S3

BACKWARD INTEGRATION AND RAW MATERIAL SECURITY

The presence of our captive iron ore mines in Karnataka and Odisha offers us crucial advantages in terms of secure, stable, and high-quality raw material supply. We have the necessary resilience and control over raw material supply, further enhancing our overall business performance and mitigating potential risks.

41%

Captive iron ore consumption

1,770 MW

Total capacity of the Group’s captive power plants

Capitals deployed

NATURAL

INTELLECTUAL

Capitals enhanced

FINANCIAL

MANUFACTURED

Key risks

R1 - Raw material availability and cost–Iron ore and Coking coal
R2 - Infrastructure and logistics
R3 - Merger and acquisitions
R5 - Foreign exchange fluctuations
R9 - Occupational health and safety

Material issues

Business ethics
Economic performance
Human rights
Sustainable mining
Supply chain sustainability

Key trends

High coal costs
Volatile commodity prices
Geopolitical tensions leading to supply side availability and constraints
Opening of new mining leases in India
No major capital expenditure being incurred on existing coal mines due to ESG concerns

Coking coal mines

We won two coking coal mines (Parbatpur and Sitanala) in India in the auction conducted by the Ministry of Coal in FY 2022-23. Coal production from Parbatpur mine is expected in early FY 2024-25 and from Sitanala in FY 2027-28. Lease deed execution is underway for Moitra mine.
To further augment raw material security, we are also keen to work with Coal India Ltd. on the washeries proposed for monetisation. This will enable us to increase domestic sourcing of coking coal.

Odisha capability enhancement

We are focused on enhancing the capabilities of our mining operations in Odisha. Our plans include replacing the Mine Developer and Operator (MDO) with our own equipment for sustainable mining, establishing a Central Processing Unit (CPU) and beneficiation plant, implementing a conveyor system for ore transportation, setting up a grinding and slurry pumping unit at the mines, constructing a slurry pipeline with a capacity of approximately 30 MTPA, and developing a raw material handling system at Jatadhar. Additionally, we aim to build an 8 MTPA pellet plant on Jatadhar land. These initiatives require a capital expenditure of ₹13,000 crore.

Advantages

Deployment of large-size equipment which would be able to produce ~30 MTPA iron ore per annum as per mining plan & maintain safety standards. We would also be able to develop the in-house mining capability to derisk dependency on MDO.
Beneficiation plant would increase the quality of ore due to the removal of aluminous clay and laterite gangue resulting in reduced transportation cost and increased productivity in blast furnace
The slurry pipeline would facilitate logistic infrastructures and certain strategic advances including reducing the challenges faced in movement between port to mines, reduced transportation cost, and also meeting the recommendations of National Environmental Engineering Research Institute and approved by Ministry of Environment & Forest Clearance.

1,105 MnT

Odisha mining reserves

~28 MnT

Production capacity (EC limit)

236 MnT

Karnataka mining reserves

~7 MnT

Production capacity (EC limit)

OUTLOOK

Near-term

Operationalise Parbatpur and Sitanala mines in the next 2-3 years
Secure washeries proposed for monetisation by CIL to increase our domestic sourcing

Long term

Target to source up to 50% of the iron ore requirement captively
Establish domestic coal linkages by acquiring mines under auction and set up stroke acquired coal washeries
Participate in the government’s iron ore and coal auctions to improve backward integration
Evaluate opportunities to increasingly use domestic coal and continue diversification of coal sources