Interview: Goa sees iron ore mining resuming by December

NEW DELHI Mon May 13, 2013 4:01pm IST

A labourer works in an iron factory on the outskirts of Hyderabad May 13, 2010. REUTERS/Krishnendu Halder/Files

A labourer works in an iron factory on the outskirts of Hyderabad May 13, 2010.

Credit: Reuters/Krishnendu Halder/Files

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NEW DELHI (Reuters) - Goa expects court approval to resume by year-end the production and export of iron ore from mines with a capacity of about 40 million tonnes as it has taken steps to rectify problems that led to a mining ban eight months ago, a state bureaucrat said.

Allowing Goa, India's No.1 iron ore exporting state, to resume overseas shipments, will boost available supplies to top market China and further pressure spot prices already reeling from the mainland's slower steel demand growth.

"We've placed all the regulatory measures we have undertaken in front of the Supreme Court so that we can resume mining operations and exports under the strict supervision of the mines department," said Prasanna Acharya, Goa's mines director.

Goa, which exports about 70 percent of India's total overseas shipments of the steelmaking component, suspended all mining operations in September last year after a report by the government panel found several instances of violations such as firms mining without licences or outside the lease area.

Soon after, the environment and forest ministry suspended clearances for all the 80 mines in operation in the state. The suspension was upheld by the Supreme Court, which also banned the transportation of iron ore from Goa.

"The best case scenario is resumption of mining, partly or otherwise, in November/December," Acharya told Reuters.

He heads Goa's Directorate of Mines and Geology, which regulates the grant of mineral licenses and is responsible for enforcing rules pertaining to prevention of illegal mining, transportation and storage.

Acharya expects up to 60 mines to be able to reopen without much difficulty as they are away from forests and had committed little or no irregularities.

ALTERNATIVE SUPPLIERS

Goa exports 100 percent of its iron ore output. Most of its iron ore goes to China, but the state has not been able to export any ore over the past eight months and there is a possibility that China might line up alternative suppliers.

"Of course they will look at alternatives," said Glenn Kalavampara, secretary of Goa Mineral Ore Exporters' Association, whose members include Vedanta Resources' (VED.L) unit Sesa Goa (SESA.NS), India's largest private sector iron ore producer and exporter.

"Indonesia is opening up now, I am told Malaysia is also looking at it, Australia and Brazil have ramped up their capacities."

Iron ore producers in Goa have requested the top court to let them export some 11 million tonnes of low-grade ore, worth more than $800 million, that have already been mined and are waiting to be exported.

India produced about 207 million tonnes of iron ore in the year ending March 31, 2011, exporting nearly half of that. Output fell to about 167 million tonnes two years later, largely because of the mining ban in Goa and also in southern Karnataka state, India's second-biggest iron ore producer.

India's top court last month cancelled some mining leases in Karnataka and allowed the reopening of some others subject to conditions.

At below $130 a tonne, iron ore is trading near its lowest level since mid-December and could face further downward pressure as global miners unload more supply in the second half of 2013.

(Additional reporting by Manolo Serapio Jr. in SINGAPORE; Editing by Muralikumar Anantharaman)

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