Goa govt's mining lease renewals to open Sesa's 70% iron ore operations

Analysts not kicked about restart of Sesa's iron ore operations

With the Goa mines ministry set to renew mining leases of another 14 mines by end of next week, Sesa Sterlite, the Vedanta Group company, can expect to restart its iron ore operations soon.

"We should give renewal for the balance 14 iron ore mines by end of next week (out of the total 27 mining leases) as they do not have any major violation issues," a senior official from Directorate Mines & Geology, Goa told Business Standard.

Early last month, state's mines ministry renewed 13 mining leases. Of this, the Mareta Sodo mine spread across 26.67 hectares in the Sattari district belongs to the Vedanta Group company.

"In the second batch of renewals, there are eight leases for which the stamp duty has been paid by us (Sesa Sterlite) and so once the lease renewals come in, a total of nine mines will be open for mining by us," A.N. Joshi, vice president of corporate affairs at Sesa Sterlite-iron ore business told Business Standard.

The move will open over 70% of Sesa Sterlite's iron ore operations in Goa as the nine mines total 10.5 million tonne iron ore production of the 14.5 million tonne the company had prior to the ban.

Sesa Sterlite has 15 iron ore mines in Goa with an average 58-ferrous content ore grade.

"After renewal of mining leases, we will approach the environment ministry for the required approvals and hope to restart operations by end-January," said Joshi.

Though the company remains hopeful about restarting its operations soon, analysts said a 30% export duty on the ore, high freight costs coupled with weakening iron ore prices in the global market will keep business muted for Sesa.

"We are not kicked about the company restarting its iron ore operations. With global iron ore prices tanking to five-and-half year low and with it (company) having to pay duties, wonder if Sesa will get to earn anything," said an analyst with a local brokerage.

Sesa, however, remains hopeful that the government will surely help the industry revive as the latter focuses on growth.

"Today if the finance ministry has not been agile, it is because there are no exports of ore from the country and the industry itself is not functioning. Once the industry restarts, we are sure that the (export) duty will be reduced to zero. The ministry has always been quite agile on this front," said Joshi.

Low grade iron ore of Goa does not find any application in the domestic market and has to only be exported.

"Goan ore is too low grade to be used for primary steel producers to make steel. Moreover, there are logistical reasons for not using Goan ore. There being no steel plants in the state, the ore will have to transported which will swell the steel maker's input cost significantly," said the analyst with a local brokerage.

Currently, Sesa Goa's 65-ferrous content ore from Karnataka mines goes to JSW Steel and other alloy makers in that state.

Going ahead, Sesa will continue to focus on its existing iron ore business in Goa and has no expansion plans. "We will be concentrating on growth of existing operations. We need to start operations as soon as possible," said Joshi.