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MOEF grants final approval to POSCO; Very
interesting language with potential implications for
Indian metals/mining projects
• Landmark ruling? We think so, though could be project specific: The
MOEF in a very detailed release (link: http://moef.nic.in/downloads/publicinformation/
Posco-final-orders-02052011.pdf;) has granted final approval
to the POSCO steel project in Orissa regarding diversion of 1253 hectares
of forest land in favor of POSCO. Earlier in the year, the MOEF had given
clearance to POSCO, but withheld final forest clearance for the diversion of
forest land till the ‘receipt of certain categorical assurances from the State
Government’ was received. Recently the MOEF has given approvals (Chiria
iron ore mine) for mining /steel projects which till now were delayed. We
believe read through to VAL's bauxite mining project (currently back
in the Supreme Court) is difficult given that issues impacting both of
them are different.
• Interesting language in the Clearance order: We would highlight certain
sections of the order. The Minister highlighted that post receipt of the
Orissa state government’s replies to the forest issue, the Minister had 3
options –a) Seek further legal opinion on what the state government has
stated; b) institute an independent inquiry into the claims and counter
claims being made by the state government and the PPSS and c) Repose
trust in what the state government has so categorically asserted. The
Minister comments in the order that- ‘I have decided to follow the third
route’ and he further adds that – ‘Faith and trust in what the state
government says is an essential pillar of cooperative federalism which is
why I rejected the second option’. Given that Orissa is resource rich (iron
ore, bauxite and coal) many new projects in aluminum, steel, power and coal
mining have been planned, but very few have seen any progress.
• Expects revised MoU to avoid exports of raw material: On the MoU the
MOEF order comments that the expired MoU had provisions of export of
iron ore. The Minister has commented – ‘I would expect that the revised
MoU between the state and POSCO would be negotiated in such a manner
that exports of raw material are completely avoided’. In the earlier Jan31st
order (and subsequent for Chiria mines), the MOEF orders had called for a
2% of PAT as CSR spend as one of the conditions for environmental
clearance ( a condition which subsequently has been part of other mining
project clearances).
• Any flow through for materials demand for these clearances still some
time away: We do not see on the ground execution from any of the recent
projects (in the metals and mining sector) any time soon and thus benefits to
basic materials.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MOEF grants final approval to POSCO; Very
interesting language with potential implications for
Indian metals/mining projects
• Landmark ruling? We think so, though could be project specific: The
MOEF in a very detailed release (link: http://moef.nic.in/downloads/publicinformation/
Posco-final-orders-02052011.pdf;) has granted final approval
to the POSCO steel project in Orissa regarding diversion of 1253 hectares
of forest land in favor of POSCO. Earlier in the year, the MOEF had given
clearance to POSCO, but withheld final forest clearance for the diversion of
forest land till the ‘receipt of certain categorical assurances from the State
Government’ was received. Recently the MOEF has given approvals (Chiria
iron ore mine) for mining /steel projects which till now were delayed. We
believe read through to VAL's bauxite mining project (currently back
in the Supreme Court) is difficult given that issues impacting both of
them are different.
• Interesting language in the Clearance order: We would highlight certain
sections of the order. The Minister highlighted that post receipt of the
Orissa state government’s replies to the forest issue, the Minister had 3
options –a) Seek further legal opinion on what the state government has
stated; b) institute an independent inquiry into the claims and counter
claims being made by the state government and the PPSS and c) Repose
trust in what the state government has so categorically asserted. The
Minister comments in the order that- ‘I have decided to follow the third
route’ and he further adds that – ‘Faith and trust in what the state
government says is an essential pillar of cooperative federalism which is
why I rejected the second option’. Given that Orissa is resource rich (iron
ore, bauxite and coal) many new projects in aluminum, steel, power and coal
mining have been planned, but very few have seen any progress.
• Expects revised MoU to avoid exports of raw material: On the MoU the
MOEF order comments that the expired MoU had provisions of export of
iron ore. The Minister has commented – ‘I would expect that the revised
MoU between the state and POSCO would be negotiated in such a manner
that exports of raw material are completely avoided’. In the earlier Jan31st
order (and subsequent for Chiria mines), the MOEF orders had called for a
2% of PAT as CSR spend as one of the conditions for environmental
clearance ( a condition which subsequently has been part of other mining
project clearances).
• Any flow through for materials demand for these clearances still some
time away: We do not see on the ground execution from any of the recent
projects (in the metals and mining sector) any time soon and thus benefits to
basic materials.
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