Sesa Goa confident of mining 2.29 mn tonne ore by FY14 end

After two-year long mining ban in Karnataka, Sesa Goa is all geared up to resume operations at its Narrain mine in August following Supreme Court clearance in April.

The Supreme Court has restricted the ore production from the southern state at 30 million tonne per annum and 2.29 million tonne in case of Narrain Mine, which has a capacity of six million tonne.
The Goa-based company is confident to produce 2.29 million tonne ore by current financial year end. “I feel that by August we should get the clearances. If we start in August, there are seven months left, so in seven months reaching 2.29 million tonne should not be an issue for us,” PK Mukherjee, MD of Sesa Goa told CNBC-TV18.
The company’s fixed cost currently stands Rs 25 crore, excluding the interest cost.  Mukherjee is hopeful that once the mining starts, cash flows will improve which may reduce borrowing needs and interest cost. 
Once largest iron ore exporters from India has nearly nil dispatch of iron ore as mining has literally stopped Karnataka and Goa after mining ban by Supreme Court.
Mukherjee alleged that since nine months no effective date of hearing has been announced for Goa mining ban. The company’s high profiled merger with Sterlite Industries India is also delayed a little as one of the minority shareholders had filed litigation against the merger. Mukherjee expects order on this litigation to arrive in second week of August. On Monday, Vedanta Group company Sesa Goa  posted a 57 per cent decline in consolidated net profit at Rs 414.30 crore for the quarter ended June. The company managed to remain profitable in the quarter largely on account of Rs 625.45 crore profit coming from its associate firm and oil major Cairn India . Sesa Goa holds 20 per cent stake in the oil major.
Sesa Goa's net income from operations declined by over 79 per cent to Rs 360.66 crore from the year ago quarter. Below is the verbatim transcript of the interview Q: Although the Supreme Court (SC) has lifted the ban in Karnataka in the month of April, when do you expect to get final statutory clearances in order to restart mining?
A: We are expecting it within next few days. The point is that in last three months, the process has progressed, but not as the way we wanted.  But we are expecting that very soon we will be getting this forest clearance now and by this quarter definitely we will be able to start production. Q: If you do start production by Q2 of FY14 and once the final statutory clearances come in, what will be the reduced capacity under which the mine will operate?
A: Our capacity granted by SC provision only has ----2.29 million tonne per annum which we will be able to do before the current financial year ends. Q: Can you give me a little more precise numbers, do you expect to resume work in September or in October and therefore what might be the amount of iron ore that you maybe able to mine in the rest of FY14?
A: I am always an optimist. So I feel that by August we should get the clearances. If we start in August there are seven months, so in seven months reaching 2.29 million tonne should not be an issue for us. Q: Can you give me an idea of what is exactly the fixed costs that you have to bear irrespective of whether you mine or not, the analysts are putting it at Rs 30 crore a month, is that a fair estimate?
A: Yes, other than financial charges it is to around less than Rs 25 crore. We have continuously cut down the fixed cost so right now the figure is a little less than Rs 25 crore, but Rs 25 crore is a right number for the calculation purpose and this is excluding the financing cost. Q: Is there any chance therefore that as your mining resumes, for the rest of the year your interest cost might start dwindling because they have gone up substantially?
A: Yes, naturally once this cash flow starts coming in, our rate of increase of the borrowings will come down. So we are looking forward to good days in terms of numbers as well as the cash positions.     Q: What about Goa, do you have any clarity on when the Goa mining ban will get lifted, when is the next Supreme Court (SC) hearing?
A: Unfortunately we don’t have any clarity on that as to the SC hearing date itself. You must be aware that since last nine months no effective hearing date we have got. We expect to get the hearing date very soon and once the hearing starts, we believe that all the authorities whether at the center or the state, are quite seized of the situation.  Not only as Goa state economy but also the central economy including the impact of Goa mining ban on exports and correspondingly impact of it on the rupee. So I believe that once the hearing starts, it will be resolved little faster that what many of the people are guessing. Q: On the merger process of the Sesa-Sterlite, I understand that you got the last leg of approval on July 25 but the order is still awaited on one of the Sesa shareholder’s appeal against this merger, any kind of clarity on when the merger process will be completed in terms of a timeline?
A: The Goa bench of the Bombay High Court (HC) has got faster in the order of approving the merger. That was a single judge bench. The other side that is Madras High Court’s order has been received – it has been pronounced, the written order we are yet to receive. However, against the first order of Goa bench of the Bombay High Court, the one single shareholder has gone to the division bench and appealed against that, the hearings against that is over and the order is reserved. We believe that the order will come very soon definitely in first week of August. That is what we expect.
With that the court process would be over.