Orissa selects POSCO for iron ore block

June 9, 2008

June 9th (Economic Times) – South Korean steel major POSCO’s jinxed $12-billion steel project, one of the largest investments by an overseas company, may get its all-important raw material linkage with the Orissa government deciding to offer Khandadhar iron ore block in the state to the steel maker.

Grant of iron ore mine would be a major step forward in salvaging POSCO’s project, the 12-million-tonne steel project that has been in the midst of controversy ever since the MoU was inked in late 2005. With reserves of 200 million tonnes, the iron ore block would be enough to support initial capacity of the steel project.

“The state government has finalised POSCO for grant of prospecting licence for Khandadhar mining block. A formal application seeking Centre’s approval for prospecting licence would be sent by the state this week. Once Centre’s approval is obtained, the licence could be notified in the name of the South Korean steel maker,” a source in the Orissa government told ET.

The prospecting licence has been painstakingly finalised in the name of POSCO after the state government heard around 200 applicants in a public hearing for the iron ore block, as per the directions of the high court. The hearing that concluded recently found POSCO as the most deserving applicant for the iron ore block with a firm investment commitment and project development plan.

Though Khandadhar mines would only meet a third of the 600-million-tonne iron ore required by the steel maker, sources said it could kickstart the project with the state government finalising other blocks for release in favour of POSCO later.

The Orissa government had offered 83.65-sq km Khandadhar mines for iron ore mining in 1991. Since then, there have been 252 applications for the block. POSCO’s application is among the last for the block, received as late as September 2005.

The mining lease issue for POSCO has been in the limelight in the wake of strong reactions coming from the company recently. A senior executive of the company recently threatened to pull out of the Rs 52,000-crore project if their pending issues over land allocation and mine leases were not sorted out soon.

The government is also moving carefully to see that all the legitimate demands of the company are met quickly to ensure the success of the project key to bringing more foreign investment in the sector. The prime minister’s office is directly monitoring the progress of the project.

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