Indian Iron Ore Exporter Sesa Goa Looks To Liberia

India’s largest exporter of iron ore, Sesa Goa Ltd., seems firm on its plan to invest about US $2.4 billion to develop assets in the West African nation of Liberia.

If things do work out for Sesa, the spotlight will once again be on this mining major as this will be its first international foray after an Indian court had ordered a mining ban in the state of Goa where Sesa is located.

The London-based, Vedanta Resources Plc-controlled iron ore miner has been facing some major challenges in the wake of the ban, and has been a state of flux ever since.

The company stock has also been drifting as uncertainty continues to linger over its future operations. The stock had crashed 21.7 percent over the last one-year period. As of Dec. 31, Sesa’s net debt was about $743 million. Sesa’s Q3 financials showed a 28 percent drop in net profit.

A report by Bloomberg stated the Anil Agarwal-controlled Sesa Goa will use the money over the next four years on 30 million metric tons of mining capacity in three properties in Liberia.

Sesa Goa Managing Director Prasun Kumar Mukherjee was quoted as saying the first part of the project was scheduled to start by March 2014, with 4 million tons of capacity. The project will be financed through borrowings because restrictions at home had stopped cash flow, he said. Sesa is now said to be looking for a line of credit for the Liberia project.

Like another private steelmaker, Jindal Steel, Sesa Goa is among the Indian miners and steelmakers who are now looking overseas to get their raw materials after Indian authorities cracked down on mining to protect the environment. If the Liberia plan comes true, it is bound to turn Sesa Goa’s fortunes around.

Hitting the Ground Running?
The company is seeking to hire mining contractors to start operations in Bomi, the site for the first phase of the Liberia project, and has even placed advertisements in the Business Day, a Johannesburg-based newspaper. The contractor will carry out mining activities, including drilling, blasting, loading and hauling.

Liberia, devastated by civil wars from 1989 to 2003, is recovering under Ellen Johnson-Sirleaf, a Nobel laureate who became the nation’s first female president in 2006. Already, ArcelorMittal and OAO Severstal operate iron ore mines there.

Agarwal himself is in the process of combining three group companies — Vedanta Aluminium Ltd., Sterlite Industries (India) Ltd. and Sesa — to cut costs, revamp debt and boost operational synergies.

For Vedanta Resources, most of its earnings these days are bolstered by its gas operations. A few days ago, it reported a 31 percent rise in third-quarter core earnings, helped by a strong performance by Cairn India, its Indian oil and gas unit.

Vedanta, which sold 5 million metric tons of iron ore in the third quarter last year, recorded no iron ore sales this year owing to mining bans in the states of Goa and Karnataka.

by Sohrab Darabshaw