PANAJI: For Goa, mining industry is one of its core strength for its economy and is expected to generate Rs 500 crore royalty revenue for the state during the current financial year as against, around Rs 292 crore in the year 2009-10 after increase of royalty rate midway during last year.
Apparently, Goa’s poor mining infrastructure is a huge concern to cater to the need of this industry laying golden eggs. It is becoming very difficult to transport the existing level of ore produced to the port, leave aside any potential increase, said Sesa Goa MD Mr P K Mukherjee, and Goa’s highly rated corporate star.
Although Goan mining industry (read ‘established miners’) has been unable to capitalize on the sharp rise in the iron ore prices as it could not increase its ore production significantly, due to external factors such as logistic hurdles, poor infrastructure (road and port facilities) and blockades at almost every places to transport the ore.
In a casual chat with the Navhind Times, Mr Mukherjee said, all these hurdles can be minimized or removed with the help of Government of Goa and the people of Goa in order to make the Goan economy stronger and capitalize the huge demand coming from China and other parts of the world, while addressing all concerns raised for increase in production.
" The changing face of Goan mining industry can be visualized by improving the infrastructure making a separate road corridors for mining trucks and implementing innovative ideas like substitution of 10-tonner trucks by higher capacity trucks and creating belt conveyor facilities wherever it is feasible.
Mr. Mukherjee added that Sesa Goa is continuously moving towards creating new dedicated infrastructures such as jetties, separate road corridor and bridges on its own as well as along with other mining companies. The process of improvement in the infrastructure is very slow for the reason that land acquisition is the hardest in India, including Goa. The will and commitment for such an infrastructure requires whole hearted support from all sides, he said.
Mining companies not only in Goa but throughout India have been facing roadblocks lately, often because of delays in getting environment clearances and other regulatory approvals which are kept on hold.
Sesa Goa acquired Dempo mining assets in June 2009, which has played an important role in Sesa Goa’s increased production volume in Q1 FY2011, although excluding Dempo operations, Sesa Goa’s production has declined by 10 per cent. This means that Goa’s production has declined compared to the previous year’s production due to frequent disruption of transportation of ore from mines to the port and other regulatory hurdles.
However the bottom line of Sesa Goa in the first quarter saw an increase in revenue due to sharp rise in iron ore prices in the international market this quarter as compared to the same quarter of previous year when prices were almost at rock bottom and also by additional Dempo’s production volume. Average net realization of Iron ore prices for Sesa Goa in the first quarter (including higher grades of production from its Orissa and Karnataka mines were at $85 per tonne as compared to $37 per tonne on FOB basis a year ago.
However, in the first half of this month iron prices in world markets have considerably fallen by about 35 percent from its peak in the 1st quarter, which may reflect in future quarter results besides impacting negatively royalty and other taxes.
Sesa Goa’s pig iron sales volumes also decreased by 24 per cent compared to its corresponding prior year’s quarter, due to slackening of demand in pig iron. The demand slowdown was mainly because of the sharp fall in scrap prices which is a substitute for pig iron. Sesa Goa being optimistic of its future, it is expanding the pig iron capacity by 0.375 million tonnes along with its associated capacity expansion for met coke, installing a new sinter plant and a 30 MW power plant with an investment of over Rs 600 crore which is on stream and is scheduled to be commissioned by the 3rd quarter of the next calendar year.
Referring to his views on China banning import of iron ore below 60 per cent Fe, Mr. Mukerjee said Chinese traders are influencing price for low grade ore which is sold only in the China market. However, exports of low grade to Chinese steel mills and traders importing on behalf of steel mills are not affected and correspondently the impact is marginally felt by Sesa. Only exporters, who are exporting low grade ore through pure traders, may be facing the pressure of the restriction.
One advantage miners have is that Goan ore is very much cost competitive in the world market in spite of the fact that such low grade ore is sold at a huge discount as compared with Australia and Brazilian ore.
Most of Sesa’s expansion projects are on hold and waiting for government approvals. Capacity increase approval process is expected to start only after the state mineral policy approval, which was slated during the monsoon session of Assembly.
