Odisha HC rules in favour of JSPL in Sarda mines case

In a major positive development for Jindal Steel & Power (JSPL), the Odisha High Court has directed the Odisha government to issue necessary orders to lift the ban pertaining to transportation of material lying within the Sarda mines premises. "We have been informed that the petition to transport JSPL's iron ore fines, which are lying at the dispatch point within Sarda Mines has been accepted by the Hon'ble High Court of Odisha. This will enable us to transport our material to our pellet plant," said a JSPL spokesperson. The order has nothing to do with lifting of the mining ban, the spokesperson added.JSPL procured close to 70 percent of its iron ore requirement from these mines.Analysts estimate close to 10 million tonnes of iron ore were lying idle at these mines after the ban which was imposed a couple of years ago.
Chintan Mehta of Sunidhi Securities says this is definitely a positive development and JSPL might save around Rs 100 crore on iron ore cost considering current market rates.

However, some factors must be considered before understanding the full financial impact, he adds.

Since JSPL does not own these mines but has a procurement agreement with them, it needs to be seen whether iron ore is made available to them at the current market price or at a pre-defined rate, he says.

Below is the verbatim transcript of the discussion with Chintan Mehta.Sonia: Now that they can resume their operations at Sarda Mines because the court ruling has come in favour of that, what do you think the upside for JSPL could be and what is the capacity of iron ore that the company can now use from these mines?A: This mine doesn't belong to JSPL. They have arrangement with Sarda Mines regarding this mine. After the Supreme Court banned iron ore mining in Orissa couple of years back there was around 9.5-10 million tonnes of inventory which was lying with Sarda Mines. So, the immediate thing is that they can lift this inventory. However the question still remains whether this inventory will be sold at market price or the agreement price which they had entered into earlier. I am still awaiting regarding that. It is a big thing, it will give additional supply. However what has happened is that private miners in Orissa have already reduced their rates. So, the benefit which would have accrued two years before has reduced over this period of time.Sonia: If the 9.5-10 million tonnes of inventory can be lifted what do you think the impact could be in terms of either revenues, anything monetary that you can give us which could eventually impact the earnings of the company?A: The inventory which was lying around would be not more than around Rs 600-700 and Rs 1000 after paying royalty. While NMDC which is selling at around Rs 1600, so say around Rs 1000 saving you can expect for JSPL per tonne. Rs 100 crore odd would be immediate benefit what I am looking at at this point of time.