Mumbai: Until a year ago, the assets of Stemcor India Ltd (Stemcor India)—the Indian arm of the UK-based and Oppenheimer-family controlled Stemcor Holdings Ltd—were in high demand, and valued at over a billion dollars. Today, with the company’s mining operations shut and production at a pellet manufacturing plant owned by the company’s subsidiary halted, Stemcor India may have nothing to sell.

Still, that hasn’t stopped Stemcor Holdings from trying.

“Discussions continue with various third parties to sell our assets in India. No time frame has ever been attached to these discussions," said the company in an email reply. In February 2014, Stemcor said in a press statement that it would find buyers for its Indian operations over a period of two years.

The problem is, there may be nothing left to sell and few interested buyers—changes in mining policy in the state where it operates have left the company with an unoperational mine and no clarity on whether it will be allowed to continue operating the mine.

The operating licence for the mine, which has 100 million tonnes of 57.2% Fe grade iron ore reserves, is held by Aryan Mining and Trading Corp. Ltd (AMTC). Stemcor India holds majority stake in AMTC. Access to these reserves was one of the key reasons why firms such as JSW Steel Ltd, Jindal Steel and Power Ltd (JSPL), Aditya Birla Group’s Essel Mining and Industries Ltd, among others had previously expressed interest in buying Stemcor’s India assets. The valuation of the assets was pegged at close to a billion dollars.

However, an order by the Supreme Court on 16 May 2014, forced the temporary closure of nearly 50% of the iron ore mines in Odisha due to the non-renewal of old leases.

“Although mining operation continued for the full year in 2013-14 without interruption, post balance sheet date the operation of both the mines have been suspended from 19 May vide an interim order of the Honorable Supreme Court of India stating that the mines operating the on 2nd or subsequent deemed renewal under Rule 24(6) of the MCR, 1960 should not be allowed to operate until the State Government agrees to renew the leases with express orders under the MMDR Act," said the company’s annual report for fiscal 2014 which was released in October last year.

While AMTC has applied for a renewal of its mining licence, the state government is yet to take a view on this.

Deepak Mohanty, director, mines, government of Odisha said that the application of lease renewal of Stemcor and other mines is Odisha is still under consideration.

“The mines are closed in the state and we are in the process of finalizing the process of approval. However, with the new mining ordinance coming from the Centre, the state has to take a final call on its stand," he said.

With the mine shut and no clarity on mining policy in the state, interest from buyers has dwindled.

Jayant Acharya, director, commercial, JSW Steel, which was one of the companies keenly interest in Stemcor a year back, said, “The iron ore mines in the state will any way be auctioned; therefore, at this time there is no need to discuss Stemcor separately." He added that every company is waiting for a detailed policy on iron ore mining before deciding on any further course of action. He spoke to Mint at the sidelines of the company’s third quarter results announcement on 28 January.

Meanwhile, other operations in which Stemcor India has a stake have also come to a standstill. AMTC holds 100% stake in Brahmani River Pellets Ltd (BRPL), which has a 4 million tonne per annum (mtpa) beneficiation plant in Barbil and a pellet plant complex in Jajpur in Odisha; both have been forced to shut down due to the lack of ore. Beneficiation is the process of enriching the ore content.

Additionally, Stemcor has a 10% equity stake in Mideast Integrated Steel (MISL) which has an iron ore mine at Roida, Orissa, with a permission to ore 4.4 mtpa. This, too, is shut.

“The widespread suspension of iron ore mining in Odisha has had knock-on effects on the wider iron and steel market and, given the changed nature of supply, our plant (pellet) has temporarily suspended producing pellets whilst maintaining deliveries to customers," said Stemcor UK in an email reply.

“The asset is still good but there is a certain uncertainty attached to it. This is what has taken away the premiums available on the asset earlier. Unless the mineral allocation policy is clear in the country, not much can be said," said Purushottam Agarwal, vice-president (project advisory and structured finance), SBI Capital Markets Ltd.

He said he is not aware of the specific issues related to the company and added that the mineral allocation policy itself has rendered several iron ore mines in the state of Odisha unoperational and Stemcor is no different.

Stemcor posted a total income of 538.90 crore in fiscal 2014, as compared with 611.05 crore the previous year, according to the annual report filed by Stemcor India to the Registrar of Companies (RoC) in January 2015. For fiscal year 2014, Stemcor India incurred a loss of before tax of 97.66 crore, as compared with a loss of 18.77 crore a year ago.

According to an auditor’s note included in the annual report, “The accounts have been prepared on a going concern basis though the company’s accumulated losses exceed its net worth and its total liabilities exceed its assets."

The annual report further added that the political, legal, fiscal and other regulatory policies of the government may result in higher operating cost such as imposition of new taxes or increasing the royalties etc. Any such changes in the government policies and legislation also may affect the business profitability.

Mails sent on 10 February to Essel Mining and JSPL on whether they are still looking at buying out Stemcor’s India assets remained unanswered.

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