Shares of mining major Sesa Sterlite zoomed above ₹300 in the morning after reports indicated that over 27 new mining leases are likely to be granted by the Goa government to iron-ore miners within the next two months. But this will only be mild relief for the company that is grappling with regulatory clearances and environment-related issues in its mining operations across the country and outside.

There has been a ban on iron ore mining in Goa since October 2012. The ban has impacted Sesa's earnings and the company was considering cost-cutting by reducing its labour force. The State Government’s recent statement that it intends to resolve mining-related issues by the year end should be positive for Sesa's revenue and margin.

Sesa's iron ore mining operations in Karnataka were also hit by a ban imposed in July 2011. This was only partially lifted in December 2013, with the Supreme Court granting permission to mine up to 40 per cent capacity.

Besides iron, its aluminium segment has also been witnessing issues. Sesa's refinery in Odisha has been closed since December 2012 after it was denied permission to mine locally. Since July 2013 the company has been sourcing bauxite ore from other local miners and had increased its capacity utilisation to above 70 per cent by December 2013. The company recently received approval from villagers to expand Vedanta Aluminium's refinery capacity in Lanjigarh in Odisha from 1 mt to 6 mt. The aluminium segment could do relatively better with higher output capacity, cheaper ore sourced locally, and improved global aluminium prices.

The company's copper smelting plant in Tuticorin is also mired in environmental concerns. Sterlite's smelter was closed between April-August 2013. Although it is currently running, the company's plan to double smelter capacity to 8 lakh tonnes in 2014-15 might be stalled due to opposition from the local population.

Sesa's mining woes are not just limited to India. Operations in Liberia, originally planned for December 2013, have slipped due to delays faced in obtaining clearances for constructing a railroad for iron-ore transport.

​

Related Topics