Vedanta Ltd, India's largest private miner, today led resumption of iron ore production at Goa after a three-year ban as the top ore exporting state looks to regain lost glory.
Vedanta Ltd, India’s largest private miner, today led resumption of iron ore production at Goa after a three-year ban as the top ore exporting state looks to regain lost glory.
Vedanta resumed operations with a ceremonial opening at its Codli mine amid a slump in prices.
The Supreme Court had in 2012 banned mining in Goa as part of a clampdown on illegal mining. The ban was lifted in April last year but operations could resume only today after various clearances, including environmental, were secured.
While iron ore exports had reached about 50 million tons in 2010-11, the apex court has capped the output at 20 million tons a year for now.
Goa hopes all miners to restart operations within this fiscal.
Chief Minister Laxmikant Parsekar formally launched the mining operations at Codli mines, 100 km from Panaji.
Though the mining resumption was announced today, the actual extraction of ore will start only after the monsoon season gets over next month.
Parsekar said the resumption of mining is an indication of “Acche Din”.
Codli mine which was Asia’s largest mining site before it was shut down has the extraction capacity of 3.1 million tons.
Besides Codli, billionaire Anil Agarwal-led company said it has received all approvals to restart mining at Bicholim.
“We waited for three years for this day. We were waiting for our mining operations to resume. Government was also willing that the mining operation should resume,” said Kishore Kumar, Chief Executive Officer, Sesa Iron Ore, a unit of Vedanta.
“We have no control over the market prices but we can at least have proper regulated mining operation. This is possible only with the help of employees,” he said responding to worries about decreasing international pricing.
The company in a statement said final clearances to other mines are expected to be granted by the end of August.
“Post monsoon season, the company plans to fully resume mining and by the end of the current fiscal year, to utilise its full annual production allowance of 5.5 million tonnes,” it said in a statement.
In a concall with reporters, Vedanta CEO Tom Albanese said: “We need to work hard to regain market share in a very difficult market. This will take close cooperation between the industry, the government and all stakeholders to ensure we can reopen on a competitive basis.”
On iron ore prices, he said: “Considering the conditions, we expect the prices to be much below USD 45 per tonne. The industry needs government help.”
In a statement, Vedanta Resources also indicated that “even as India and in particular miners from Goa look to regain lost markets, iron ore markets/prices are weak and the international trade environment remains challenging.
We continue to work with central and state government to improve competitiveness of Indian exports.”
Albanese said that the company is confident to manage the business in “such trying times”.
“These are tough times for the industry. There is huge increase in expenses and we are talking to the government over issues like export duty, various cess and District Mineral Foundation. We understand that we will not see profits from Goa like before,” he added.
Vedanta needs to set an example that it can generate positive cash flows in such conditions and create an example of the standards that it can set in such a weak market, he added.
The London-based group said that Vedanta has been granted approval for total extraction of 5.5 million tonnes of which Codli is at capped at 3.1 million tonnes.
“Till date, five mining plans and schemes for company’s mines have been cleared by Indian Bureau of Mines and we are awaiting clearance of further 15 plans. Over the balance monsoon period we anticipate receiving these approvals and expect a full scale resumption post monsoon,” it said.
Vedanta’s Iron Ore Business CEO Kishore Kumar said: “I urge the government to note the current market scenario, with the steep downturn in prices and more importantly resolve the issue of dumping of ore outside lease areas for Goa mining to be viable.”
Since the closure of mining operations in September 2012, prices have crashed to USD 32-33 per tonne for Goa grade of iron ore (average grade 58 per cent FE) from a peak of about USD 140 per tonne in 2012.
Prior to the suspension of mining in 2012, India was the third largest exporter of iron ore and Vedanta was the largest Indian exporter of low grade ore, it added.
The actual mining operations will begin post monsoon around the second half of September, when the rains stop.
On the reasons behind commencing operations despite the unviable low prices, a senior company official had said the firm has been paying salaries and wages to all its nearly 4,000 workforce for last three years, incurring around Rs 1 crore a day.
The Goa government had temporarily banned iron ore mining in September 2012 pending verification of documents in the wake of Justice M B Shah Commission’s report.
During the same month, the Environment Ministry had put the environment clearance granted to the mining leases in Goa in abeyance.
In October 2012, Supreme Court had imposed a blanket ban on mining while hearing a petition. It lifted the ban in April last year, but with conditions.