The temporary suspension on mining iron ore in Goa is unlikely to substantially hit Sesa Goa and other miners in the state, as mining activity during the monsoon season is typically low.

The company’s shares fell 5.81 per cent on Tuesday, closing at Rs 159.80 a share on the BSE.

Sterlite shares fell 4.4 per cent to Rs 93.95.
Earlier, a PTI report, quoting the state mines and geology department, stated the government had issued a notification asking 90 mines in Goa to suspend operations with immediate effect.

“Chief Minister Manohar Parrikar said the mines would not be allowed to operate, if these were found to be carrying out work without necessary permissions,” the report added. To resume operations, the mine owners have been asked for various documents.

The government has clarified the ore already mined would not be affected by the ban. Companies, therefore, can sell or transport the iron ore already mined, or that from their inventories. However, if the ban continues for long, it may take a toll on companies.

The second quarter of a financial year is the slowest for mining companies, as mining is difficult during the monsoon season. Various companies, including Sesa Goa, reduce mining activities during these months and sales, too, take a hit. With two-thirds of the quarter already over, the financial impact of the mining suspension on Sesa Goa would be contained.

A Sesa Goa statement read, “Sesa will submit all relevant documents to government authorities for scrutiny at the earliest in order to ensure early restart of its operations.”

In a note on September 11, Giriraj Daga of Nirmal Bang, stated as Goa’s economy depended on iron ore mining, the state would look to expedite the process of resuming mining operations. “We also like to acknowledge, unlike Karnataka, iron ore mining contributes extensively to Goa’s gross domestic product and the exchequer and any delay in resuming mining operations will the impact state’s financials as well,” he added.

As on June 30, Sesa Goa had 3.8 million tonnes of iron ore inventories.

Daga stated given what happened in Karnataka, it may take 6-12 months to restart mining in Goa and this could severely hit Sesa Goa. The broking firm cut Sesa Goa’s volume estimate 39 per cent for FY13 and reduced the company’s profit estimate 56 per cent.

Analysts don’t feel the ban would continue for long, as mining companies have been asked to submit their reports in a week.

Till last year, India was the world’s third-largest exporter of iron ore, with a contribution of about 100 million tonnes. Half of this was accounted for by Goa, making it the largest iron ore exporter state.

Source: Business Standard

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