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The cup of woes for mining sector seems never ending as investor hammered the stocks of these companies following the Supreme Court order to ban mining operations at Tumkur and Chitradurga districts in Karnataka. Earlier, mining was banned in Bellary due to large scale illegal activities.
Almost all the mining and metal company stocks such as Coal India, Tata Steel, Hindalco, Sterlite, NMDC, Sesa Goa, JSW Steel, SAIL, Hindustan Zinc and Nalco were bogged down by heavy selling in the bearish market on Friday.
Sesa Goa, one of the largest iron ore exporters, has a mine in Chitradurga that produced about 2.3 million tonnes last fiscal, accounting for 13 per cent of the company's total production. The mine is expected to play a bigger role in the company's financial performance with production capacity being extended to 6 million tonnes per annum and further to 10 mtpa after receiving environment clearance from the ministry.
JSW Steel, which sources a major quantity of iron ore from Chitradurga and Tumkur, may also be impacted by the ban. Both the Chitradurga and Tumkur districts together produce about 9-10 mtpa iron ore.
JSW Steel has to now tap iron ore source from Chhattisgarh and Orissa at a higher logistics cost to meet its production target of 8.75 million tonnes for this fiscal.
The iron ore prices are expected to increase substantially with constrains in domestic supply, said an analyst. However, liquidation of 25 million tonnes of inventory in Karnataka will avert sharp spike in prices, he added.
MAINTAIN BALANCE
Delivering the judgement on Friday, the three-judge bench led by Mr Chief Justice S.H. Kapadia advised the mining companies to form an association and consult the Attorney General, Mr G E Vahanvati, and Amicus Curie Mr Shyam Divan, who are assisting the court to propose a scheme on how mining should be done in a scientific manner so that no further damage is done to environment. A fine balance between environment and economic development should be struck by the mining industry. The court was hearing a petition moved by a group of mining companies.
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