Mining giant Vedanta feels that the worst phase for the iron ore industry is over and exuded confidence that its Goa arm is prepared to sustain the export momentum amidst softening global prices and subdued demand.
Goa produces low grade iron ore (Fe content below 58 per cent), which is exported to China. After removal of the mining ban by the Supreme Court in 2014, the state is allowed to mine 20 million tonnes (MT), with the highest share of 5.5 MT going to the firm led by billionaire Anil Agrawal.
“Goa iron ore industry went through a lot, but the worst is over. Globally, prices are soft and demand is subdued, but we will find traction. We have competed in similar environments earlier and will do it again. The future of mining is intact,” CEO of Vedanta’s Iron Ore business, Kishore Kumar told PTI.
Since the resumption of mining operations in Goa, the state has exported about 5 MT of the ore, which includes both the old as well as the freshly mined stock, he added.
“Of the total cap for Vedanta, we have exported 2.2 MT and will export the rest in this fiscal. What we are looking at is relaxation in production cap so that economies of scale can be achieved, which will make us more competitive,” he said.
Vedanta mines iron ore in Goa from the Codli and Sonshi mines. It also has a met coke and pig iron plant, besides a captive power plant in the state.
The firm maintained a monthly production run rate of 8 lakh tonnes in the April-June quarter this fiscal. During the quarter, Vedanta produced 2.4 MT of the ore and exported 2.1 MT. This is against a production of 1.9 MT and sales of 1.6 MT in the January-March quarter of 2015-16.
On higher production cap, he said: “See, it is going to be a tough ride in such challenging conditions, but higher production we give us economies of scale, which will help us to be more competitive. The Expert Committee appointed by the Supreme Court has also recommended raising the cap to 37 MT.”
The Goa government is also supportive and is creating a mining corridor for better transportation of iron ore from the mines to the jetties and the plants, which will also help in optimising logistic costs. It will cost around Rs 125 crore, he added.
Vedanta is also pursuing other alternatives to get a relaxation on the cap on iron ore mining.
In an analyst call in July, Vedanta Ltd had said that the Supreme Court is hearing the case to enhance the overall cap, both for Karnataka and Goa, and the firm expects a decision by the end of July-September quarter.
During the call, Kumar told analysts that of the total 20 MT, state government (Goa) is able to execute about 16-17 MT of capacity on the ground, leaving about 3-4 MT unallocated.
“We have been discussing the matter with state government that should our production get over by end October-November of the third quarter, would they be in a position to give us additional allocation,” he had said.