Sesa Goa sees clarity on mining ban by Nov-end

Matters concerning the Goa iron ore mining ban, which has debilitated Sesa Goa since September, are likely to clear by November-end. Or so the company says.

“Goa is a small state. The impact of ban on mining is very serious. All stakeholders are out on streets. Revenues are getting hit. We’re sure it won’t go the Karnataka way. The clouds should clear by November-end,” said P K Mukherjee, MD of Sesa Goa, in an analyst conference call after announcing the second quarter results.

As 25% of Goans are dependent on mining and allied activities, even the festive season is losing cheer due to the ban, he said, adding that the state government and all stakeholders are working overtime to find a remedy.

The west Indian state is the main revenue earner for the company, accounting for well over 90% of its volumes last year.

However, due to a state-imposed September 11 temporary ban on iron ore mining in Goa, followed by another ban on transportation and export activities in the state by the Supreme Court, the company lost almost 25% of its volumes in the second quarter (Q2; July-September).

In Q2, Sesa Goa sold 2 lakh tonne of iron ore, down 75% on-year (from 8 lakh tonne in Q2 of 2011). “Besides the September 11 mining ban, the monsoon-related restrictions on transportation from south Goa affected the volumes,” said Mukherjee.

In the post-monsoon Q3 last fiscal, the company clocked volumes of close to 60 lakh tonne which rose to 70 lakh tonne in Q4. But Mukherjee declined any guidance for the next two quarters.

He, however, expected an early resolution of the current situation.
He said Sesa Goa and other miners in the state are pushing for at least a lift in the ban on transportation of ore. Any such easing could help the company in selling inventories of up to 35 lakh tonne, thereby reaching 50% of last year’s volumes.

Considering the prospect of an enquiry into mining activities across the country, analysts told DNA Money that the company had projected muted growth this year in terms of volumes, but with the ban in mining activities in Goa, it might eat into 30% of the company’s volumes this year.

“We are factoring in a halt in the activity for almost a quarter, which means the company might miss the volumes target by almost 4-5 million tonne for the fiscal,” said an analyst with a domestic brokerage.

He said the ban could hit the company’s standalone profit margins by 13% and of the merged Sesa Sterlite entity by 5-6%.