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SESA GOA: Key takeaways
The company reiterated its FY2013 exit iron ore capacity of 40mn tons comprising of
30MT in Goa and 10MT in Karnataka. Approvals for Karnataka expansion (current
capacity of 6MT and FY2011E shipments of 3.4MT) to 10MT is at an advanced stage and
will likely come through by FY2012. The time frame for Goa capacity expansion is
uncertain and contingent on announcement of new mineral policy by the Goa Government.
The company has started making investments in logistics infrastructure to meet its
capacity expansion targets. Company has invested in private road corridor, barges and
transhippers to facilitate movement of iron ore to the port of export.
The cost of production has increased by ~US$10/ton (excluding export duties). The cost
increase comprise of US$4/ ton for demurrage, US$4/ton for royalty and US$2/ton for
other costs. Increase in cost attributed to demurrage is non-recurring in nature; note that
heavy monsoons increased the turnaround time of the ships at the port in this year.
The company expects significant increase in reserves and resources for at least the next
two years based on the current iron ore cut off grade of 50% iron ore content.
The government in Karnataka recently increased the freight rates by Rs550/ton – this
takes the rail transportation cost to Rs2,000/ton from Karnataka. The company expects
the total cost of iron ore to increase to US$80/ ton on FOB basis from Karnataka mines
versus an average of US$37/ton for 9MFY10 and US$61/ton in 9MFY11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SESA GOA: Key takeaways
The company reiterated its FY2013 exit iron ore capacity of 40mn tons comprising of
30MT in Goa and 10MT in Karnataka. Approvals for Karnataka expansion (current
capacity of 6MT and FY2011E shipments of 3.4MT) to 10MT is at an advanced stage and
will likely come through by FY2012. The time frame for Goa capacity expansion is
uncertain and contingent on announcement of new mineral policy by the Goa Government.
The company has started making investments in logistics infrastructure to meet its
capacity expansion targets. Company has invested in private road corridor, barges and
transhippers to facilitate movement of iron ore to the port of export.
The cost of production has increased by ~US$10/ton (excluding export duties). The cost
increase comprise of US$4/ ton for demurrage, US$4/ton for royalty and US$2/ton for
other costs. Increase in cost attributed to demurrage is non-recurring in nature; note that
heavy monsoons increased the turnaround time of the ships at the port in this year.
The company expects significant increase in reserves and resources for at least the next
two years based on the current iron ore cut off grade of 50% iron ore content.
The government in Karnataka recently increased the freight rates by Rs550/ton – this
takes the rail transportation cost to Rs2,000/ton from Karnataka. The company expects
the total cost of iron ore to increase to US$80/ ton on FOB basis from Karnataka mines
versus an average of US$37/ton for 9MFY10 and US$61/ton in 9MFY11.
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