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CNBC TV-18 reported a short while back that the Supreme Court has allowed iron ore exports to
resume from Karnataka from April 20. This will impact Sesa Goa positively and could add 3mt to
volumes in FY12F. We estimate incremental FY12F EBITDA of US$150mn with lifting of the ban.
CNBC TV-18 reported today that the Supreme Court has lifted the export ban on iron ore in
Karnataka effective from April 20.
Sesa Goa currently has 6mt capacity in Karnataka which has been impacted by the export
ban. The company has been selling some volumes in the domestic market for comparatively
lower realizations. Sales in 3QFY11 from the state was 0.7mt. We expect that the resumption
of exports will add 3mtpa of volumes and EBITDA of US$150mn. (15% of FY12F EBITDA).
We estimate impact on valuation at Rs43/share.
Inventory at the end of the December quarter in Karnataka was 2.3mt. Management had
earlier highlighted that these were ready for dispatch as soon as the ban was revoked.
The company also plans to expand capacity in Karnataka to 10mt. Currently Sesa has
environmental clearance only for 6mt capacity and management highlighted during the
3QFY11 earnings call that processes for environmental clearances were at an advanced
stage. The company expects to achieve 10mt volumes in Karnataka in FY13F.
The State Government of Karnataka had banned iron ore exports in July 2010 to curb illegal
mining in the state and miners including Sesa Goa had taken legal recourse. The Supreme
Court had earlier directed the government to take necessary steps to curb illegal mining in the
state and revoke the ban by 31 March 2011. We note that on 1 April, the state government
notified the Karnataka (Prevention of Illegal Mining, Transportation and Storage of Minerals)
Rules 2011.
We have a Buy rating on Sesa Goa with target price of Rs380.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CNBC TV-18 reported a short while back that the Supreme Court has allowed iron ore exports to
resume from Karnataka from April 20. This will impact Sesa Goa positively and could add 3mt to
volumes in FY12F. We estimate incremental FY12F EBITDA of US$150mn with lifting of the ban.
CNBC TV-18 reported today that the Supreme Court has lifted the export ban on iron ore in
Karnataka effective from April 20.
Sesa Goa currently has 6mt capacity in Karnataka which has been impacted by the export
ban. The company has been selling some volumes in the domestic market for comparatively
lower realizations. Sales in 3QFY11 from the state was 0.7mt. We expect that the resumption
of exports will add 3mtpa of volumes and EBITDA of US$150mn. (15% of FY12F EBITDA).
We estimate impact on valuation at Rs43/share.
Inventory at the end of the December quarter in Karnataka was 2.3mt. Management had
earlier highlighted that these were ready for dispatch as soon as the ban was revoked.
The company also plans to expand capacity in Karnataka to 10mt. Currently Sesa has
environmental clearance only for 6mt capacity and management highlighted during the
3QFY11 earnings call that processes for environmental clearances were at an advanced
stage. The company expects to achieve 10mt volumes in Karnataka in FY13F.
The State Government of Karnataka had banned iron ore exports in July 2010 to curb illegal
mining in the state and miners including Sesa Goa had taken legal recourse. The Supreme
Court had earlier directed the government to take necessary steps to curb illegal mining in the
state and revoke the ban by 31 March 2011. We note that on 1 April, the state government
notified the Karnataka (Prevention of Illegal Mining, Transportation and Storage of Minerals)
Rules 2011.
We have a Buy rating on Sesa Goa with target price of Rs380.
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