26 JUL, 2012, Economic Times
MUMBAI: Sesa Goa, which part financed Sterlite's $10-billion takeover of Cairn India, expects iron ore production in the current fiscal year to fall by about 24% due to regulatory constraints and production caps, a senior executive said on Wednesday.
The Goa-based company, which is part of Vedanta Resources and also India's largest iron ore exporter , will most likely produce about 16-17 million tonne of iron ore this year. "This is much lower than our earlier estimate of 21 million tonne," managing director P K Mukherjee told ET. "This is mainly because of the production caps that have been suggested in Karnataka, which will greatly restrict our mine output."
The Central Empowered Committee , a panel appointed by the Supreme Court that had investigated into allegations of illegal mining in Karnataka and had recommended the current mining ban, recently suggested capping total production in the state at half the earlier gross output to lessen the impact on environment .
Under this directive, Sesa Goa can mine only 2.9 million tonne, compared to the earlier 6 million tonne for which it has the Environment Clearance. On July 23, Sesa said its profit fell 76% due to lower volumes and weak ore prices. The company said income from associate company , Cairn India, boosted its finances .
Sesa earned Rs 755 crore from Cairn India for its 20% share in the oil company. According to Mukherjee, the outlook for iron ore continues to remain weak. "Ore prices will likely fall by another $6-7 per tonne. That is our estimate. We have factored an average floor price of $120 per tonne, mainly as consumption is falling in China." The current average price of the ore, crucial for steelmaking is $127 per tonne.
A recent report by Emkay Global says iron ore prices fell broadly during the fortnight, with high grade ore losing 3% to $137.3, while 62% Fe grade ore losing 4.4% to end at $129.4. The more common 58% Fe grade ore declined moderately by 1.2% to $119.5/tonne. "Increased regulatory scrutiny and higher iron ore demand has impacted mining.
We estimate India's iron ore exports at 39 million tonne in FY13," Standard Chartered analysts Satish Kumar and Saurabh Prasad wrote in a recent report. Last fiscal year, ore exports stood at 55.2 million tonne. Weak demand and higher export levies have also affected price realisation for exporters like Sesa Goa. Realisations have been $30 lower, with $10 accounting for the levies.
Sesa Goa expects the process for according court approval to its merger with Sterlite Industries to start from September. "There may be some delay as we are anticipating opposition to the merger . But the court clearance may be in by December," said Mr Mukherjee . Sesa Goa will restart its production in Goa as the mandatory rehabilitation and resettlement plan for its mines in Chitradurga.
MUMBAI: Sesa Goa, which part financed Sterlite's $10-billion takeover of Cairn India, expects iron ore production in the current fiscal year to fall by about 24% due to regulatory constraints and production caps, a senior executive said on Wednesday.
The Goa-based company, which is part of Vedanta Resources and also India's largest iron ore exporter , will most likely produce about 16-17 million tonne of iron ore this year. "This is much lower than our earlier estimate of 21 million tonne," managing director P K Mukherjee told ET. "This is mainly because of the production caps that have been suggested in Karnataka, which will greatly restrict our mine output."
The Central Empowered Committee , a panel appointed by the Supreme Court that had investigated into allegations of illegal mining in Karnataka and had recommended the current mining ban, recently suggested capping total production in the state at half the earlier gross output to lessen the impact on environment .
Under this directive, Sesa Goa can mine only 2.9 million tonne, compared to the earlier 6 million tonne for which it has the Environment Clearance. On July 23, Sesa said its profit fell 76% due to lower volumes and weak ore prices. The company said income from associate company , Cairn India, boosted its finances .
Sesa earned Rs 755 crore from Cairn India for its 20% share in the oil company. According to Mukherjee, the outlook for iron ore continues to remain weak. "Ore prices will likely fall by another $6-7 per tonne. That is our estimate. We have factored an average floor price of $120 per tonne, mainly as consumption is falling in China." The current average price of the ore, crucial for steelmaking is $127 per tonne.
A recent report by Emkay Global says iron ore prices fell broadly during the fortnight, with high grade ore losing 3% to $137.3, while 62% Fe grade ore losing 4.4% to end at $129.4. The more common 58% Fe grade ore declined moderately by 1.2% to $119.5/tonne. "Increased regulatory scrutiny and higher iron ore demand has impacted mining.
We estimate India's iron ore exports at 39 million tonne in FY13," Standard Chartered analysts Satish Kumar and Saurabh Prasad wrote in a recent report. Last fiscal year, ore exports stood at 55.2 million tonne. Weak demand and higher export levies have also affected price realisation for exporters like Sesa Goa. Realisations have been $30 lower, with $10 accounting for the levies.
Sesa Goa expects the process for according court approval to its merger with Sterlite Industries to start from September. "There may be some delay as we are anticipating opposition to the merger . But the court clearance may be in by December," said Mr Mukherjee . Sesa Goa will restart its production in Goa as the mandatory rehabilitation and resettlement plan for its mines in Chitradurga.
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