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SC lifts ban on Category ‘A’ mines in Karnataka
Supreme Court has lifted ban on Category A mines in Karnataka, according to reports. Reports stated that Supreme Court has allowed iron ore mining by some companies in Karnataka. SC has also allowed 18 mining lease holders to operate with conditions, says report. Shares of JSW Steel, Sesa Goa and Kalyani Steels were up after this announcement. Reports stated that the output from the re-started mines will be in addition to state-run NMDC's 1 million tonnes per month, which was cleared by the Supreme Court for production from August 6, 2011.
The Supreme Court last year had also banned iron ore mining in Bellary, Chitradurga and Tumkur districts of Karnataka citing environmental violations. The CEC report had said that Category ‘A’ leases, which consist of 21 operational and 24 non-operational leases, be allowed to carry on their business as they have not violated any rules. The CEC had put the mines in the area into three categories as A, B and C and the mines in which there was least or no irregularities were categorised as ‘A’ and those with maximum illegalities were put in ‘C’ category, says report.
Coal scam: CBI files FIRs against 5 Cos for alleged cheating
The Central Bureau of Investigation filed First Information Reports (FIRs) for alleged cheating against five companies who were allotted coal blocks, reports said. According to reports, the companies named in the FIRs were AMR Infrastructure, Vimmy Iron, Navbaharat Steel, JLD Yavatmal and JAS Infra. Post filing of the FIR, the CBI would carry raids across the country and also question the companies and government officials. The CBI is probing whether companies misreported their financial or technical qualifications to be granted valuable coal fields in possible collusion with government officials.
Reports said that Congress MP Vijay Darda from Maharashtra had links to two of the five companies booked today - he has 7% stake in Jas Infrastructure along with his son, Devendra. Darda was also associated to JLD Yavatmal, a company named after his father.On Monday, the Coal Ministry said it would, on the direction of the Prime Minister’s Office (PMO), take up de-allocation of another 32 coal blocks for which notices have been issued over “unsatisfactory progress”.
Earlier, show-cause notices were issued to the developers of 58 coal blocks after they failed to develop within the stipulated time frame. Reports said citing Coal ministry sources that the government is under pressure because of the shortage of coal and feels no time can be lost in the development of these blocks to meet the domestic coal demand and supply gap.
This development comes against the backdrop of the Opposition parties demanding the cancellation of 142 coal block allocations over the Comptroller and Auditor General’s (CAG) reports.The CAG reports have estimated “undue benefits” of over Rs.3.06tn to private parties in coal block allocation without bidding, Delhi Airport development and diversion of coal to a power project. The auditor also says that allocation has caused a loss of Rs. 1.86tn to the national exchequer.
PM Manmohan Singh is under attack over the allocation during 2005-2009 when he held the coal portfolio.However, a Coal Ministry official had earlier said the blocks, barring a few, were different from those mentioned in the CAG report.
In Focus Stories
IIFL recommends ' Reduce' on JSW Steel
IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, recommends “Reduce” JSW Steel.
According to IIFL Institutional Equities report, the proposed merger of JSW Steel (JSTL) and JSW Ispat, broadly on expected lines, would lead to a spike in net debt and deterioration of leverage ratios. On the other hand, lower interest costs on Ispat’s debt and tax shield on carried-forward losses of Ispat are positives.
However, this would not have a meaningful impact on cash generation and valuation, in our view. JSTL’s large dependence on third-party miners in Karnataka (JSTL’s peak requirement > 70% state’s production cap) makes iron ore procurement a lingering issue, report stated.
Further, iron ore cost may increase as miners’ are moving away from export-parity pricing. At 5.4x FY13ii EV/Ebitda,the risk/reward is unattractive. Reduce, brokerage added.
The report was published by IIFL’s Institutional Equities Research desk.
Domestic News
Coal India to invest Rs 42.75bn for increased production
As per the approved Budget Estimates for the Annual Plan 2012-13, the capital investment of CIL for achieving a coal production target of 464.10mn tonnes and dispatch target of 470mn tonnes is Rs. 4275 crore.
In addition a budget provision of Rs. 5000 crore has been made for acquisition of assets abroad and Rs. 500 crore for development of Coal Block in Mozambique. This was informed by Shri Pratik Prakashbapu Patil, Minister of State in the Ministry of Coal while replying a written question in Rajya Sabha today.
The Minister stated that further the envisaged capital investment in the XII plan of CIL is Rs. 24,400 crore for the period 2012-17. In addition an amount of Rs. 25,000 crore is also envisaged for acquisition of assets abroad and Rs. 10,000 crore for development of Coal Block in Mozambique.
Report on 58 coal blocks by Sep 15th
After show-cause notices were issued to the developers of 58 coal blocks after they failed to develop within stipulated time frame, the Coal Ministry, on the direction of the Prime Minister’s Office (PMO), will take up de-allocation of another 32 coal blocks for which notices have been issued over “unsatisfactory progress”, reports said.
The government has already issued de-allocation notices to 33 government firms and 25 private entities.
The notices were issued to firms like Reliance Power’s Sasan, Tata Power, Hindalco and Grasim Industries, ArcelorMittal, GVK Power, MMTC and others.
The development comes against the backdrop of the Opposition parties demanding the cancellation of 142 coal block allocations over the Comptroller and Auditor General’s (CAG) reports.
The CAG reports have estimated “undue benefits” of over Rs.3.06tn to private parties in coal block allocation without bidding, Delhi Airport development and diversion of coal to a power project. The auditor also says that allocation has caused a loss of Rs. 1.86tn to the national exchequer.
PM Manmohan Singh is under attack over the allocation during 2005-2009 when he held the coal portfolio.However, a Coal Ministry official had earlier said the blocks, barring a few, were different from those mentioned in the CAG report.
JSW Steel to absorb JSW Ispat...Swap ratio fixed at 1:72
The Boards of Directors of JSW Steel and JSW Ispat, in their respective meetings held today, approved the merger proposal. The exchange ratio recommended by the Valuers and approved by both the boards is 1 (one) equity share of JSW Steel to be issued for every 72 [seventy two] equity shares of JSW Ispat.
Under the terms of the proposed Scheme of merger, equity shareholders of JSW Ispat will receive 1 (One) equity share in JSW Steel of face value of Rs 10 each for every 72 [seventy two] equity shares in JSW Ispat held by them.JSW Steel’s shareholding in JSW Ispat will stand cancelled under the Scheme.JSW Steel will issue 1.86 crore new equity shares, thereby increasing its outstanding shares to 24.17 crore and its equity capital to Rs. 241.72 crore. JSW Steel will also issue 48.54 crore new 0.01% non convertible cumulative redeemable preference shares to the preference shareholders of JSW Ispat increasing its preference share capital to Rs. 764.44 crore.
In the post merger equity share capital, the promoters of JSW Steel will own 35.12% in the merged entity, 14.92% shall be held by JFE Steel International Europe BV (herein referred to as “JFE Holdings”) and the remaining 49.96% will be held by the public shareholders.
SAIL output up by 7% in August
SAIL produced 1.16 million tonnes of crude steel recording a growth of 7 % in August’2012 over CPLY. The cumulative production of crude steel by SAIL at 5.65 million tonnes in April-August’12 was up 3 % over CPLY. This assumes added significance considering the fact that world over the production levels have stagnated for last couple of months. With continued thrust on improving techno-economic parameters aimed at cost competitiveness, BF productivity in August’12 was up by 9 % over CPLY, and concast production as a percentage of crude steel grew by 4 %.
At a time when steel producers all over the world are adjusting their output to meet the market demand, nameplate capacity figures have become redundant. Production of steel being a complex process requires, interplay of several dynamic factors including availability of sufficient raw material, health of equipment etc. In such a scenario, actual production figures become critical, since production by each company will in reality determine its earning potential and bottomline in the times of idling of capacities.
CIL's cash pile to cross Rs. 1 lakh crore in 3 years
JSW Steel August crude steel output up 15%
Jindal Steel and Power acquires CIC Energy
Nava Bharat Ventures clarifies reports on coal blocks
Inter-ministerial group reviews coal block allocation
Global News
Chalco drops plan to acquire SouthGobi
Aluminum Corporation of China Ltd also known as Chalco, has ended its bid to acquire Mongolia-focused coal producer SouthGobi Resources Ltd, according to reports.
Reports stated that this acquisition would have significantly enlarged China's role in its landlocked neighbor's critical resources sector.
The Chinese metals major was to have taken over Turquoise Hill's majority stake in SouthGobi for $920 mn, says report.
Fortescue slows growth as iron-ore prices fall: reports
Fortescue Metals Group has reportedly put its expansion plans on hold amid slowing demand and falling iron ore prices
The company will defer the development of its Kings deposit and the completion of its fourth berth at Herb Elliott Port, according to reports.
Reports said that it will also cut its staff strength and reduce operational costs.
Australia PM plays down mining decline: reports
Australian Prime Minister Julia Gillard played down speculation that the country's China-driven mining boom is over, according to reports.
The commodity price boom is "now passing" but investment in new resources projects and increases in production are yet to peak, Julia Gillard reportedly said.
Australian Prime Minister reported that China is still only 50% through its process of urbanization and industrialization