Tata Steel shares down 3%, ignores resumption of ore sourcing from Jharkhand

After a part payment made over the weekend, Tata Steel can now lift mined ore at its captive Noamundi mines after a gap of almost three months

Following the broader market trend, shares of Tata Steel were trading 3% lower in early Tuesday trade, seemingly unaffected by the steel producer’s ability to now feed its Jamshedpur plant with ore mined at captive Noamundi mines in Jharkhand. The development was announced Monday.
 
Shares of the company were trading at Rs 204 on the BSE, down 3% from its previous close.
 
After a part payment of the total dues worth Rs 372 crore to the Jharkhand state government over the weekend, Tata Steel, the country’s oldest steel producer will now be allowed to lift the mined ore at its captive Noamundi mines after a gap of almost three months.

 

The Jharkhand government had stopped issuing requisite challans, or permits, to the company for transportation of ore to the Jamshedpur plant as an extension of an unresolved lease renewal issue.
 
Meanwhile, analysts said the company in its guidance had already stated that it possesses iron ore stock that could last until end of September. As part of Plan B, it had also secured iron ore from the open market from state-owned miner NMDC and pellets from Jindal Steel & Power.
 
Due to this, brokerages do not see any changes in its earnings guidance for the company for the quarter ended September and are consequently keeping their target price unrevised.

 
“We had expected the issue to resolve by around this time since the company had given that kind of guidance and all this has already been taken into consideration in the earnings estimates,” said an analyst with a local brokerage.
 
The Noamundi mines, with capacity of 10 million tonne iron ore annually, meets 30% of the total requirement of the 9.7 million tonne Jamshedpur plant. The balance is met via captive mines in Joda and Kalamati in the state of Odisha.
 
Earlier, the Jharkhand government had failed to act on Tata Steel’s application for a lease renewal in 2009. The government then allowed the company to extract ore after the expiry of the lease on a “deemed renewal” basis. However, in 2014, the Jharkhand government decreed deemed renewal unlawful and demanded a penalty equivalent of the ore value extracted after lease expiry.

 
This led to a shutdown of the Noamundi mines on the instruction of the state government from September 5 to December 31, 2014. During this period, Tata Steel was forced to import iron ore for the first time. Tata Steel resumed operations at the Jharkhand mine on January 1, 2015, after receiving an ‘expressed order’ from the Jharkhand government.