SC lifts 18-month-old mining ban, Sesa Sterlite jumps 7.5%

Written by feBureau | Mumbai | Updated: Apr 22 2014, 04:23am hrs
The Sesa Sterlite (SSLT) stock rose 7.5% on Monday and volume of traded shares jumped 1.3 times its 30-day average on Monday after the Supreme Court (SC) allowed the company to restart mining operations in Goa, albeit with riders. Mining ban was in place for last 18 months.

This is the companys biggest single-day gain since October 18. The scrip closed at a three-month high of R201.80, up about 4.78%, on BSE. Over 1.55-crore shares changed hands on Monday compared with an average 65.41 lakh shares that were traded in the last 30 sessions.

The apex court on Monday lifted the ban on iron-ore mining but set a maximum production limit of up to 20 million tonne per annum (mtpa) compared with 45 mtpa of total production in the region before the ban. The cap will be subject to a final panel report. Analysts say SSLT's business had been affected after the SC ban on mining in Goa. They consider the move positive as it will help the company revive production and exports. The company reported a negative earnings before interest, taxes, depreciation and amortisation (ebitda) of R42.82 crore in the first quarter of FY14, Bloomberg data showed.

Analysts, however, said Monday's gain was a knee-jerk reaction and one must not expect the company to restart production before the monsoon.

We do not see any visibility in ore output before the monsoon. Also the base price of Goa ore is expensive and rail freight to Karnataka will raise the total cost... JSW Ispat may benefit as it is close to the coast. Sea freight is less expensive than rail, said an analyst with a Mumbai-based financial services firm.

Data show about 25-30% of SSLT output came from Goa operations. Sesa Goa had produced 13.3 mtpa in the state before the ban, said a Bloomberg report. SSLT, earlier known as Sesa Goa, is the largest private sector iron ore producer in India.

Even after Supreme Court allowed mining, SSLT will require various approvals from MoEF and the state government. Management does not expect mining in Goa to resume at least before the monsoon, Kotak Institutional Equities analysts Kawaljeet Saluja and Abhishek Poddar had said on April 11 report.

The positive momentum was also seen in the stocks of other mining and mineral companies. State-owned iron ore mining company NMDC ended up nearly 1%. Other companies like Impex FerroTech and Ashapura Mine advanced 1.8-3.9%.

Apart from ore miners, steel-producing companies also witnessed positive movement. Kalyani Steels, which is a part of the Bharat Forge Group and sources raw material from Goa, gained more than 10%. Sunflag Iron and Surana Industries advanced 4.7% each. Besides, the production, SC said there will be no grant of lease for mining around one km of national parks and wildlife sanctuaries. The ministry of environment and forests (MoEF) will identify eco-sensitive areas around national parks in six months.

The SC had banned mining in all 90 mines in Goa in October 2012, due to investigations into alleged illegal mining operations.