Currently, iron ore is traded at $40 (R2,600) per tonne for 55-58% Fe grade in the international market
Vedanta’s iron ore division, Sesa Iron Ore, is set to resume exports by the end of October after a gap of three years. The company, which has long-term supply contracts with Chinese buyers, intends to export over 5 million tonne during the current financial year, a top company official said.
“We have started work on resuming production in our Goa mines. Currently, we are in the process of removing water from the mining pits which will be completed in a month’s time and the regular production of iron ore will begin in November. However, to begin with, we will use ore coming from the auctions for exports and ramp up once fresh ore is made available from November,” Kishore Kumar, CEO, Iron Ore Business, Sesa Iron Ore Division, Vedanta Limited told FE.
Sesa Iron Ore has three operating leases in Goa with a combined capacity of 5.5 million tonnes per annum. It will resume production at its Codli mine, about 100 kms from Panaji in South Goa, Kumar said. Codli mine has a capacity of 3.1 million tonnes per annum. Sesa’s two other mines are in Bicholim and Sonshi.
Currently, iron ore is traded at $40 (R2,600) per tonne for 55-58% Fe grade in the international market. “Though the prevailing prices are not lucrative for us to export as margins are very low, we are working towards bringing down the cost of production,” Kumar said.
He said the cost of operation is around $34 (R2,210) per tonne, while the taxes and royalty amounts to $15 per tonne. “We have managed to keep the cost of production below $20 per tonne, so that we hope to make a margin of around $5 per tonne with current prices,” Kumar said.
Incidentally, since mining operations closed in September 2012, prices have been coming down in global markets to touch a low of $32-33 per tonne for low-grade iron ore, which Goa produces from a peak of about $140 per tonne in 2012, he pointed out.
Unless the government removes export duty completely and enables the industry by reducing various cess and contribution towards district mineral fund and Goa Permanent Fund, it would be difficult for the miners to operate and make money, he said.
In 2012, the Supreme Court had banned mining in Goa as part of a clampdown on illegal mining. The ban was lifted in April last year, but the company had to wait till August this year to secure various clearances including environmental clearance before resuming operations.
Prior to ban in Goa, Sesa’s peak iron ore production had touched 15 million tonnes in 2010-11. Its annual capacity was 14 million tonnes per annum, which is now reduced to 5.5 million tonnes. The Apex Court has also fixed a cap of 20 million tonnes for all Goan mines per annum.