Mining ban extended in Karnataka
Supreme Court (SC) extends mining ban to Tumkur and Chitradurga districts:
Central Empowered Committee (CEC) had found that iron ore miners
resorted to illegal mining activity in Chitradurga and Tumkur districts of
Karnataka resulting in environmental damage and loss of forest cover. As per
CEC, the level of illegal mining and the consequential environmental
degradation in these two districts were similar to that in Bellary district. Thus,
based on the CEC’s suggestions, the SC has extended the ban to Tumkur and
Chitradurga districts. These two district account for approximately 20% of
Karnataka’s iron ore production. Earlier (on July 29, 2011), the SC had
ordered a blanket ban on mining in Bellary district of Karnataka (accounts for
80% of Karnataka’s iron ore production).
Severe steel production cuts underway in the region
With extension of mining ban in Chitradurga and Tumkur districts, iron ore
production will decline drastically in the state which will be followed up
by severe cuts in steel production in the region. Some of the plants in the
region have been already shut down while several plants are running at
a lower utilisation levels on the back of shortage of iron ore to feed their furnaces.
Steel industry in the region requires approx. 2.9mn tonnes of iron ore per month.
Currently iron ore from Karnataka is used to feed plants of companies that
include JSW Steel, Kalyani Steels, Mukand Steels, Kirloskar Ferrous, MSPL,
BMM Ispat etc.
Further, several sponge iron manufacturers in Tamil Nadu and Goa also
source iron ore from Karnataka. On the supply front, NMDC’s Bellary mine is
the only major mine operating in the region; however, it is still to achieve its
targeted run-rate of 1mn tonne per month from its Bellary mines.
Auctions of piled-up inventory may provide some relief: The current iron ore
inventory at Karnataka’s mines is estimated at 25mn tonnes, which includes
~11mn tonnes of high-grade iron ore. As per JSW Steel, the SC is expected
to provide guidelines on auction of this iron ore inventory on September 02,
2011. SC has indicated that it will ensure that the required amount of ore is
released so that the steel industry does not suffer. Further, SC will look into
rehabilitation and forestation package and henceforth, permit regulated
mining in the region. This may take several months.
Sesa Goa’s Chitradurga mine to be shut: Sesa Goa operates an iron ore mine
in Chitradurga district which would be shut down until further update by SC.
Our earlier estimate of production and sales volumes from Chitradurga mine
for FY2012 was 5mn tonnes (21.8% of Sesa’s total production volumes for
FY2012). With mining ban in the region, now prune production and
sales volume estimates for FY2012 and FY2013. It is expected no
production from Chitradurga mines. Except a lower our target price to `253
(`335), valuing the stock at 3.0x FY2013 EV/EBITDA
The Question now hang on the fire, to the Extent to Which and Whether the companies
to Punishment. Shri Rao, JSW Steel, in his Press Conference had, Disassociated from t
the Mafia, But the Lok Ayuktta Report had mentioned there name. Market is expecting
Some Fine to be imposed on some of the Biggies and whether is takes the proportion of
the ' 2G ' Scam or worse..?
Supreme Court (SC) extends mining ban to Tumkur and Chitradurga districts:
Central Empowered Committee (CEC) had found that iron ore miners
resorted to illegal mining activity in Chitradurga and Tumkur districts of
Karnataka resulting in environmental damage and loss of forest cover. As per
CEC, the level of illegal mining and the consequential environmental
degradation in these two districts were similar to that in Bellary district. Thus,
based on the CEC’s suggestions, the SC has extended the ban to Tumkur and
Chitradurga districts. These two district account for approximately 20% of
Karnataka’s iron ore production. Earlier (on July 29, 2011), the SC had
ordered a blanket ban on mining in Bellary district of Karnataka (accounts for
80% of Karnataka’s iron ore production).
Severe steel production cuts underway in the region
With extension of mining ban in Chitradurga and Tumkur districts, iron ore
production will decline drastically in the state which will be followed up
by severe cuts in steel production in the region. Some of the plants in the
region have been already shut down while several plants are running at
a lower utilisation levels on the back of shortage of iron ore to feed their furnaces.
Steel industry in the region requires approx. 2.9mn tonnes of iron ore per month.
Currently iron ore from Karnataka is used to feed plants of companies that
include JSW Steel, Kalyani Steels, Mukand Steels, Kirloskar Ferrous, MSPL,
BMM Ispat etc.
Further, several sponge iron manufacturers in Tamil Nadu and Goa also
source iron ore from Karnataka. On the supply front, NMDC’s Bellary mine is
the only major mine operating in the region; however, it is still to achieve its
targeted run-rate of 1mn tonne per month from its Bellary mines.
Auctions of piled-up inventory may provide some relief: The current iron ore
inventory at Karnataka’s mines is estimated at 25mn tonnes, which includes
~11mn tonnes of high-grade iron ore. As per JSW Steel, the SC is expected
to provide guidelines on auction of this iron ore inventory on September 02,
2011. SC has indicated that it will ensure that the required amount of ore is
released so that the steel industry does not suffer. Further, SC will look into
rehabilitation and forestation package and henceforth, permit regulated
mining in the region. This may take several months.
Sesa Goa’s Chitradurga mine to be shut: Sesa Goa operates an iron ore mine
in Chitradurga district which would be shut down until further update by SC.
Our earlier estimate of production and sales volumes from Chitradurga mine
for FY2012 was 5mn tonnes (21.8% of Sesa’s total production volumes for
FY2012). With mining ban in the region, now prune production and
sales volume estimates for FY2012 and FY2013. It is expected no
production from Chitradurga mines. Except a lower our target price to `253
(`335), valuing the stock at 3.0x FY2013 EV/EBITDA
The Question now hang on the fire, to the Extent to Which and Whether the companies
to Punishment. Shri Rao, JSW Steel, in his Press Conference had, Disassociated from t
the Mafia, But the Lok Ayuktta Report had mentioned there name. Market is expecting
Some Fine to be imposed on some of the Biggies and whether is takes the proportion of
the ' 2G ' Scam or worse..?
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