Billionaire Anil Agarwal’s Vedanta Group stands to lose less than 2 percent of its consolidated revenue after the Supreme Court cancelled all mining leases in Goa.
India will lose nearly Rs 4,000 crore ($600 million) of export value with this ban given that the low-quality iron ore is shipped at about $30 a tonne, said PK Mukherjee, former managing director of erstwhile Sesa Goa, now part of Vedanta Ltd. The ban is not expected to impact the margins of miners since the current export prices are hardly profitable, he said.
The total banned capacity in Goa stands at 20 million tonnes a year, of which Vedanta operates 5.5 MTPA. Going by Mukherjee’s math, the miner stands to lose about $165 million, or about Rs 1,000 crore, in revenue. That’s about 1.4 percent of its Rs 71,721 crore turnover in the last financial year.
Shares of Vedanta ended 1.96 percent lower today compared with a 0.17 percent decline in the benchmark S&P BSE Metal Index.
Besides Goa, the company also has 2.3 MTPA iron ore capacity in Karnataka. It earned about a quarter of its Rs 1,000 crore operating profit from iron ore in the quarter ended December.
The Agarwal-led miner was also allocated 3 million tonnes additional capacity in Goa recently that it planned to use to produce higher quality ore. There is no clarity on the fate of this licence yet.
Vedanta declined to comment saying it would first like to study the Supreme Court judgement.
The court cancelled 88 iron ore leases and banned mining after March 15. The ruling came on a plea filed by NGO Goa Foundation that stated the leases were illegal. The new licenses will require fresh environment clearance.
The case dates back to 2012 when the Supreme Court quashed all mining leases in Goa since their 50-year term lapsed in 2007. In August 2015, licences were renewed and given extension till 2020 under the “deemed” provision.
No Impact Likely On Domestic Prices
The ban is not expected to increase the domestic iron ore prices since there are no takers for low-quality ore in the Indian market, Mukherjee said. Besides, high-quality iron ore is available for steelmakers at much cheaper prices in Odisha, Karnataka and Chhattisgarh.
The Goa ban comes after the Odisha government suspended operations in seven mines that failed to pay penalties by December 31 for illegal extraction of iron and manganese ores between 2000 and 2011.