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Business News/ Companies / Vedanta resumes iron ore mining in Goa
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Vedanta resumes iron ore mining in Goa

Mining commences from 10 August as the firm has been granted approval for total extraction of 5.5 million tonnes, of which Codli mine will account for 3.1 million tonnes

Vedanta has been granted approval for total extraction of 5.5 million tonnes, of which Codli will account for 3.1 million tonnes. Photo: ReutersPremium
Vedanta has been granted approval for total extraction of 5.5 million tonnes, of which Codli will account for 3.1 million tonnes. Photo: Reuters

Mumbai: After a shutdown of over three years, mining and oil and gas company Vedanta Ltd resumed mining iron ore from its Goa mines from Monday.

“...the company has received the relevant consent, licence and approvals in place to commence the iron-ore mining operations in the state of Goa for some of its leases. The company is likely to recommence operations from 10 August 2015 at its biggest mine at Codli in Sanguem taluka in Goa," the company, part of Anil Agarwal’s Vedanta Resources Plc, said in a notice to stock exchanges on Monday.

It said the company has been granted approval for total extraction of 5.5 million tonnes, of which Codli will account for 3.1 million tonnes. Till date, five mining plans and schemes for its mines have been cleared by the Indian Bureau of Mines and it is awaiting clearance for 15 more plans.

Mint reported on 3 August that in spite of an approval and the subsequent start of mining operations from Goa, the company will find it tough to scale up its operations from the state as low iron ore prices, lower demand and loss of market to Australian iron ore miners are expected to be major impediments to resume operations and run them profitably in Goa.

Goa iron ore, which has a relatively lower quality of iron content in the ore, cannot be used in Indian steel mills and is fully exported. The ores also claim less realisations on each tonne of iron ore sold due to poor quality. In the last three years of a Supreme Court-imposed ban in Goa, most miners in the state lost their export market to Australian miners. This situation has worsened due to a fall of over 50% in the cost of iron ore, making it tough for miners to maintain margins.

During a recent interaction with the media, Tom Albanese, the chief executive officer (CEO) of Vedanta Ltd, acknowledged these issues and said the company will have to work really hard to regain market share and maintain margins once operations start in Goa.

Currently, Vedanta is producing iron ore from its mines in Karnataka which contributed only 10% to its overall iron ore production in 2012, when mining was banned. Goa mines were the company’s flagship iron ore business.

In 2014-15, Vedanta Ltd produced 0.6 million tonnes of iron ore and generated an operating profit of 135 crore, or just over 1% of the overall operating profit of the group, due to resumption of mining in Karnataka.

During a conference call on Monday, Albanese said the efforts of the company will be to maintain positive cash flows from Goa.

“At current pricing environment, we will not get more than $45 per tonne for the ore from Goa. This is way below what the company earned three years ago. But it will still help us to maintain positive cash flows," he said.

He said the company will also engage with the state Government and with various other stakeholders to increase the permissible limit of mining iron ore in Goa beyond 5.5 million tonnes per annum (mtpa).

On Monday, shares of Vedanta Ltd closed at 127.75, down 1.31%, while the benchmark Sensex closed at 28,101.72 points, down 0.48%.

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Published: 10 Aug 2015, 11:38 AM IST
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