The ongoing iron ore auction in Goa is struggling to find takers due to the subdued global economic sentiment as well as weakness in prices, something which is expected to impact mining of the ore in the state.

According to industry sources, of the total of 3.5 MT of iron ore under the hammer in the past three auctions (7, 8 and 9), only 0.77 MT, or 22 per cent, was sold.

Iron ore mining in Goa will commence next month after a gap of three years, with mining conglomerate Vedanta set to start operations at its Codli and Bicholim mines.

Goa has around 15 million tonnes (MT) of iron ore that is being auctioned by the government. In the nine auctions so far, only 6.3-6.5 MT has been sold, which the industry attributes to competitive prices of the ore in global markets.

Goa mainly produces low grade iron ore (with iron content between 55-58 per cent), which is mainly exported. The price of 58 per cent ore has fallen to $37-38 while taxation on it is over 70 per cent. There are a few takers for this as global prices of high-grade iron ore (Fe content over 60 per cent) are hovering below $50 per tonne, the industry said.

"Goa has about 15 million tonnes of iron ore to be auctioned and it is not finding many buyers. Subdued global market sentiment as well as low prices are impacting the sale.

"Also, since most of the iron is exported and with prices being on the higher side, this is again acting as a dampener," CEO of Vedanta's Iron Ore Business Kishore Kumar told PTI.

For miners, it is a double whammy, he said, adding that prices are not competitive due to the export duty and added to this is the weakening of the global prices.

"Besides, we have been urging the government to find a solution to allow miners to dump the waste outside the lease area. And another important issue is the 30 per cent export duty. To make the ore competitive, the government should think of slashing the duty," Kumar suggested.

He said miners have iron ore dumps at their barges and sites, for which there are not many takers due to the prices.

"How can such a situation help mining operations, which will start next month? Mining is a source of livelihood for many here," Kumar wondered.

The Goa government is conducting e-auctions through the Metal Scrap Trading Corporation (MSTC), which are being monitored by a Supreme Court-appointed committee. Goa's Directorate of Mines and Geology has identified 15 MT of iron ore for auction.

Expressing a similar view, industry body Goa Mineral Ore Exporters Association (GMOEA) Executive Director S Sridhar said: "It (auction) is not successful. Globally, buyers are getting better grades at competitive prices. So, why will they buy it from here (Goa)?"

The auctions will be a success only when there is an incentive for it to be exported. The current status of duty as well as the prices in which the iron ore market is, there is not much incentive for people to buy and export it, he added.

"Clearing the auctioned cargo was expected to help early restart of mining operations, but it seems that lukewarm response to the auction will naturally delay the restart of mining in Goa as about 11 MT of iron ore is still lying at various mines and jetties," industry sources said.

Goa's leading miner Fomento Resources Managing Director Ambar Timblo said nobody will put their money in the sector at such a time when there is no clear indication on which way the prices will move in the global market and on top of that, there are issues related to prices on the domestic front.

"It is very clear from the negative indication on the auctions. The prices are higher here and why will someone buy this ore (lower grade) at this price when they can get a better grade at competitive prices in the global market?" he asked.

"There is no issue in developing mines as Goa miners have been doing this for the last 65 odd years. But if one needs to sell this ore globally, then the export duty has to be brought down to zero to make it competitive."

To make the iron ore from Goa competitive, Sridhar suggested the government look at correcting the duties.

"There should be fiscal correction in the duties. There is export duty, then there is District Mineral Foundation (DMF) contribution as well as the levy for the Goa Mineral Ore Permanent Fund Scheme. These are impacting the sentiment," he added.

Mining in Goa has a 30 per cent export duty on iron ore fines with Fe content of 58 per cent and above and 10 per cent for below this content. For iron ore lumps, the duty is 30 per cent. There is a 5-10 per cent levy for DMF and 10 per cent on export price for the Goa Mineral Ore Permanent Fund Scheme.

According to sources in the Goa government, the reason behind the weak response to the e-auction is the higher base price.

"Low ore prices in the international market and subdued demand from China are impacting the auctions. The base prices have been reduced, but it still has not made a very positive impact on the sale," they said.

On the commencement of mining operations in October, Vedanta's Kumar said the company looks forward to starting mining, but there is not much incentive before it in such a bleak scenario.

"We will start mining, and Vedanta is looking forward to it. But what is happening at the auctions gives us a peak into the whole scenario and the future that lies ahead," he added.

GMOEA's Sridhar said the global scenario will have a bearing on the mining operations.

"Considering that Goa exports most of the iron ore, it will be impacted by the international market scenario. We are urging the government to look into this issue so that the prices that are offered are competitive," he added.