Sesa Goa sees FY12 volumes up after iron ore ban lifted

Sesa Goa sees FY12 volumes up after iron ore ban lifted

Mumbai: Sesa Goa, India’s largest iron ore exporter, expects sales volume to jump 15 to 20% this year after the Supreme Court lifted a ban on shipments from a key state, its managing director said on Tuesday.

Production at Sesa, a unit of London-listed Vedanta Resources, had fallen 21% in the March quarter because of the export ban in the Karnataka. However, it posted a 21% jump in net profit in the fiscal fourth quarter with sales volumes rising marginally to 6.7 million tonnes as it used up stocks.

“The Supreme Court has lifted the export ban and hopefully the materials will be allowed to move out to the port soon. If it is done, we are expecting a 15-20% volume growth on a yearly basis," managing director Prasun Mukherjee told Reuters over the telephone.

Karnataka had banned shipments of iron ore from 10 ports and stopped its transport to other ports for exports in July last year, citing a drive against illegal mining and the need to preserve the raw material for local steelmakers.

The court’s order freed up about a quarter of iron ore supplies from the world’s third-largest exporter. India ranks behind Australia and Brazil, with most of its 100 million tonnes of annual shipments landing in China, the world’s top steel producing country.

“In coming quarters the growth will be determined by exports from Karnataka. How soon we are able to start moving our ore from mines to port -- that is the driver and that is the biggest challenge also," Mukherjee said.

Iron ore prices are expected to remain firm due to steady demand for steel globally, he said, adding Sesa’s average realizations to stay around $100 per tonne.

Cairn investment

Earlier this month, Sesa Goa bought a 10.4% stake in Cairn India, pushing ahead with plans to take control of the Indian oil and gas explorer, despite regulatory delays plaguing the deal.

Mining giant Vedanta has agreed to take control of Cairn India in a $9.6 billion deal, but has been caught up in a dispute over royalty payments, and the two sides have been waiting for government approval for eight months.

“That was a driving force definitely," Mukherjee said when asked if the share purchase will help bring down the cost of acquiring Cairn for the group. Sesa held about $2.3 billion of cash reserves at March end.

The move may also have been prompted by the possibility that many investors would not tender shares in the offer due to the narrowing gap between the open offer price and the market price, analysts said.

Sesa acquired the stake from Malaysia’s Petronas for Rs331 ($7.40) a share, below the Rs355 being offered to minority shareholders in the open offer and at a discount to Cairn India’s market price.

“When the open offer is on, it is contingent we don’t know how much we will get," Mukherjee said. “We have to cut our coat according to the cloth."

Sesa Goa shares, valued by the market at $6.4 billion, were trading down 0.8% at Rs324.20 at 3:10 pm in a flat Mumbai market.