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Indian Metal & Mining
SAIL's Chiria mine gets forest approval- 2% of PAT on
CSR again one of the conditions (last week POSCO
had a similar condition)
• Forest clearance given for Chiria mines: The MoEF in an order issued
today announced that it has granted forest clearance for 25% of the area
of SAIL’s Chiria mine (595 hectares), which encompasses renewal of
area already broken up and also new leases. The Minister has cited
multiple factors backing the approval, the chief ones being a) SAIL's
existing steel plants would need to source iron ore from the Chiria
mines in the future; b) the Chiria mine region is affected by left
wing extremism and has substantial tribal population, therefore,
CSR activities by the Indian metal & mining companies in these
resource-rich regions would be positive as it would lead to socioeconomic
development in the area; c) given the long lead times in
starting production, urgent approval was required. We believe this is
the first time that CSR activities in a mining region has been cited as a
potential counter-weight to the presence of left wing extremism and
hence approval being granted.
• Spending 2% of PAT on CSR is one of the conditions for approval,
similar to POSCO: The MoEF had given a conditional approval for
POSCO last week, which included (among several other conditions) a
condition to spend 2% of PAT on CSR activities. Similarly, SAIL's
clearance is also based on a condition, among 12 other conditions, that it
would have to spend 2% of net profit (no definition of whether it would
be of a specific plant or the company) on CSR activities in the region.
We had highlighted in our note on POSCO (‘MOEF clearance for
POSCO project: 2% PAT for CSR among 28 other conditions; A
precedent being set?’ published on 31 Jan 2011), that this could likely be
a precedent for other projects. Overall, we believe that spend on CSR
activities by Indian metal companies would lead to the development of
the resource-rich region.
• Role of Forest Advisory Committee (FAC): The minister in his
comments on the role of FAC highlighted that on two separate occasions
(SAIL’s Chiria mine and POSCO), he has granted approval even though
the FAC recommended rejection. The minister said that while FAC
would continue to focus on issues of forests and bio-diversity, the
minister would have to 'take a broader view'.
• Takeaways for Sterlite Industries and Coal India: While we do not
see any easy or near-term solution for Sterlite's associate company VAL
(alumina refinery and bauxite mines) given the complexity of the issues,
we believe Coal India could likely benefit if the current restrictions are
relaxed (primarily related to CEPI impacting production in existing
mines).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian Metal & Mining
SAIL's Chiria mine gets forest approval- 2% of PAT on
CSR again one of the conditions (last week POSCO
had a similar condition)
• Forest clearance given for Chiria mines: The MoEF in an order issued
today announced that it has granted forest clearance for 25% of the area
of SAIL’s Chiria mine (595 hectares), which encompasses renewal of
area already broken up and also new leases. The Minister has cited
multiple factors backing the approval, the chief ones being a) SAIL's
existing steel plants would need to source iron ore from the Chiria
mines in the future; b) the Chiria mine region is affected by left
wing extremism and has substantial tribal population, therefore,
CSR activities by the Indian metal & mining companies in these
resource-rich regions would be positive as it would lead to socioeconomic
development in the area; c) given the long lead times in
starting production, urgent approval was required. We believe this is
the first time that CSR activities in a mining region has been cited as a
potential counter-weight to the presence of left wing extremism and
hence approval being granted.
• Spending 2% of PAT on CSR is one of the conditions for approval,
similar to POSCO: The MoEF had given a conditional approval for
POSCO last week, which included (among several other conditions) a
condition to spend 2% of PAT on CSR activities. Similarly, SAIL's
clearance is also based on a condition, among 12 other conditions, that it
would have to spend 2% of net profit (no definition of whether it would
be of a specific plant or the company) on CSR activities in the region.
We had highlighted in our note on POSCO (‘MOEF clearance for
POSCO project: 2% PAT for CSR among 28 other conditions; A
precedent being set?’ published on 31 Jan 2011), that this could likely be
a precedent for other projects. Overall, we believe that spend on CSR
activities by Indian metal companies would lead to the development of
the resource-rich region.
• Role of Forest Advisory Committee (FAC): The minister in his
comments on the role of FAC highlighted that on two separate occasions
(SAIL’s Chiria mine and POSCO), he has granted approval even though
the FAC recommended rejection. The minister said that while FAC
would continue to focus on issues of forests and bio-diversity, the
minister would have to 'take a broader view'.
• Takeaways for Sterlite Industries and Coal India: While we do not
see any easy or near-term solution for Sterlite's associate company VAL
(alumina refinery and bauxite mines) given the complexity of the issues,
we believe Coal India could likely benefit if the current restrictions are
relaxed (primarily related to CEPI impacting production in existing
mines).
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