Stemcor's iron ore project in Odisha gets Rs 900 crore funding

26 JUN 2012, M V RAMSURYA, ET BUREAU
MUMBAI: A consortium of lenders led by IL&FS have agreed to provide Rs 900 crore to an iron ore project in Odisha promoted by UK-based trading major Stemcor, sparking hopes of a revival in lending to large mining projects.

The mining sector has recently taken a hit on government and Supreme Court investigations into illegal mining.

Non-banking finance companies (NBFCs) such as Indostar Capital, Tata Capital, Birla Finance and IFCI are the other members of the IL&FS consortium. Brahmani River Pellets, a wholly-owned subsidiary of Stemcor UK, is executing the project.

This is one of Stemcor's largest projects in India and includes a beneficiation plant, a 230-km pipeline and a four-million-tonne pellet plant that would partially feed the ore requirements of greenfield companies such as Tata Steel Odisha, Jindal Stainless, Mesco and Neelachal Ispat.

"Obviously, the fundamentals of the project have given comfort to the lenders who have been very reluctant to lend to the mining industry," said Stemcor managing director Mathew Stock. "The parent company's guarantee to the project also sends the right signal to the institutions," he added. Pellets are typically formed out of low-grade iron ore fines to be used in blast furnaces directly.

Under the terms of Stemcor's project, about 5 million tonnes of iron ore fines will be beneficiated to produce about 4 million tonnes of concentrate. The fines will be sourced from the mines of Mideast Integrated Steel, Essel Mining and KN Ram from Barbil and transported through a slurry pipeline to Kalinganagar where about six greenfield projects are being built.

Mideast would be the major supplier of iron ore fines and shall fulfil about 50% of the requirement, while the balance will be sourced from the other mines.

Stemcor's pipeline will pass through relatively safe areas, unlike Essar Group's similar pipeline that was laid in the Naxal-hit areas of Chhattisgarh and was prone to a number of attacks leading to supply disruptions.

"Most approvals from government agencies are in place," said a senior official of one of the lenders who did not want to be named.

"The pipeline is on track which will be ready in three months," he added. Banks in India, hit by rising number of corporate defaults, have restricted lending to various sectors, including mining, in recent times.