Opportunities Ahead For SMIORE

Could you briefl y take us through your business and its outlook going ahead?

The Sandur Manganese & Iron Ores Limited (SMIORE) has been in the business of mining manganese ore and iron ore for the last six decades, and in production of value-added products (ferroalloys) for over four decades. Like any other business, mining has also had its ups and downs. In the initial years, growth in the steel sector was very moderate and so our company also witnessed slow growth.

As the Indian ferroalloy industry was also in its infancy, the demand for manganese ore was low in India and our operations were dependent mainly on exports. It is only during the last 10 – 15 years that we have seen growth in the steel and ferroalloy 

However, during the recent few years, especially aft er the Hon’ble Supreme Court’s Judgment on the PIL regarding illegal mining in Karnataka, production of minerals, especially iron ore, has reduced drastically, while the demand has just moderately increased. The prices witnessed higher growth rates during this period due to short supply. Iron ore prices in India have now peaked and we can expect the domestic prices to remain stable from now onwards though international prices are dropping. SMIORE is planning to establish a one million tonne steel plant which will strengthen the operations in the long run.

For FY14 your topline has increased by 85 per cent. What are the reasons for the same and what do you expect in the coming years?

The 85 per cent growth in operating income in FY14 over FY13 was mainly due to resumption of mining operations, earlier suspended in the districts of Bellary, Chitradurga and Tumkur in the State of Karnataka by virtue of the general Orders dated July 29, 2011 of the Hon’ble Supreme Court. The discovery of fair prices due to a system of e-auction also contributed towards growth in operating income. But it must be noted that FY13 itself is not a comparable year because there was hardly any operation and our company’s mining re-commenced only by February 13. As stated earlier, we hope to increase the production in the coming years, as a result of which the bottomline will also increase. But the prices may remain stable since more production of iron ore will take place as a larger number of mines become operational after completion of their respective R&R plans and obtaining permission to resume operations.

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There is a drastic fall in the overall commodity prices in the last couple of months. What is your observation on that and how soon do you see it reviving?

Though iron ore prices in the international market have fallen, perhaps to the lowest level during the last few years, Indian prices are expected to remain stable due to an expected fall in overall production during FY15. There will be a demand pressure on supply which will have to be relieved by imports. The domestic prices have peaked now and might remain at the present level. Even then they match the landed cost of imported iron ore.

You have diversified your business by entering into other activities. Please share information about this development.

SMIORE started as a mining company in 1954. In the seventies, we diversified into pig iron and ferroalloy business. It was a step towards consolidation of our mining activities by way of value-addition; pig iron from iron ore and ferromanganese and silicomanganese from manganese ore. With the lease of a quartz mine, we produced ferrosilicon in the 1970s with the hope of serving the planned steel plant in the vicinity. By then SMIORE had developed into one of the largest mines and metallurgical units of the country and we had diligently implemented processes and procedures to produce high-quality foundry grade pig iron to be used for special castings by the automobile industry and also ferroalloys of internationally acceptable quality to meet the requirements of SAIL and other steel industries.

Our ventures in the 1990s for the manufacture of products for the electronics industry was not very successful largely because like many other European and American industries we were swamped by high-volume and low-cost production units in China and Taiwan. Though our Copper Clad Laminate production facility at Sandur (for production of CCL for the printed circuit board industry) and the Resistor Network Plant were one of the largest in India, our capacity became miniscule compared to new units in China and Taiwan. They were able to produce at much lower costs. The non-availability of adequate power to operate our ferroalloy furnaces coupled with high and unaff ordable tariff was a double tragedy. We had no option but to close down our production facilities one by one. By the end of 1999 we were reduced to being just a mining company, struggling to survive. Fortunately, the first decade of the new millennium brought about changed fortunes. Manganese ore and Iron ore saw an unprecedented increase in prices. Not only were we able to settle all our liabilities but could again foray into ferroalloys with renewed vigour by setting up our own captive 32 MW power plant to feed the furnaces.

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How is your expansion plan going on and by what time do you believe it will start kicking in your financials?

• The company has the following projects under its consolidation programme:

• 1.0 Mtpa steel plant.

• 1.7 Mtpa iron ore beneficiation project (or acquisition of already established 1.2 Mtpa beneficiation plant near Sandur).

• Establishing a rope way/conveyor belt to transport iron ore from pit head to railway yards.

• Production of PV modules and assembly of solar power systems

What are the key opportunities and challenges you see going ahead for your company?

The key opportunity before us is to establish an industry locally to ensure long-term development of Sandur, the surrounding villages and betterment of the lives of the local population at large. The steel and ferroalloy industry will ensure value-addition and long-term viability of the mines. This approach will certainly fulfi ll the aims and dreams of the founders and patrons of our company who believed: “All that we get (earn) from the soil of Sandur in one form or the other should be primarily used to benefit Sandur.”

So, be it the ferroalloy plant, power plant, steel plant, iron ore beneficiation plant and the PV module and power systems plant, these are all not really diversification projects but are actually a process of consolidation of our mining operations with the aim of doing full justice to the people of the region endowed with valuable natural resources. The first challenge before us is to continue our mining operations uninterrupted, especially in a scenario where the authorities have developed a fear to act, inhibited by the limitations experienced. We face a piquant situation when we have to struggle for permissions to carry on legitimate business because of inhibitions, lethargy, and unwillingness to take timely decisions. But the situation is gradually changing and we have had some very pleasing and happy experiences as well.

Could you share with us details of the various CSR and community development activities taken up by the company?

Development of the area, maintenance of social and communal harmony, nurturing of cultural heritage, traditions and fine art, and protection of the Indian family values have always been at the heart and core of the ethos and philosophy of SMIORE and its promoters. SMIORE has always been and will continue to be managed and run with the same ethos of good governance, fair play and righteousness.

With societal needs in mind and as part of its Corporate Social Responsibility, SMIORE has consistently done its bit in the welfare of the area and the surrounding villages. Education and health are the thrust areas in which SMIORE has paid special attention. Some of the noteworthy and presently implemented social service activities of the company are as follows:

• Support to educational institutions, primary schools, high schools, pre-university colleges and a polytechnic, which together represent about 5,500 students and about 250 teachers.

• Scholarships for studies to needy and merit students.Free vocational training for better employability to local boys and girls in trades such as electrical wiring, TV repair, welding, fitting, plumbing, carpentry, masonry, horticulture and computer operation.

• Aid to special training centre for rural children’s education and prevention of child labour; cash incentives to such parents to leave their children for study in such schools.