Critical Mineral Blocks Auctions: Coal India To Bid For Three Mines In February

Launched in November last year, the auctions aim to raise around Rs 450 billion ($5.42 billion) in total

Coal India, the state-run mining giant, announced its intention to participate in the upcoming auctions for three critical mineral blocks, as revealed by Chairman and Managing Director P M Prasad during a post-earnings conference call with analysts on Monday. According to Reuters, the auctions, overseen by India's mines ministry, are part of the country's efforts to bolster its clean energy initiatives. Launched in November last year, the auctions aim to raise around Rs 450 billion ($5.42 billion) in total. Other entities such as Ola Electric and Shree Cement have already shown interest in the auctions.

In addition to bidding for lithium and nickel mines in the forthcoming auctions on February 26, a senior official from Coal India confirmed the company's proactive stance in acquiring critical mineral assets.

Prasad said that Coal India has explored opportunities in lithium mines in Australia and is in preliminary discussions regarding potential operations there. Despite facing challenges related to land and environmental clearances, particularly in its South Eastern Coalfields unit, Coal Indiaremains optimistic about achieving its production target of 780 million metric tons for the current fiscal year.

However, concerns over record-high stockpiles and inventories in power plants have prompted Coal India to revise down its annual production target for fiscal 2025 to 838 million tonnes, marking a 1.4 per cent decrease.

The surplus inventory has impacted the premiums earned from e-auctions, with premiums falling between 36 per cent to 50 per cent for January and February, significantly lower than the annual average of 80 per cent.

This downward trend in premiums contributed to a subdued revenue growth of nearly 3 per cent for Coal India in the October-December quarter, marking its slowest top line growth in eleven quarters, except for the April-June period in 2023.

Reflecting market sentiments, shares of Coal India closed 4 per cent lower on Monday, despite having surged more than twofold over the past 52 weeks until Friday. Prasad expressed his expectation for global coal prices to stabilize at current levels over the next 1-2 years.

Moreover, he anticipates a continued decline in employee costs for Coal India, estimating a reduction of about Rs 20 billion in fiscal 2024 due to attrition. As one of the largest employers in the country, this cost management strategy holds significance for the company's financial outlook.