Iron ore miner Sesa Goa was hit by mining ban in Karnataka and Goa throughout FY13. Though the firm closed the year gone by with a 93 percent dent in net profit to Rs 120.77 crore and 66 percent drop in sales to Rs 2414.29 crore, it is hopeful of performing better in FY14 after the Supreme Court (SC) recently lifted the ban in Karnataka.
The impact of the mining suspension could be gauged by the fact that the company made only Rs 1313 crore, down 77 percent year-on-year.
"Sesa Goa is awaiting statutory clearances, including forest clearance that expired in October 2012 and will resume mining in Karnataka," PK Mukherjee, managing director, Sesa Goa told CNBC-TV18 in an exclusive interview. Read This: SC verdict will not give major relief to Sesa Goa: Centrum
He further said, the company will see iron ore sales from Karnataka plant by September quarter of FY14. Below is the edited transcript of his interview to CNBC-TV18.
Q: In your result you mentioned a goodwill increase of Rs 250 crore on year-on-year basis. Can you explain how that was derived?
A: We have purchased additional stake in Western Cluster Limited, Liberia (WCL) so that is reflected plus there are some exchange gains during this quarter so we had to reinstate as per the accounting standards as a closing exchange rate.
Q: When will the first shipment come from WCL?
A: The first shipment will happen by the end of this FY14.
Q: On the goodwill what the analysts want to know is whether the increase in goodwill in any way can be linked to the stamp duty in Goa for renewal of mining lease?
A: No.
Q: You got the Supreme Court permit to start mining in category B mines but you still require forest clearance as well as the pollution control board’s approval. When will that happen and how soon before actual mining can begin?
A: So far the forest clearance from the ministry of environment forest level is concerned, that will happen very soon because it is more of a technical clearance. The whole forest clearance was already there with us before we stopped production based on the Supreme Court order.
All the papers have moved from the state government, that way we are quite advance and we are expecting the Forest Advisory Committee to sit and clear our case because no more money has to be paid or no more compliance is required.
Q: Some people on the Street believe it will take six months. Do you think it will take long or it will be done in one-two months?
A: I do not want to go into the debate on the Street on this guess work.
Q: For this quarter we have only a couple of months left. Should we expect that when you report your Q2 numbers we should be seeing iron ore mine from Karnataka?
A: Correct.
Q: We have now seen the process in Karnataka. What are you estimating by way of the time that might take for you to restart mining in Goa?
A: Unfortunately, we can only pray and plead in front of the court to start hearing which has not yet happened since last seven months effectively. The process is on and we cannot guess when the hearing will start. New forest bench has been reconstituted and we expect couple of hearings should happen before the court goes for summer vacation.
Q: So you expect that you will continue to increase the amount of pig iron that you produce through imported ores and ores from other sources? Should we expect that in Q1 itself as well as in Q2 we should see this number increase the amount you earn from pig iron?
A: No, today the pig iron business is facing a huge headwind in the form of subdued pricing of the pig iron. Second, it is further complimented by the high price of iron ore because of non availability from Goa and very scanty quantity available from Karnataka.
But till this stage while import or iron ore is on radar but definitely at the moment economy wise import of iron ore doesn’t make sense for our business. So that is why we are running the business based on the availability of iron ore from Karnataka as well as whatever quantities of iron ore we had in our pig iron plant.
Q: Your pig iron business this time has reported an operational loss. So because of the headwinds that the business is facing do you expect the operational loss to continue?
A: Yes, we have already booked in substantial quantity of export order so this export order will be fulfilled or exported during this current quarter.
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