Sesa Goa Ltd hits 52-week low; mining ban hurts

NEW DELHI: Shares in Sesa Goa Ltd hit 52-week low of Rs 195.30 on the Bombay Stock Exchange in early trade after the Supreme Court extended a ban on mining in two more districts of Karnataka.

The Central Empowered Committee (CEC) had found that iron ore miners resorted to illegal mining activity in Chitradurga and Tumkur districts of Karnataka resulting in environmental damage and loss of forest cover.

As per CEC, the level of illegal mining and the consequential environmental degradation in these two districts were similar to that of Bellary district.

Thus, based on the CEC’s report, the Supreme Court (SC) has imposed the ban to Tumkur and Chitradurga districts. These two district account for approximately 20% of Karnataka’s iron ore production.

“Sesa Goa Ltd operates an iron ore mine in Chitradurga district which would be shut down until further orders by SC. Our earlier estimate of production and sales volumes from Chitradurga mine for FY2012 was 5mn tonnes (21.8% of Sesa’s total production volumes for FY2012)”, said a report by Angel Broking.

“With mining ban in the region, we now prune our production and sales volume estimates for FY2012 and FY2013 as we expect no further production from Chitradurga mines. We lower our target price to Rs 253 from Rs 335, valuing the stock at 3.0x FY2013 EV/EBITDA and maintain ‘BUY’ rating on the stock”, added the report.

At 10:10 a.m., shares in the company were trading 1.3% lower at Rs 201 on BSE.