Jindal Steel Stock Falls On Order To Halt Sarda Mine Operations, But...
The Environment Ministry found the mine’s environment clearance to be invalid, Steel Mint reports.
Shares of Jindal Steel & Power Ltd. dropped after the Environment Ministry asked the company to immediately halt operations at its key Sarda mine in Odisha. Yet, analysts see a limited impact.
The ministry, according to a Steel Mint report, found the iron ore mine’s environment clearance to be invalid, and wants the miner to be penalised.
Reacting to the development, Jindal Steel’s stock slumped 8.5% on Tuesday, but soon pared some of the losses to trade 2.1% lower at Rs 170.6 apiece. That compares with a 0.9% drop in the NSE Nifty 50 Index.
The Supreme Court had in January allowed the steel mill to sell iron ore inventory of 11-12 million tonnes from the Sarda mine, clearing charges of illegal mining, if it pays royalty dues to the state. In August 2017, the apex court had directed that a 100% penalty be levied on steelmakers that have illegally extracted iron and manganese ore in Odisha since 2000-01. The penalty was applicable on the total value of illegal mining extracted by each company over the years. Jindal Steel has recently deposited Rs 930 crore as compensation for violating mining norms.
While confirming the Environment Ministry’s order, a Jindal Steel spokesperson said Sarda Mines Pvt. will appeal to continue its operations as the miner has necessary environment clearance but interpretation is made differently. Its operations also will not be affected as the company is shifting its iron ore stock. There is no time limit to transport. The company has received clearance from the government as per directives of the Supreme Court, the spokesperson said in an emailed response to BloombergQuint.
Analysts, too, aren’t too worried.
The ministry’s order doesn’t preclude Jindal Steel from transporting its existing inventory, according to Amit Dixit, assistant vice president (research) at Edelweiss Securities. Besides, company took very limited quantity from Sarda mine in the first half of the ongoing financial year, that too at market prices. The only impact, he said, would be of Rs 200 per tonne that the mill was saving from logistics cost.
Ritesh Shah, analyst at Investec, too, sees a very minimal impact on Jindal Steel for the next three quarters. But he said there will be no cost impact on the company, factoring in Sarda’s (existing) inventory and Tensa, Odisha mines.