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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily16042012.pdf
Metals & Mining: A step closer to restart of mining in Karnataka, moderate
positive for JSW
` SC provides "in-principle" approval to restart mining in Category 'A' mines
` Implications for companies: Modest positive for JSW Steel, negative for Sesa
Goa
A step closer to restart of mining in Karnataka, moderate positive for JSW. The
Indian Supreme Court has accepted CEC recommendations on mining in Karnataka.
Iron-ore production may restart for mines classified in category ‘A’ over 2-3 months
while sale will continue through e-auctions. Category ‘A’ mines restart may not be
sufficient to meet requirements of all steel mills, which means iron ore pricing will
continue to be at elevated levels. The SC decision is moderately positive for JSW as it
offers production visibility; negative for Sesa as it will take time to restart its mines.
SC provides “in-principle” approval to restart mining in Category ‘A’ mines
The Supreme Court has accepted the recommendations of the CEC and has accordingly given “inprinciple’ approval to restart mining in Category ‘A’ mines. The key highlights are as follows:
` Mining companies with fewer violations will be taken up for Reclamation & Rehabilitation (R&R)
first. The CEC had previously classified 166 mining leases in the State into three broad
categories. Category ‘A’ mines are those in which illegal activities are absent/negligible.
Category ‘B’ mines are those with a certain level of illegal activity and Category ‘C’ are those
that were found to have indulged in illegal mining activities in a big way.
` It may take at least tow months for mining to restart in Category ‘A’ mines. The SC has not
given a view on the restart of Category ‘B’ mines. No details are available about category-wise
production of mines though we would not be surprised if the number is 10-12 mn tonnes
(excluding operational mines of NMDC) for Category ‘A’ mines.
` The SC has directed a panel to formulate a concrete framework in a week for mobilization of
machinery for mining. The SC has accepted the recommendations of the CEC to cap mining
with a production ceiling of 25 mn tonnes and 5 mn tonnes for Bellary and Chitradurga/Tumkur,
respectively.
` The SC has directed the R&R plan to start immediately under the supervision of the CEC and
mining resumption would only be allowed once the R&R works, undertaken by respective
miners, are complete and approved by the certified authority.
` Sale of iron ore would continue through e-auctions and 10% of the sale price along with
royalty and other applicable taxes will be deposited with the monitoring committee.
` Iron ore would be used primarily to meet domestic steel-mill requirements. Exports are
permissible only for ore that domestic steel mills are not willing to buy. Miners have the option
to export if the steel mills offer a price that is lower than average realized prices for the relevant
grades of fines/lumps during the sale of inventory.
Implications for companies: Modest positive for JSW Steel, negative for Sesa Goa
JSW has only ~1.5 months of iron ore inventory to run its plant at 60-65% capacity utilization.
Restart of mining will provide visibility of production for the rest of FY2013E. Nonetheless, our
forecast of steel production for FY2013E will be at risk due to likely delays in restart of mining in
Karnataka versus our estimate. JSW’s iron-ore mine is a 40:60 JV with MML, classified in the
Category ‘A’ list of mines. Iron ore from this mine has to be sold through e-auctions, the benefit of
which will flow to the JV and reflect in consolidated operations. We maintain our negative stance
on JSW due to expensive valuations and a domestic market slowdown.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily16042012.pdf
Metals & Mining: A step closer to restart of mining in Karnataka, moderate
positive for JSW
` SC provides "in-principle" approval to restart mining in Category 'A' mines
` Implications for companies: Modest positive for JSW Steel, negative for Sesa
Goa
A step closer to restart of mining in Karnataka, moderate positive for JSW. The
Indian Supreme Court has accepted CEC recommendations on mining in Karnataka.
Iron-ore production may restart for mines classified in category ‘A’ over 2-3 months
while sale will continue through e-auctions. Category ‘A’ mines restart may not be
sufficient to meet requirements of all steel mills, which means iron ore pricing will
continue to be at elevated levels. The SC decision is moderately positive for JSW as it
offers production visibility; negative for Sesa as it will take time to restart its mines.
SC provides “in-principle” approval to restart mining in Category ‘A’ mines
The Supreme Court has accepted the recommendations of the CEC and has accordingly given “inprinciple’ approval to restart mining in Category ‘A’ mines. The key highlights are as follows:
` Mining companies with fewer violations will be taken up for Reclamation & Rehabilitation (R&R)
first. The CEC had previously classified 166 mining leases in the State into three broad
categories. Category ‘A’ mines are those in which illegal activities are absent/negligible.
Category ‘B’ mines are those with a certain level of illegal activity and Category ‘C’ are those
that were found to have indulged in illegal mining activities in a big way.
` It may take at least tow months for mining to restart in Category ‘A’ mines. The SC has not
given a view on the restart of Category ‘B’ mines. No details are available about category-wise
production of mines though we would not be surprised if the number is 10-12 mn tonnes
(excluding operational mines of NMDC) for Category ‘A’ mines.
` The SC has directed a panel to formulate a concrete framework in a week for mobilization of
machinery for mining. The SC has accepted the recommendations of the CEC to cap mining
with a production ceiling of 25 mn tonnes and 5 mn tonnes for Bellary and Chitradurga/Tumkur,
respectively.
` The SC has directed the R&R plan to start immediately under the supervision of the CEC and
mining resumption would only be allowed once the R&R works, undertaken by respective
miners, are complete and approved by the certified authority.
` Sale of iron ore would continue through e-auctions and 10% of the sale price along with
royalty and other applicable taxes will be deposited with the monitoring committee.
` Iron ore would be used primarily to meet domestic steel-mill requirements. Exports are
permissible only for ore that domestic steel mills are not willing to buy. Miners have the option
to export if the steel mills offer a price that is lower than average realized prices for the relevant
grades of fines/lumps during the sale of inventory.
Implications for companies: Modest positive for JSW Steel, negative for Sesa Goa
JSW has only ~1.5 months of iron ore inventory to run its plant at 60-65% capacity utilization.
Restart of mining will provide visibility of production for the rest of FY2013E. Nonetheless, our
forecast of steel production for FY2013E will be at risk due to likely delays in restart of mining in
Karnataka versus our estimate. JSW’s iron-ore mine is a 40:60 JV with MML, classified in the
Category ‘A’ list of mines. Iron ore from this mine has to be sold through e-auctions, the benefit of
which will flow to the JV and reflect in consolidated operations. We maintain our negative stance
on JSW due to expensive valuations and a domestic market slowdown.
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