Indian state may cancel iron ore mine lease to NMDC

NEW DELHI: The government of India's Karnataka state has warned NMDC Ltd that it will cancel the lease of its Donimalai iron ore mine if the state-owned miner refuses to pay 80 percent premium on the sale of ore.

"This mine roughly produces 6 million tonnes per annum and so every year the loss to the state government would be 20 billion rupees," Karnataka mining secretary Rajender Kataria told Reuters over the phone.

"State resources cannot be distributed just like that," Kataria said.

Following the news, NMDC shares fell as much as 7.4 percent to 99.20 rupees, their lowest since July 25, marking their biggest single-day fall since Aug. 9.

NMDC, the country's largest iron ore miner, will lose as much as 10 billion rupees ($139.07 million) or almost 10 percent of its annual revenues if the state government doesn't reverse its decision to charge a premium on the iron ore sold, the company said in a letter to the state government on Nov. 1.