Expiry of mining lease in K'taka hits Sesa Goa's plans

Unlikely to be able to achieve its iron ore production target of 15 mn metric tonne for FY13

Sesa Goa, a Vedanta Group firm, is unlikely to achieve its iron ore production target of 15 million metric tonne for FY13 owing to the mining ban in Goa and the expiry of its lease in Karnataka.

The company’s operations are currently in limbo due to the recent action by the Goa government and expiry of its lease in Karnataka.

The company, during the first half of this fiscal produced about 3.1 million metric tonne. However, the mining ban in Goa has put brakes on its plans for the year. The Goan mines, which contributed approximately 83 per cent of Sesa’s output in FY12, face an uncertain road ahead, with all mining operations in the state currently banned and ministry of environment and forests (MoEF) issuing suspension of all mining leases.

“To add to the woes, we find the majority of Sesa Goa’s leases are mentioned under Justice M B Shah’s report on illegal mining in the state. Whilst we think the drive against illegal mining initiated by the state is the right step, we expect larger mines with a clean track record to emerge as beneficiaries in the longer run, as illegal miners/leases are revoked leading to de-congestion of the stretched Goan mining infrastructure,” Ritesh Shah, senior analyst with Espirito Santo Securities said.

Meanwhile, Sesa Goa’s iron ore mining lease in Chitradurga district of Karnataka expired on October 20, 2012. The Supreme Court appointed Central Empowered Committee (CEC) has classified the mine under Category B.

The company's reclamation and rehabilitation plan with a production capacity of 2.29 million tonne per annum as against its earlier capacity of 6 mtpa has already been approved by the CEC. However, the company can resume production only after the apex court approves mining in Category-B mines in Karanataka.

The company is contemplating the move to file an application in the Supreme Court for a temporary approval to resume mining for 3 months.