Vedanta Group company Sesa Goa, with cash in hand of around Rs 8,054 crore at the end of June 2010, has hinted at expanding mining capacity ? both through the organic and inorganic routes. With mines in Goa, Karnataka and Orissa, it is in the process of increasing capacity to 50 million tonne by 2014 from 25 million tonne at present. PK Mukherjee, managing director of Sesa Goa, spoke to Smita Joshi Saha of FE about the company?s first quarter performance and outlook on iron ore prices. Excerpts:
Can you highlight the reason for the top line and bottom line growth during Q1?
A growth in volumes is the first reason. The company sold 5.4 million tonne of iron ore, of which 1.2 million tonne was from Dempo. Secondly, iron ore prices have increased and we have seen a very good increase in our bottom line, primarily driven by the sales prices this quarter.
But your volumes in Goa excluding Dempo have declined. How confident are you in achieving your target of 20-25% volume growth in FY11?
We are very confident and there are no issues in achieving the volume target this year. As far as sales volume in Goa is concerned, it was marginally less. There were constraints on the shipping front in Goa from second half of May. However, one should not see Sesa Goa and Dempo separately as we are consolidating and this bifurcation is for the accounting purpose only.
What is the progress in terms of expanding capacity to 50 mt and what is the capex for the current year?
We are gradually progressing towards our target. However, the hurdle remains the environment clearance for Goa mines. The ministry of environment has put an embargo on new mining projects in Goa until the state legislature adopts a minerals policy. This will be discussed in the current Assembly session. Our sustainable capex is Rs 150-200 crore. Moreover, we have committed Rs 400 crore towards our 50-mt target.
Do you think that the quarterly pricing mechanism is sustainable?
It is very difficult to take a guess on that. The Japanese and the Koreans are not comfortable with this. There is a wait and watch situation. However, we follow the big suppliers.
The steel industry is demanding a hike in iron ore export duty. What is your take on this issue?
The steel industry is demanding this for the last 3-4 years and we have started living with it.
We leave the decision to the government.
