The drum beats of mining revival may be heard in the corridors of the state secretariat and can be very useful for Chief Minister Parsekar, to conjure up a scenario of revival. But the same drum beats are not heard in the boardrooms of mining majors who have ready back of the envelope calculations from their finance heads on the only figure that matters – the money in hand on per tonne of exported ore after deducting costs. And the truth is that for every tonne of ore which will be exported even after the abolition of export duties, an exporter will lose over Rs 300.
Chief Minister Parsekar may be blowing the bugle of pulling off the impossible, but those who are attempting to restart operations are actually staring at the impossible – making the export of iron ore, a profitable business. Thus the feel good factor of mining kick-starting after the abolition of export duty, is all but mirage. In the front page of this edition, we have broken down the sale of ore per tonne into the revenue and cost components and calculated (this is a credible approximate and may not be correct to the right paisa) and have arrived at the loss per tonne of ore of Rs 300. While this is a shocking estimate, it is important to know the genesis of this deficit amount. In the last six months or so, two important downturns have taken place. The price of 58 Fe ore has dropped from a figure of 70USD per tonne to about 40 USD per tonne. Secondly the rupee has considerably weakened to a dollar and stands at about Rs 68. Thus the effective sale price per tonne of ore is Rs 1224 before the cost deduction sets in. Once the cost of transportation and all other contributions to the various funds are met, the spend per tonne of ore is Rs 1529.
The Goa government, its Chief Minister and the mining MLAs are thus behaving like village elders who have never stepped out of the village to even look at the market where its produce is sold. The size of the market and the strength of competition can be seen if you go to the market, and not sit in the village and assume that a bumper crop will be sold in the market at a high price.
The iron ore market has changed. The Goa market has been pushed out of the frame with international mining giants like Rio Tinto and Vale dominating the international market, mainly in China. Moreover with huge vessels and deep port advantages in some countries, these companies sell ore with lower operating costs. For instance, one mine in Nigeria alone does 60 million tonnes annually, more than what the whole of Goa did during its peak period and three times more than what Goa will export if mining does resume. This mine, which was non-functional during the Ebola virus scare, has resumed operations and has its own deep sea port.
It is this changing world that those who rule Goa do not know and perhaps do not care to know. Someone sensible should tell Mr Parsekar that the mining story does not end with ore extraction and its loading onto trucks and barges. That’s when the story begins. And this story does not have a happy ending for Goa, even after his party’s government has abolished export duties on iron ore.
