Bid Price Assessment of Iron Ore Block in Odisha
The Mines and Minerals (Development and Regulation) (MMDR) Amendment Act, 2015 removed the discretion in the granting of mineral concessions and enacted that all the concessions of major minerals will be granted by the respective State Government through auctions. This has opened up the opportunity to the Indian steel producers to own iron ore mines for their captive purposes.
Geovale Services was appointed by one of the large integrated steel producers having presence in Chhattisgarh and Odisha for financial bid advisory and documentation for Ghoraburahani-Sagasahi iron ore block auction in Odisha.
The project proposal had three distinct parts –
- Financial modelling for Price Offer
- Overall Assessment of Risks
- Preparation of Bid Documents
Geovale started the project with visiting the Ghoraburahani-Sagasahi iron ore block auction in Odisha. Our team of geologists, mining engineers and market analyst visited the site for a rapid assessment of surface observations of geology, structure, iron ore occurrence, infrastructure and socio-economic scenario.
Following that the geologists of Geovale validated the resource estimation in conjunction with the Geological Report and estimated the mineable resource. Our mining engineers and processing experts estimated the mining methodology, production schedule, equipment phasing and requirement of processing plants.
Based on these inputs Geovale’s valuation specialist prepared a detailed financial model for calculating Capital Expenditure considering pre-mining expenditure, regulatory expenses and other statutory expenses. We also estimated the all major Operating Expenses for running the mine like, OB removal & iron ore extraction, salary and wages, power cost, transportation, depreciation, interest and taxes.
Our market analysts projected the long term prices of iron ore considering demand and supply situation of iron ore in the domestic as well as overseas markets.
We also considered the level of competition amongst the prospective bidders after analysing the future demand-supply condition of iron ore in India, resource available with the Indian steel producers as captive mines, mines which will come for auction following the expiry of lease period, financial strength of the bidders, distance from the mine to their steel plant, transportation cost etc.
Our business analysts calculated the NPV, IRR and Pay Back Period after undertaking a robust financial analysis and recommended the bid price range for both the initial price offer and final price offer.