. 11 New Office at Barbil was inaugurated on 14 Dec 2010. SIL is also following a strategy of two or more parcels a month with a mix of traded and self cargoes. Iron ores are rocks and minerals from which metallic iron can be economically extracted. About 98% of iron ore is used to make steel - one of the greatest inventions and most useful materials ever created. The ores are usually rich in iron oxides and vary in color from dark grey to rusty red. Iron ore is found /available in the form of lumps. It is crushed to produce sized ore. During the crushing and formation of sized ore, fines are produced.
  12. 12. 12 Recent shipment from Sara International Limited from Paradeep are as follows: EXPORT FROM PARADEEP(SARA INTERNATIONAL LTD) YEAR QUANTITY EXPORTED (MT) 2006 - 2007 34,400.000 2007 - 2008 2,88,524.000 2008 - 2009 1,64,029.000 2009 - 2010 2,41,999.000 2010 - 2011 1,29,165.000
  13. 13. 13 6.0 A SNAPSHOT OF ORISSA FROM IRON ORE PERSPETIVE Orissa is located on the north eastern part of the Indian peninsula, surrounded by the Bay of Bengal on the east. Agriculture is the key occupation of almost 65% of the mineral rich state’s total workforce, contributing almost 20% of the States Gross Domestic Product during FY0911. The state is home to a several key minerals and ores such as iron ore, bauxite, chromite and nickel ore. Orissa accounts for about 32.9 per cent of all the iron-ore deposits in India [25.6 billion tones], thus making it one of the favored investment destinations for domestic and international iron and steel players.
  14. 14. 14 6.1 PORTS IN ORISSA Orissa is endowed by many major and minor ports with Paradeep, Dhamra and Gopalpur being the major ones. Paradeep: Paradeep Port is one of the Major Ports of India serving the Eastern and Central parts of the country. Its hinterland extends to the states of Orissa, Jharkhand, Chattisgarh, West Bengal, Madhya Pradesh and Bihar. The Port mainly deals with bulk cargo apart from other clean cargoes. There is unprecedented growth in the traffic handled at this Port in the last five years and the Port has got ambitious expansion program to double its capacity to meet the ever increasing demand. Dhamra: The Dhamra Port Company Limited (DPCL) is a 50:50 joint venture of L&T and Tata Steel. DPCL was awarded a concession by Government of Orissa to build and operate a port north of the mouth of river Dhamra in Bhadrak district on BOOST (Build, Own, Operate, Share and Transfer) basis. Situated between Haldia and Paradeep, the port at Dhamra is slated to be one of the deepest ports of India with a depth of 18 meters, which can accommodate super cape-size vessels up to 180,000 DWT. The master plan provides for 13 berths, capable of handling more than 100 million MT per annum of dry bulk, liquid bulk, break bulk, containerized and general cargo. Gopalpur: Gopalpur, a natural port of Orissa, is one of the ideally located and topographically suited deep sea ports on the East Coast of India. The mammoth task of developing Gopalpur has been awarded to Sara International Ltd. and Orissa Stevedores Ltd. by the Government of Orissa. It was envisioned with capability of handling capesize vessels. With 10 covered godowns and more than 200,000 sq. ft. of paved open space, Gopalpur Port is capable of anchorage loading and onshore direct berthing operations of capesize vessels. Gopalpur Port will be analyzed in greater detail further in the report.
  15. 15. 15 7.0 GLOBAL PELLET INDUSTRY – AN OVERVIEW The world Iron ore Pellets production has seen a steady rise during the past decade or so. According to available data the production stood at 345 Million Metric tonnes in 2008 with USA, Brazil and China spearheading the race. 7.1 INDIAN SCENARIO At present the total installed capacity of Pellet plants in India is about 18 MT which corresponds to a share of about 5% of world pellet capacity. India is placed at 7th position. USA maintains the leading position followed by Brazil and China. The plants installed in India are mostly of bigger capacity and based on straight gate induration process. The plants have been set-up by Lurgi and Davy international. All the plants operate on Haematite ores with the exception of Mangalore Pellet Plant which so far was using Magnetite ore concentrates for producing pellets. In India, the operational Magnetite ore body is restricted to Kudremukh area only. However, due to environmental problems, mining operations have been suspended by Supreme court order and Mangalore Pellet plant has started operating on Haematite ore of Bellary region. 0 50 100 150 200 250 300 350 1955 1975 1995 2000 2004 2008 World Iron Ore Pellets Production Production in MT
  16. 16. 16 Managalore pellet plant is export oriented towards South-East Asian countries, whereas Jindal South West (JSW), Torangallu is mostly consumed internally in their Blast furnaces and COREX units. Production from Hy-Grade Pellets Ltd., is partly consumed in their gas based DR units at Hazira and partly exported to China and other Asian countries.
  17. 17. 17 8.0 ORISSA – A CASE FOR PELLETS 8.1 WHY ORISSA? According to the figures obtained from the Indian Bureau of Mines, Orissa constitutes about 36% of the Iron Ore fines production in India. Above figure is an illustration of the same. Approximately 80% of the produce in Orissa is classified as Medium – High [Fe +63%]. The below chart depicts an overall Indian Iron Ore Grade wise distribution: 0 20000 40000 60000 80000 100000 120000 140000 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 Selected State-wise Production of Iron Ore Fines in India Orissa Karnataka Jharkhand Goa Chattisgarh Andhra Pradesh 19% 51% 28% 2% Grade-wise distribution of Iron Ore in India High (Fe +65%) Medium (Fe 62-65%) Low (Fe -65%) Others
  18. 18. 18 8.2 WHY PELLETS – UNDERSTANDING PELLETIZATION Pelletizing is the process of compressing or molding a material into the shape of a pellet. A wide range of different materials are pelletized including chemicals, iron ore, animal compound feed, and more. Pelletizing of iron ore: Iron ore pellets are spheres of typically 8–18 mm (0.31–0.71 in) to be used as raw material for blast furnaces. They typically contain 67%-72% Fe and various additional material adjusting the chemical composition and the metallurgic properties of the pellets. Typically, limestone, dolostone and olivine is added and Bentonite is used as binder. The process of pelletizing combines mixing of the raw material, forming the pellet and a thermal treatment baking the soft raw pellet to hard spheres. The raw materials is rolled into a ball, then fired in a kiln to sinter the particles into a hard sphere. The configuration of iron ore pellets as packed spheres in the blast furnace allows air to flow between the pellets, decreasing the resistance to the air that flows up through the layers of material during the same. The configuration of iron ore powder in a blast furnace is more tightly-packed and restricts the air flow. This is the reason that iron ore is preferred in the form of pellets rather than in the form of finer particle. Preparation of raw materials: Additional materials are added to the iron ore (pellet feed) to meet the requirements of the final pellets. This is done by placing the mixture in the pelletizer, which can hold different types of ores and additives, and mixing to adjust the chemical composition and the metallurgic properties of the pellets. In general, the following stages are included in this period of processing: concentration / separation, homogenization of the substance ratios, milling, and classification, increasing thickness, homogenization of the pulp and filtering.
  19. 19. 19 Formation of the raw pellets: The formation of raw iron ore pellets, also known as pelletizing, has the objective of producing pellets in an appropriate band of sizes and with mechanical properties for usefulness during the stresses of transference, transport, and use. Both mechanical force and thermal processes are used to produce the correct pellet properties. Thermal processing: In order to confer to the pellets high resistance metallurgic mechanics and appropriate characteristics, the pellets are subjected to thermal processing, which involves stages of drying, daily pay burn, burn, after-burn and cooling (in a cooling tower). The duration of each stage and the temperature that the pellets are subjected to have a strong influence on the final product quality.
  20. 20. 20 From equipment point of view there two alternatives for industrial production of iron ore pellets: drum and pelletizing disk. The Traveling Grate process for larger capacities: The Traveling Grate process, chiefly developed by Lurgi (now owned by Outokumpu Technology) accounts for two thirds of the world’s installed pelletizing processes. It comprises three steps: Raw material preparation: Prior to the formation of green pellets, water is added to the fine iron ore to adjust the moisture content to approximately 9 % and the ore is mixed with small amounts of binding agents such as bentonite (approximately 0.5 %) and fluxes such as limestone, lime olivine and dolomite (1–5 %). These give the pellets the proper physical and metallurgical properties needed in further processing. Mixing takes place in continuously operating drum or pan-type mixers with a capacity of 450–700 t/h. Green pelletizing: On an industrial scale, green pellets are formed either in pelletizing discs or drums, drums usually being connected to roller screens used for separating undersized pellets (150–250 %) which are returned to the drum. This high level of circulation makes pelletizing drums less sensitive to variations in feed material properties. Pelletizing discs need only a single process step to form pellets, their classifying effect discharging the pellets from the disc rim
  21. 21. 21 within a very narrow size range. Green pellet size can be precisely adjusted by varying the disc inclination, circumferential speed, feed rate or water addition. Pellet hardening: This step involves the elimination of big thickeners and of the entire filtration section, hugely simplifying the grinding circuits. In green-field projects or plant expansions high- pressure roller presses can be combined with conventional ball mills. Such roller press comminution offers much lower capital and operating costs as regards civil engineering, structural steels and engineering as well Advanced Steel Belt Sintering for smaller capacities: Since traveling grate plants are most efficient with 3–7 mt/a production capacities, a smaller alternative is the steel belt technology for production of 80,000–1,000,000 t/a. This innovation is designed for the cost-effective agglomeration of smaller quantities of chrome ore, iron ore, manganese ore or niobium ore as well as for steel plant residues. Steel belt plants differ from traveling grate plants in terms of the lighter design of their indurating machines and process gas systems. Green pellets are transported through the indurating machine by a perforated steel belt instead of pellet cars, while heat is generated by the combustion of carbon inside the pellets and by auxiliary burners in the gas duct between the cooling and firing compartments.
  22. 22. 22 8.3 PELLETS - BENEFITS Stable Blast Furnace operation Less Handling losses Superior permeability due to size uniformity Less specific consumption of coal High Blast Furnace productivity Increased campaign life Lower coke rate of Blast Furnace Low Refractory repairing cost Better Sponge Iron Quality Overall lower cost of production Less fines generation in sponge iron kiln Better environmental conditions Following table depicts the comparison between the Iron Ore Pellets and Fines: Standardization Uniform size range, generally within a range of 9–16 mm Purity 63–68 % iron, mainly Fe Cost-effectiveness virtually no loss on ignition while a high and uniform porosity of 25–30 % allows fast reduction and high metallization rates Strength high and uniform mechanical strength even under thermal stress in reducing atmospheres Transportable low degradation under abrasive influences 8.4 EXISTING PROJECTS Brahmani River Pellets Project: Brahmani River Pellets Ltd (BRPL), a wholly owned Stemcor project, has been envisaged to take low grade fines and convert them to high grade pellets for consumption within Indian and for export to China and other markets. BRPL has commenced construction of a beneficiation plant located at Barbil in the iron ore belt of Orissa, India, which will take fines from various mines, including AMTC and MISL, and refine them using grinding and magnetic separation processes. The beneficiation plant will be connected by a 220 km underground slurry pipeline to a 4 million tonnes per annum pellet plant under construction at Kalinga Nagar in the district of Jajpur, close to both industrial development and port facilities, where the ore slurry will be balled and fired into pellets, the highest
  23. 23. 23 grade iron ore product used in steel production. The project is progressing well and under current planning is expected to be commissioned by late 2011. With a range of feed grades available, BRPL will be able to tailor the cost and grade of pellet to meet market demand. Essar’s Paradeep Pellets project: Essar Steel, the flagship company of the Rs. 20,000-crore Essar Group, has acquired 1300 acres, out of the required 1960 acres, for its six million tonne steel project in Orissa. The company had signed a memorandum of understanding in 2005 with the state government to set up a steel plant along with facilities for making iron ore pellet and transporting iron ore slurry through dedicated pipeline from Barbil sector to Paradeep. Essar is investing Rs 15000 crore for the project. It includes an iron ore pellet plant and setting up of a slurry pipeline. The company’s Bailadilla-Vizag slurry pipleline also passes through the state. Note: On an average, a Pellets project of capacity 3-5 mt/a involve a capital investment of INR 800-1000 crores with a period of 2-3 years from Civil construction to Commissioning of Production.
  24. 24. 24 9.0 RECOMMENDATION – PELLETS PROJECT FOR SIL 9.1 SIL – 360◦ CAPABILITY To venture in to any new enterprise, an internal assessment of the company is imperative. The above figure illustrates the strengths possessed by SIL which accrue from its long- standing presence in the Indian Iron Ore export market. The mentioned aspects make a strong case for SIL to seriously consider foraying in to beneficiation or Iron Ore Fines from its present position as a trader/exporter of Iron Ore Fines. Strategically located operations for catering to major seaborne markets Unique logistic cost advantage arising out of proximity to ports and integrated river logistics Strong project execution capabilities with proven track record of diversification Commitment to sustainable development Strong balance and cash generation Experienced management and manpower wtih operations running for over three decades
  25. 25. 25 9.2 COST MATRIX According to Currently prevalent market rates as on [1 April 2011], the following is the rate differential between Iron Ore fines and Iron Ore pellets in the export market: Commodity Ex-Works [Mine or Factory] Transport cost [average] Overall Cost Sales realization [average] Iron Ore Fines INR 2800/MT (63%) INR 2500/MT INR 5300/MT INR 6300/MT Iron Ore Pellets [Near mines] INR 4300/MT INR 2500/MT INR 6800/MT INR 8500/MT Iron Ore Pellets [Near port] INR 4300/MT Near Port [Nil] INR 4300/MT INR 8500/MT Assumptions: Price of Iron Ore fines Transport Cost Pellet plant operating cost/MT 140 USD FOB @ 45 INR/USD 1000,000 INR/4000 MT = 2500 INR 1500 INR [based on primary research, unsubstantiated] As can be clearly seen, Margins on: Fines Pellets: Near Mines Pellets: Near Port 15% 20% 50% The above calculations, substantiate the claim to having the Pellet project near the Port Infrastructure.
  26. 26. 26 9.3 BARBIL – SUPPLIER AVAILABILITY Barbil has many mines surrounding it. A graphical illustration is given below: 25 30 35 25 25 35 22 45 40 20 20 16 19 20 35 25 30 30 30 45 45 40 45 25 20 Distance from Barbil in Kms Distance from Barbil in Kms 0 10 20 30 40 50 Jiling-Langald Jojang Joribahal Iron… Jalahuri Iron Mines Jorudih Iron Mines Jojang II Gurubeda Ion Ore… Bahalda Iron Ore… Chamakpur Iron… Inganijhar Iron… Uchbali Iron Ore… Balita-BonaikelaInganijhar an -…Baitarani Iron…Khandbandh -… Murgabeda Iron… Deojhar Iron Mines Dalpahar Iron and… Khandbandh Iron… Secradih & Dubna Balsa - palsa &… Khuntpni &… Patabeda Iron Ore… Sunaguturia &… Jojang-III Distance Matrix Distance from Barbil in Kms
  27. 27. 27 ROAD DISTANCE BETWEEN BARBIL AND IMPORTANT PORTS Long term agreement to secure raw material supplies: With SIL’s infrastructure presence in the Port at Gopalpur, a long term supply agreement with miners in and around Barbil sector could secure long-term Iron Ore Fine supplies to feed its Pellets project. Some of the suppliers who already have an association with SIL are illustrated below: RP Sao Thriveni Earth Movers Kay Pee Enterprises Sai International KN Ram These suppliers represent the best option base for SIL to venture in to long-term agreement. MINE SOURCE PORT DESTINATION BARBIL GOPALPUR PARADEEP GANGAVARAM HALDIA 424 KM 328 KM 703 KM 318 KM
  28. 28. 28 9.4 GOPALPUR – PORT INFRASTRUCTURE Introduction: Gopalpur is located along the Bay of Bengal in the Eastern Indian State of Orissa. Paradeep and Vishakhapatnam Ports are located at a distance of 160 Km North and 260 Km South respectively of Gopalpur. The location is near the village Arjipali almost midway of a 22 km stretch of coastline between the town of Gopalpur-on-sea and Rushikulya river mouth on the North. Existing Rail Linkages: Gopalpur is blessed with excellent rail connectivity having its own railway siding and is only six kilometers inside from the main Howrah-Vishakhapatnam-Chennai broad gauge railway line. This railway siding is broad enough to handle a total cargo of more than 35 million tons. Road Connectivity: The national Highway No. 5 (Kolkata-Chennai) passes about 6 Km from Gopalpur Port site. State Highway 7 and 17 are also connected with NH 5 and provide good road network in the region. There are two access roads connecting Gopalpur Port area to NH 5. Government has already announced the National Highway from Gopalpur on sea in Orissa to Raipur in Chattisgarh. This highway makes it possible to connect the inaccessible and tribal areas of Ganjam, Kondhmal, Kalahandi and Naupada district of Orissa. This connectivity would facilitate transport of forest produce and other agricultural products to the port of Gopalpur on sea and to larger markets on the coastal areas. Environment: Gopalpur Port, located on the East coast of India in the State of Orissa is one of the most environment friendly ports in region. The Port is being developed on a 4 Km stretch of coast line, which is devoid of vegetation. This area is barren and falls in the rain shadow region. There are no mangrove/tidal rain forest. This area is not home to any endangered species of flora or fauna. The other sensitive area which may be of concern to other ports like nesting grounds of Olive Ridley Turtles are also not in the Port Zone. Nor is the proposed site near any heritage, historical or any place of national importance. The nearest habitation is the fishing village of Arjipalli which falls outside the proposed port site.
  29. 29. 29 The construction of the Port will involve acquisition of land, but here again the environment friendly aspect of the Port comes into the fore. The land to be acquired is mostly the de-graded area which has been mined out by Indian Rare Earths Ltd. In fact what is today degraded land will be converted into a state of the art Port in future Due to its very nature, that is a state of the art Port, a small number of persons would be needed to operate the facilities thereby reducing the burden on the land for mass housing. The Port management has plans to carry out afforestation in the area to enhance the natural beauty and add to the ecological balance. 0 200 400 600 800 1000 Angul Bhilai Bokaro Burnpur Cuttack Dantewada Dhenkanal Durgapur Jagadalpur Jagatsinghpur Jaipur Jamshedpur JharsugudaKalahandi Keonijhar Kharagpur Koraput Kobra Mayurbhanj Raigarh Raipur Rayagada Sambalpur Sidhi Sundargarh Distance Matrix Distance from Gopalpur
  30. 30. 30 9.5 FINANCIAL CALCULATIONS - SIL Snapshot of SIL’s Balance sheet: From the Balance sheet of M/S Sara International Limited as at March 31, 2010, Total Assets INR 188,73,43,159 Equity INR 063,42,55,094 Debt INR 124,97,89,566 Debt to Equity Ratio 2 app. This analysis is based on the standard model of limiting debt-equity ratio to 2:1 and also borrows from the example of the Brahmani River Pellets project of Stemcor which involved, Project cost USD 320 million Debt USD 245 million Equity USD 75 million Debt to Equity Ratio 3.2 app. It is quite clear that for an estimated project cost of INR 1000 crores the present balance sheet size of SIL is not sufficient, hence as a proposal for this project the following recommendations are proposed:
  31. 31. 31 Proposed Financing avenues: •Debt at 700 crores and Equity at 300 crores •Reasonably comfortable Debt to Equity ratio at 2.33 Going for a balanced mix of Debt and Equity • Going for an Initial Public offering to fund its equity capital for the project • In this recommendation, project scope doesn't explore the vision of the Promoters of SIL Equity • Rupee term loans costly at present - Recent RBI revision of rates • Foreign Currency loans available at Libor referenced rates • SIL's credit rating BBB according to CRISIL Debt •External commerical borrowings, general tenure 5 years •Buyers credit for Working capital and Capex requirements, tenure upto 3 years Foreign Debt •Debentures •Foreign Currency Convertible Bonds Future financing options
  32. 32. 32 9.6 KEY CONSIDERATIONS Raw Material availability •Iron Ore fines are abundantly available in the Barbil sector, getting into a long-term contract to secure supplies would ensure timely availability •Coal makes a very important part of the input, with Port viscinity, sourcing Coal would be a much easier task compared to having the production setup in the hinterlands Water availability •Abundant water supply available near the port Land availability •With levelled land lying unused, Land availability, with land filling options are abundantly available near Gopalpur area Forest Clearance •The adjoining area near Gopalpur port doesn't have substantial forest cover hence the danger of degradation is minimal Environment Clearance •The Project wouldn't substantially hamper the daily life of the local populace around, nor does it endanger any other specie in the area Pollution Clearance •Requisite technology investment with clean technology as the focus can fasten getting Pollution clearance Factory License •With SIL's existing Port Infrastructure and Capex capacity, factory license could be obtained •Beneficiation projects get priority according to Centre and State regulations Labour availability •Labour exchanges aplenty in Orissa, Cheap and skilled labour availability wouldn't be a hindrance
  33. 33. 33 10.0 ANNEXURE 10.1 MINES IN ORISSA MINE STATUS BELKUNDI IRON ORE (OMDC), KEONJHAR OPERATING BHADRASAHI MINE (OMDC), KEONJHAR OPERATING THAKURANI MINE (OMDC), BARBIL, KEONJHAR OPERATING JODA EAST IRON ORE (TISCO), KEONJHAR OPERATING KATAMATI IRON ORE (TISCO), KEONJHAR OPERATING MURGABEDA IRON ORE , KEONJHAR OPERATING DAITARI IRON ORE (OMC) , JAJPUR OPERATING GANDHAMARDAN IRON ORE , KEONJHAR OPERATING BOLANI IRON ORE (SAIL), KEONJHAR OPERATING ESSEL MINING AND INDUSTRIES {JILLING LANGOLATA IRON ORE ), KEHOJHAR """ OPERATING BPJ IRON ORE (OMC), KEONJHAR OPERATING KASIA IRON & DOLOMITE ORE (ESSEL MINING IND. LTD.) BARBIL, KEONJHAR OPERATING BARAPADA KASIA IRON ORE , BARBIL, KEONJHAR OPERATING JORUDI IRON ORE , M/S TARINI MINERALS, JODA, KEONJHAR OPERATING DEOJHAR IRON ORE , M/S TARINI MINERALS AND PVT. LTD., KEONJHAR OPERATING GONUA IRON ORE , M/S MAITRI SUKLA, KEONJHAR OPERATING KHANDADHARA IRON ORE (OMC), JODA, KEONJHAR CLOSED NARAYANI SONS (SURGUTURIA IRON ORE ), KEONJHAR OPERATING ROIDA IRON ORE (MESCO), KEONJHAR CLOSED BARSUAN IRON ORE (SAIL) SUNDARGARH OPERATING KHANDABANDHA IRON ORE (OMC), SUNDARGARH OPERATING KALTA IRON ORE (SAIL), SUNDARGARH OPERATING KOIRA IRON ORE (ESSEL MINING), SUNDARGARH OPERATING TRB IRON ORE (JINDAL STEEL & POWER), SUNDARGARH OPERATING GORUMAHISANI IRON ORE , MAYURBHANJ OPERATING TOMKA IRON ORE (MEESCO), SUNDARGARH CLOSED
  34. 34. 34 KAY PESS ENTERPRISES IRON MINE, BARBIL, KEONJHAR OPERATING KASIRA BHANJAPALI IRON, SUNDARGARH CLOSED SULIAPAT IRON ORE , MAYURBHANJ OPERATING THAKURANI IRON ORE , KAYPEE ENTERPRISES (Crusher) OPERATING BHANJIPALI IRON ORE , KOHIRA, M/S J.N.PATTNAIK, SUNDERGARH OPERATING BALDA BLOCK IRON ORE, KEONJHAR, M/S SIRAZ-UD- DIN& CO., KEONJHAR OPERATING ORGHAT IRON MINES, M/S RUNGTA SONS (P) LTD., KOIRA, SUNDARGARH OPERATING NUAGAON IRON MINE, KJS AHLUWALIA, KEONJHAR OPERATING THAKURANI IRON BLOCK "B" S.L. & M.L. .SARDA KEONJHAR OPERATING BADAMPAHAR IRON MINE, LAL TRADERS & AGENCIES PVT. LTD..MAURBHANJ CLOSED SAN-INDUPUR IRON & BAUXITE MINE, RUNGTA SONS PVT. LTD., KOIDA OPERATING ROIDA IRON MINE-II, KHATAU NARBHERAM, KEONJHAR OPERATING PATABEDA IRON MINE, M/S M.G.MOHANTY, BONAI, SUNDARGARH OPERATING RAIKELA IRON ORE MINE, M/S GITARANI MOHANTY, SUNDERGARH. OPERATING JORURI IRON ORE MINE,M/S GITA RANI MOHANTY(KMC) KEONJHAR OPERATING CHAMAKPUR IRON RE MINES, K.C PRADHAN, KEONJHAR OPERATING KJS(JALDIHI) IRON & BAUXITE MINE, S N MOHANTY KEONJHAR OPERATING SUKRADIHI IRON ORE MINE.M/S OMC LTD., KEONJHAR OPERATING JARIBAHAL IRON ORE MINE.KEONJHAR OPERATING KOLHA ROIDA IRON ORE MINE KEONJHAR OPERATING GHUSURIA ISO MINES, D C DOGRA, RAIRANGPUR, MAYURBHANJ OPERATING RAIKELA IRON ORE MINES, S N MOHANTY , RAIKELA, SUNDERGARH OPERATING GUALI IRON ORE MINES, GUALI, KEONJHAR OPERATING BALITA IRON ORE MINES, BELIPADA, KEONJHAR OPERATING RAIKELA IRON ORE MINES, NATIONAL ENTERPRISES, SUNDERGARH OPERATING
  35. 35. 35 DALPAHAR IRON ORE MINES, DALPAHAR, DHARAMCHANDA JAIN, KEONJHAR OPERATING BAITARANI IRON ORE MINES, DR, SAROJINI PRADHAN, CHAMPUR, KEONJHAR OPERATING 10.2 COMPARISON BETWEEN PELLETS AND SIZED ORE Particulars Pellets Sized Ore Average Campaign Period 120 days 60 days Average yearly shutdowns 3 6 Total time loss in shutdowns 15 days 30 days Total Productivity Loss 4.16% 8.33% Production Capacity (Per day) 120 mt 80 - 90 mt Fines generation in transit Nil 2% Iron Lumps / Ore required per ton of sponge iron 1.50 mt 1.60 mt Fines (-5mm) in ore 2% 8% Coal consumption per ton of sponge Iron 1.4 mt 1.6 mt Electricity consumption 50 units 70 units Total cost of shutdown maintenance 50% 100% Sponge Iron Fines <10% >20% Cost of production of per ton of Sponge Iron Lower Higher Laterite 0 2%
  36. 36. 36 10.3 FIGURE – IRON ORE DEPOSITS OF INDIA
  37. 37. 37 10.4 MINES IN BARBIL SECTOR Name of Mine Distance from Barbil in Kms Jiling-Langald 25 Jojang 30 Joribahal Iron Mines 35 Jalahuri Iron Mines 25 Jorudih Iron Mines 25 Jojang II 35 Gurubeda Iron Ore Mines 22 Beheld Iron Ore Mines 45 Chamakpur Iron Ore Mines 40 Inganijhar Iron and Mineral Mines 20 Uchbali Iron Ore Mine 20 Balita-Bonaikela 16 Inganijhar an - Bonaikela 19 Baitarani Iron Mines 20 Khandbandh - Jojang Mines 35 Murgabeda Iron Mines 25 Deojhar Iron Mines 30 Dalpahar Iron andmines 30 Khandbandh Iron Mines 30 Secradih & Dubna 45 Balsa - palsa & jojang 45 Khuntpni & Unchbali 40 Patabeda Iron Ore Mines 45 Sunaguturia & Laupada 25 Jojang-III 20
  38. 38. 38 10.5 SPONGE IRON MANUFACTURERS STATUS OF SPONGE IRON INDUSTRIES IN KEONJHAR DISTRICT Sl. No. Name & Address of the Industry No. of Kilns & Capacity 1. M/s. Orissa Sponge Iron Ltd. At/P.o-Palaspanga Dist-Keonjhar 1 X 350 TPD 13.2 MW power plant (WHRB & AFBC Boiler) 1 x 500 TPD 2 x 24 MW (WHRB & AFBC Boiler) 2. M/s. Rungta Mines (Sponge Iron Division) At-Karakola, P.o- Barbil. Dist-Keonjhar 5 x 100 TPD 3. M/s. Deepak Steel and Power Ltd. At-Topadihi, P.o- Barbil Dist-Keonjhar 2 x 50 TPD 2 x 100 TPD 4. M/s. Sree Metaliks Ltd. At-Loidapara, P.O- Barbil Dist-Keonjhar 2 x 50 TPD 4 x 100 TPD 1 x 300 TPD CPP 8 MW ( WHRB) CPP 20 MW ( WHRB + AFBC) 5. M/s.Kusum Power Met (P) Ltd., At- Kutugaon. Dist-Keonjhar 2 x 50 TPD 2 x 100 TPD 6. M/s. N.K. Bhojani Pvt. Ltd. 3 x 40 TPD
  39. 39. 39 At- Rugudihi, Barbil Dist-Keonjhar 7. M/s. Tata Sponge Iron Ltd. At- Beileipada, Joda, Dist-Keonjhar 2 x 375 TPD CPP 7.5 MW 1x 500 TPD CPP 18.5 MW 8. M/s. Grewal Associates At-Matkambeda, Barbil Dist-Keonjhar 4 x 100 TPD 9. M/s. Sumrit Metalicks (P) Ltd. At- Soyabali, Barbil. Dist-Keonjhar 2 x 50 TPD 10. M/s. OMDC Sponge Iron Plant At-Thakurani , Babil Dist-Keonjhar 1 X 100 TPD 11. M/s. Hima Ispat Ltd. At- Barpada Dist-Keonjhar 1 x 300 TPD 12. M/s. Deepak Steel & Power Ltd. At- Uliburu, Barbil Dist-Keonjhar 2 x 100 TPD 13. M/s. Beekay Steel & Power Ltd. AT- Uliburu, Barbil. Dist-Keonjhar 1 x 300 TPD 14. M/s. Crackers India Pvt. Ltd. At-Gobardhanpur. Dist-Keonjhar 2x 100 TPD 15. M/s. Sri Ganesh Sponge Iron Pvt. Ltd., At-Kutugaon. 2 x 100 TPD
  40. 40. 40 Dist-Keonjhar 16 M/s. Shree Jagannath Metalicks At-Khaparakai, Palaspanga. Dist- Keonjhar 1 x 100 TPD 1 x 100 TPD 17. M/s. Orion Ispat Ltd. At-Ramchandrapur. Dist-Keonjhar 3 x 100 TPD 18. M/s. MSP Sponge Iron (P) Ltd. At-Haldiaguna, Gobardhanpur, Dist-Keonjhar 2 x 40 TPD 2 X 50 TPD 19. M/s. Aditya Sponge and Power At-Dublapal, Telkoi Dist-Keonjhar 2 x 100 TPD 20. M/s. Patnaik Steels & Alloys Ltd., At: Purunapani,Nayagarh, PO: Dubuna, Dist: Keonjhar 1 x 350 TPD, Electricity(WHRB)- 8 MW
  41. 41. 41 Serial No Name and Address Products and Qty Remarks of the Industry 1 Kalinga Iron works Pig Iron-13110 TPM Have their own mines. Roida ‘C’ Iron & Mn. Mines, Roida At/Po-Barbil Dist-Keonjhar Granulated Slag- 3312 TPM (Blast Furnace I -170 TPD Furnace II – 130 TPD Span pipe-1683 TPM Furnace III – 140 TPD Furnace IV – 140 TPD ) Gas based power plant 16 MW 2 Arya Iron and Steel Co. Pvt. Ltd. Iron ore Pellets- One lakh ton per monthAt: Matkambeda, Barbil, Keonjhar 3 B.R.M. Hi-tech Steelss Pvt. Ltd. M.S. Rods, Angles, Flats, Squares, Channels, Bars, Round and
  42. 42. 42 At: salarpenth, PO: Mahadeijoda, Dist: Keonjhar structures- 3000 Ton/month 4 Jindal Steel and Power Ltd, Iron Ore Pellets-10 MTPA Have their own mines. Soyabally, Barbil, Keonjhar Producer gas – 1,80,000 5 Kalinga Metallics & Power Pvt Ltd, Gopalpur, Badaposi, Keonjhar. MS Bars- 6000 MT/ Month
  43. 43. 43 11.0 REFERENCES Reuters, 11th March 2010 http://www.cesorissa.org/mines.asp http://in.reuters.com/article/2010/04/13/crisil-ratings-idINSGE63C0CN20100413 http://ibm.nic.in http://orissaminerals.gov.in/website/default.aspx?GL=home http://www.steelmint.com/ http://www.fedmin.com/ http://www.indiastat.com/ http://www.saragroup.co.in/ http://www.advanced-exploration.com/industry/io_products/ www.portal.gsi.gov.in/ http://proquest.umi.com/pqdweb?cfc=1 http://www.cmie.com/ www.outokumputechnology.com/28620.epibrw http://www.fois.indianrail.gov.in/ Financial report for the year ended March 2010 - SIL Media Reports - Business Standard and The Economic Times Sara Connect - Jan-Mar 2011, Oct-Dec 2010 and Jul-Sep 2010

×