Higher Royalty For Donimalai Mine In Karnataka To Not Hit Profits, Says NMDC
India’s biggest iron ore miner may have to pay one-and-a-half times higher royalty to the Karnataka government for extracting ore from its Donimalai mine in the state. This can pave the way for renegotiation of its contracts with other states.
According to Sumit Deb, NMDC Ltd.’s new chairman and managing director, the new royalty is 37.5% but that won’t have a major impact on profitability. That’s because it will be counterbalanced by higher production and cost optimisation measures, he told BloombergQuint during an interaction. Any hike in royalty would be effective only after a notification of the MMDR Act and the company hasn’t received one yet, he said.
The Donimalai mine, with a capacity of seven million tonnes per annum, contributes to nearly 18% of NMDC’s production. The Karnataka government withdrew the lease for the mine in November 2018 after the company refused to pay it a higher royalty on profit, resulting in suspension of production.
The miner said in January this year that the Karnataka government had no valid reasons to keep on hold the extension of the mine lease.
Deb refused to comment if the revised royalty rate will be applicable to mines in Chhattisgarh, where NMDC has already negotiated a contract, or when its lease in Kumaraswamy iron ore mines in Karnataka comes up for renewal in 2022.
On Monday, NMDC shares fell 9.81% to Rs 96.95 apiece on BSE while the benchmark Sensex ended the day 2.13% lower at 38,628.29 points.