• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Our Bureau Kolkata, Sept. 17 Despite distribution of 1:1 bonus shares last month, Sesa Goa has been witnessing steep decline.

In the past one month, this merchant miner’s stock has dropped by over 36 per cent. However, weekly fall for the one-rupee stock, which finished on Wednesday at Rs 112.25, has been more severe at 30 per cent.

According to analysts, there has been a sharp fall in spot price of iron ore recently. According to Ms Vasundhara Karwa of Microsec, last week the spot price for ore in China dropped by $55 a tonne from $185 a tonne in July. “The ore shipment from Goa, which includes exports from Sesa Goa, significantly dropped last week to 33,000 tonnes compared to 2 million tonnes in the corresponding period last year, the reason being a substantial fall in import by China,” Ms Karwa said.

According to Ms Preeti Dubey of BNP Paribas, the Chinese imports of iron ore and concentrates have reduced by 12.7 per cent. She estimated that the fall in Indian iron ore export price to China has been more than 25 per cent.

Noting that there is a consensus negative momentum in the counter, BNP Paribas in a recent report said further softening of iron ore prices might not be ruled out. It said: “The Vedanta management adopted a policy of selling all incremental production in the spot market after assuming control of the company in April 2007. We believe that this opportunistic move of the management can backfire in a falling price scenario.”

Citi Investment also felt that fetching a better price for ores would be difficult for Sesa Goa in the near future.

The company mentioned in its annual report that the weakness in prices in China was because of stoppage of production by steel mills around Beijing because of Olympics, and was temporary.

According to analysts, though current appreciation in dollar against rupee is a positive for the company, there could be additional risk for the company’s profitability if export duty is raised further and royalty on ore mining is also increased.

BNP Paribas also expressed concern over Sesa Goa’s dwindling reserve base. “Though the company has recently announced that it is undertaking exploratory work in its existing mines, we believe that Sesa needs to get access to new mines to be able to expand its reserve base,” it said.

Sesa Goa is yet to get forest clearance permission from the Union Ministry of Mines on the mining leased area it obtained from Jharkhand in 2005. However, it is reportedly scouting for mining assets abroad too.

More Stories on : Stocks | Minerals

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line