Home >companies >Mining in Goa to be unviable even if mining restarts: Sesa Goa

New Delhi: Diversified natural resources company Sesa Sterlite Ltd believes that even though iron-ore mining could resume in Goa as early as September-October, the current global price for the resource and duty structures in India will make it commercially unviable to mine in the state.

“We expect mining activity to resume in Goa by October this year. But with the lower grade iron-ore prices hovering at just around $60/tonne, the 30% export duty, and an expected increase in the royalties from 10-15%, it will become virtually impossible to mine," A.N. Joshi, vice-president-corporate affairs at Sesa Goa, said on Thursday. Sesa Goa handles the company’s iron ore business.

The dampened global prices of iron ore are due to excess global supplies and huge iron-ore stocks lying at Chinese ports, and this situation is expected to persist for some time. Iron ore prices are still down 30% from the end of last year. Joshi said that assuming the company earns $60/tonne of iron ore, around $36 will go in export duty, Goa Iron Ore Permanent Fund, transport cost up to port, royalties etc. “This leaves us with virtually no money after the cost of production is met," said Joshi.

Almost all of Goa’s iron ore used to be exported to China, which has the ability to blend low-grade Goan ore with other grades of richer ore.

“Only China can use Goan ore because the Goan hematite coarse fines can be blended with very fine magnetite concentrates that are only produced in China in large quantities," he said.

Prakash Duvvuri, head of research, OreTeam, said Indian steel companies do not use Goan iron ore owing to the huge costs involved in “beneficiating" the ore.

Duvvuri said it is very difficult for Goan ore to compete in global markets where major producers like Australia and Brazil offer discounts up to 8-9% for low-grade ore. The cost structure in India is much higher due to infrastructure bottlenecks in the state.

The Supreme Court lifted an 18-month ban on mining in Goa in April with a production cap of 20 million tonnes (mt) a year.

Joshi suggested the low grade ores which cannot be used in India must be exported.

“From 70-$80 maybe 5% duties, $80-$100 maybe 10% and so and so forth. Ultimately it is the higher grade you want to conserve," he added.

Sesa has three clusters of mines in south, north, central Goa that used to produce about 14.3 mt of iron ore before the ban was imposed. This accounted for about one-third of the state’s output. “By that logic, we feel that once mining is resumed,,our production cap will be around 7 mt considering that the entire state’s cap is 20 mt," said Joshi.

Mining in Goa was suspended in late 2012 by the Supreme Court under an environment and illegal mining case. It came on the back of a report on mining in the state submitted on 7 September by the M.B. Shah Commission, which listed violations by mining companies and also lapses by both the Goa and the central government in enforcing rules.

The Supreme Court order has demanded that Goa earmark eco-sensitive zones around national parks and sanctuaries as the Shah Commission pointed to the possibility of mines being located in these zones.

Goa has around 95 iron-ore mines that produce iron-ore fines (powdery iron ore), sold mostly in China.

Goan mines are some of the oldest in India—some date back to the 1960s.

An executive working at Sesa Sterlite said mining is unlikely to resume soon as government clearances could take months.

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

My Reads Logout