Mining clamps in Goa & K'taka upset Sesa Goa's output plan

During the first half of FY13, it produced 3.1 mt, a drop of 46.5 per cent compared to the 5.8 mt in the corresponding period last year

Sesa Goa, a Vedanta group company, is unlikely to achieve its iron ore production target of 15 million tonnes for 2012-13, owing to the mining ban in Goa and expiry of its lease in Karnataka.

During the first half of FY13, it produced 3.1 mt, a drop of 46.5 per cent compared to 5.8 mt in the corresponding period last year. During FY12, it produced 15.9 mt of ore, a drop of 18.5 per cent over the previous year.

However, the Goa mining ban has put brakes on its year’s plan. The Goan mines contributed 83 per cent to Sesa’s output in FY12 and face an uncertain road ahead, with all mining operations frozen and the Union ministry of environment and forests having suspended all leases. Managing Director P K Mukherjee declined to comment on the development.

In Karnataka, their mining lease is spread over 162 hectares, with approval to mine up to six mt yearly. The capacity was reduced to 2.3 mt after the Supreme Court’s Central Empowered Committee (CEC) approved its reclamation and rehabilitation plan. However, the company can resume production only after the apex court approves operations in Category-B mines.

Its mining lease in Chitradurga district also expired on October 20. The CEC has classified it as a Category-B mine and the company might apply for a temporary permit to mine for three months.

“To add to the woes, we find the majority of Sesa Goa’s leases are mentioned under the Justice M B Shah report on illegal mining in the state (Goa). 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,” said Ritesh Shah, senior analyst with Espirito Santo Securities.

Adding: “The proposed Goan mining policy is likely to attract short-term pain, in our view. The proposed policy, along with the recommendation of Shah commission’s report, not only puts Sesa’s future volume growth story in the doldrums but also questions the sustainability of its existing mining leases in Goa.”