AFTER a shutdown of more than three years Vedanta Resources subsidiary Sesa Goa recently received necessary government approvals to resume iron ore mining in the state of Goa. The company was likely to recommence operations at its biggest mine at Codli from August 10.

Vedanta Resources CEO Tom Albanese.

It received relevant consent, licence and approvals to commence mining operations for some of its leases and was the first company to restart iron ore mining in the state.

Vedanta said in a statement it had been granted approval for total extraction of 5.5 million tonnes, of which Codli has 3.1 million tonnes. “To date, five plans and schemes for company’s mines have been cleared by the Indian Bureau of Mines and we are awaiting clearance for further 15 plans. Over the balance of the monsoon period, we anticipate receiving these approvals and expect a full-scale resumption, post monsoon.”

Despite the restart, the company is likely to find it tough to scale-up operations as low iron ore prices, lower demand and loss of market to Australian miners are expected to be major impediments to run operations profitably in Goa, where iron ore is generally of lower quality.

The Goa iron ore cannot be used in Indian steel mills and is fully exported. The ores also claim less realization on each tonne of iron ore sold due to the quality. In the last three years of a Supreme Court-imposed ban in Goa, most miners lost their export market to Australian miners and this situation has worsened due to a fall of more than 50% in the cost of iron ore.

Vedanta’s CEO Tom Albanese acknowledged these issues and said the company would have to work really hard to regain market share and maintain margins once operations started in Goa.

Vedanta is producing from its mines in Karnataka which contributed only 10% to its overall iron ore production in 2012, when mining was banned. In 2014-15, Vedanta produced 600,000 tonnes due to resumption of mining in Karnataka and generated an operating profit of Rs135 crore, just more than 1% of the group’s overall operating profit.

Vedanta said: “Even as India in general and miners from Goa in particular look to regain lost markets, iron ore markets/prices are weak and the international trade environment remains challenging. We continue to work with the central and state governments to improve competitiveness of Indian exports.”