Sesa Goa 1Q Net Profit Surges On High Iron Ore Price.

NEW DELHI -(Dow Jones)- India's Sesa Goa Ltd. (500295.BY) Tuesday reported a more than threefold jump in its fiscal first-quarter consolidated net profit as it exported iron ore at a much higher price than the year-earlier period.

For the April-June quarter, net profit rose to INR13.02 billion from INR4.22 billion, while sales more than doubled to INR23.94 billion from INR9.99 billion, the company said.

India's largest iron ore exporter by sales said its selling price for iron ore fines and lumps nearly doubled from a year earlier. Its average iron ore price was $85 a metric ton in the April-June quarter.

Iron ore prices have risen sharply over the past year, largely led by a resurgent Chinese demand. Taking advantage of the sellers' market, global iron ore producers forced often unwilling steel mills to negotiate quarterly contracts instead of annual ones.

Sesa Goa, a unit of mining conglomerate Vedanta Resources PLC (VED.LN), said it will continue to follow the prices set by major global producers, such as Vale S.A. and Rio Tinto for pricing its quarterly contracts.

The company sells around 65% of its iron ore in the spot market and the rest through long-term contracts.

Sesa Goa sold around 5.5 million tons of iron ore in the April-June quarter, up from 4.7 million tons in the year-earlier period. Of its total sales, around 80% was shipped to China.

The company hasn't faced any problems in exporting low-grade iron ore to China, despite a ban on such imports imposed by the Chinese government earlier this year, Managing Director P.K. Mukherjee said at a conference call.

"The ban is applicable only for Chinese traders who don't have a tie-up for sale to steel mills," he said. "Our shipments haven't faced any problems in finding Chinese buyers."

Mukherjee said the company expects to export 6.0 million-7.0 million tons of iron ore in the July-September quarter.

He said the major cost pressures Sesa Goa faced in the past quarter were from a rise in rail freight cost and royalty payout to the government.

He said its royalty payments averaged INR150 a ton, compared with around INR15 in the year-earlier period.

On the progress of the company's plans to double its mining capacity to 50 million tons over the next few years, he said absence of environmental clearance was holding up the program.

"The major hurdle is that the (federal) ministry of environment has put an embargo on new mining projects in the state of Goa until the state legislature adopts a minerals policy," said Mukherjee.

The western Indian state of Goa is the major iron ore production and shipping center for Sesa Goa.

Source : english.capital.gr