Vedanta Resources believes that the worst is over for the iron ore industry and is upbeat about the future of its operations in the Indian state of Goa. Since the Supreme Court imposed mining ban was lifted earlier this year, the company has been ramping up production from its Goa operations.
The government imposed a 20 million tonne annual iron ore mining limit for Goa following the lifting of the ban, with the highest share of 5.5 million tonnes allocated to Vedanta. Of this, 2.2 million tonnes had been exported by June 30 with the remainder of the allocation to be exported in the current financial year.
The company is seeking a relaxation of the production cap so that economies of scale can be achieved, making it more competitive. The Expert Committee appointed by the Supreme Court has also recommended raising Goa’s cap to 37 million tonnes.
Vedanta mines low grade iron ore with iron content below 58% from the Codli and Sonshi mines in Goa, and also has a met coke and pig iron plant as well as a captive power plant in the state.
During the June quarter Vedanta produced 2.4 million tonnes of the ore and sold 2.1 million tonnes, an increase from the March quarter production of 1.9 million tonnes. Monthly production is being maintained at 800,000 tonnes. The June quarter figure represented 40% of allocated annual capacity with the financial year running from April 1 to March 31.
Pig iron production was 7% higher year-on-year at 181,000 tonnes due to higher available capacity. Quarterly production was lower due to a maintenance shutdown for re-alignment at one of the blast furnaces.
In Karnataka state, Vedanta produced 800,000 tonnes of iron ore in the June quarter and sold 500,000 tonnes. The company’s annual allocation for Karnataka is 2.3 million tonnes.
In the company’s quarterly report, CEO Tom Albanese said, “We have made good progress on the ramp up of capacities at our aluminium, power and iron ore businesses. These would be significant contributors to earnings as the year progresses.
“We are focused on generating stronger free cash flow and de-levering the balance sheet, in line with our strategic priorities. Another of these priorities, the simplification of the group structure, is also on track following the recent announcement of the revised and final terms for the Vedanta Ltd-Cairn India merger.”