Shyam Metalics group entity bags quality iron ore block

Steel Insights Bureau

Natural Resources Energy Pvt. Ltd, where Shyam Metalics and Energy Ltd’s (SMEL) promoter group company, Dorite Tracon Pvt Ltd holds 49 percent economic interest, has been declared as the preferred bidder by the Directorate of Geology and Mining, Government of Maharashtra for Surjagad 1 iron ore block during the recent auction held for commercial iron ore blocks with 126.35 percent revenue share.

“Our operating companies shall now reap the benefits of having iron ore mines and be fully backward integrated,” SMEL said while disclosing the information on May 13. The company later told analysts that the ore quality of the mine spread over 1,526 hectare, is better than what is available in Odisha.

“We have been able to identify and get iron ore mine which contains rich quality of iron in excess of 66 Fe content. We also would like to state that generally in the Odisha iron ore mines, the grade are very low and the fines generation is in the tune of around 70-75 percent. But the mine what we have been allocated has around 65 percent to 70 percent lumps and are very extreme Fe content. We have received a composite license as of now which has more than 10 years to start the extraction for the same. We intend to use the exploration period before we decide the final usage of the material but potentially having consistent access to high quality resources can have invaluable synergy to our steel business,” Brij Bhushan Agarwal, Vice Chairman and Managing Director, Shyam Metalics, told analysts.

The mines also does not have a challenge of land acquisition because the complete land is under the forest and the government is spared of dealing with land aggregators.

With the government policy of converting the forest land into a normal mine, land will not be an issue in starting the project on time, Agrawal said. Also, since the mine has a very high grade ore, coke consumption, carbon consumption and CO2 emission and product quality improves.

We have been able to identify and get iron ore mines with quality of iron in excess of 66 Fe content. Generally in the Odisha mines, the grades are very low and fines generation is around 70-75%. But the allocated mines has around 65% to 70% lumps and are very extreme in Fe content, Brij Bhushan Agarwal, Vice Chairman and Managing Director, Shyam Metalics & Energy

Improvement in realisation

The company has been reaping the benefit of moving up in the value chain from the integrated steel chain business, improving sales mix with revenue shares of pellets, sponges, billets reduced from 63 percent plus in FY19 to 31 percent in FY23.

“This shows that we had been always value adding our product and trying to increase the realisation and getting into a much better market and price rise. Going forward this share will be further reduced to 25 percent over next two years. Our finished steel has improved from the contribution of 17 percent in FY19 to 48 percent in FY2023 to our revenues. “This will sustainably improve our company profitability,” Agarwal said.

Financial performance

On a consolidated basis the company during Q4 of FY23 reported an operating revenue of Rs 3,380 crores, a growth of 18 percent y-o-y.

During the quarter, the company could sell higher percentage of finished steel at a higher realisation.