Vedanta Limited, which has managed to retain 80 per cent of its earlier mining capacity in Goa after state government’s renewal of the leases, is now looking to regain the lost market share, a senior official said.
“Since mining activities were shut in Goa, several new Australian mines were started and others expanded substantially. This means we will need to fight hard to regain lost market share. We are hopeful that our strong Sesa Goa brand will prevail, but we will have to compete against a strong set of suppliers,” Tom Albanese, Chief Executive Officer, Vedanta Resources, told PTI in Goa.
The company, which has decided to shift its registered office from Goa to Mumbai, is now keenly awaiting the restart of mining in Goa post the monsoon season by October.
“Majority of the approvals are in place and we are working to secure remaining approvals. Under the present cap of 20 million tonnes in Goa, we have been allocated an interim capacity of 5.5 mtpa of saleable ore in Goa,” he said.
“It is a good start. We expect that in the days to come, we will be allowed to extract more given our innovative and sustainable mining solutions,” Albanese added.
The CEO said that the company has intense faith in the union and state government to clear the uncertainty over the industry.
“The NDA government at the Centre has been proactive in ensuring that the MMDR Act is passed and issues of the sector are resolved,” he said.
“Although at a broader level, commodities are in a downcycle and we believe that as and when the investment cycle kickstarts, India’s domestic markets will drive the demand. This will benefit ferrous and non-ferrous miners not only in India, but across the world,” he said.
The company faced bad times during last three years since the closure of the mining industry in the state.
“Over most part of the financial year (2014-15), activities in our iron ore assets in India have remained suspended as several statutory clearances were to be secured. During November-January period, mining leases in Goa were renewed. In Karnataka, mining activities resumed in February post renewal of our lease there and we have the permission to mine 2.29 mtpa of iron ore in the state,” he said.
The company which was the major player in iron ore extraction market in the state says that most of their mining leases have been renewed.
“These renewals give us access to 80 per cent of our assets in the state. As I mentioned earlier, this is a good start and I am confident that concerted efforts by the Centre-state and the industry will lead to a turnaround sooner than later,” Albanese said.
“Things are looking up now on the policy and regulatory side and we expect that there will be a renewed interest in the sector. Stronger domestic consumption will boost our activities and hopefully generate more jobs, as mining is people intensive,” the CEO said.
When asked about retrenchment of workers, Albanese said, “Beginning last quarter, we started restructuring of our Goa business and we have initiated several cost optimisation measures as globally iron ore prices have collapsed and our production capacity has been curtailed to only one-third of original capacity.
“The measures are still being implemented. The company is monitoring the often changing iron ore export market across the globe.”
“There has been a tectonic shift at the global stage. In 2012, industrial and construction activity in China drove global commodities demand. The rest of the advanced world was slowly coming out of a harsh recession. India although slowed down a bit, was fairly on path to rapid economic growth. Commodity driven large economies such as Australia, Russia and Brazil too were going strong,” he said.
He said that the task of regaining its market share is “challenging” amid depressed price scenario.
Commodities prices are trading at around half the price, as compared to a year back due to oversupply in the market, he said. “It will take some time to recover and hence, the task to regain old market is very challenging. We are working on the options and are in touch with various buyers,” he said.
When asked about the future of Goa business, he said, “the iron ore mined in Goa has less than 58 per cent Fe content, which has does not have many industrial uses, particularly in India and hence, has no option but to export.”
“However, going by the market scenario, its difficult to predict at this moment how much share we can regain. The Government is doing all that is necessary to rejuvenate the sector which is evident from its reduction of export duty to 10 per cent from 30 per cent. Currently there is an existing inventory lying at ports in Goa. So its a step by step process and things can only improve hereon,” he said.
Considering the low prices in the international market for the ore, the Albanese said, “feasibility will depend on the cost at which the iron ore is produced, the supply chain, logistics and a host of other factors.
While iron ore prices have slumped, some regulatory measures such as imposing high duty on imported products, raising the cap on mining, inducting economies of scale and providing tax concessions are some of the steps that can get the sector back on its feet.”
“Lets put recent low iron ore prices in perspective. When mining activities were banned several years ago, iron ore prices were USD 120 or more. Last month they were half that at USD 60. Now, because of concerns about the Chinese economy, prices have dropped even further to USD 45. This will be a tough market to survive in, even with the resumption of mining,” he stated.
Albanese said the other big issue that needs to be addressed is the cost of capital.
“There is an acute shortage of capital in the industry. Access to capital hence has become expensive. Once these issues are addressed, I believe that exports can become much more lucrative. After all, we need to adjust to the ‘new normal’ and broader economic trends,” he said.
With the China market getting uncertain, Albanese said the company believe in tapping opportunities across geographies.
“We do not limit ourselves to any particular market or product. China is a huge market with vast uses of iron ore. Even when its slowing down, it is driving demand. We continue to scout for newer opportunities, he added.