Vedanta Resources group firm Sesa Goa today said its net profit for the fourth quarter of the last fiscal surged to Rs 1,215.11 crore on account of strong demand for the mineral from countries like China.
"The fourth quarter has always been our best quarter. During the January-March period, the iron ore market was also very strong," Sesa Goa Managing Director and Chief Executive Officer P K Mukherjee told PTI.
The firm had a profit of Rs 548 crore during Q4 of 2008-09. The Sesa Goa board has recommended a dividend of 325 per cent, that is Rs 3.25 per share, for 2009-10.
Looking ahead, the company expects prices and demand for the mineral to show an upward trend, even though its main market, China, has imposed a ban on imports of certain lower grades of iron ore.
"So far, China has not yet communicated to us about the ban on imports of iron ore with less than 60 per cent Fe(iron) content. Traders are still buying. We are not yet been impacted by the ban," he said.
Mukherjee added that around 25 per cent of the total produce, that is About 5-6 million tonnes (MT), consisted of iron ore with less than 60 per cent FE content.
"Prices are belying all expectations. They are on historical highs," he said, adding that prices with 63 per cent FE content are hovering at $160 per tonne and that of 58 per cent FE content at $120 a tonne.
Asked if the company would enter into quarterly supply contracts with buyers of its iron ore instead of the previous yearly arrangements, Mukherjee said, "We will follow the big three (Rio Tinto, BHP Billiton, Vale)."
These mining majors are now entering into supply contracts with steel firms for the April-June period, abandoning previous yearly supply pacts.
Sesa Goa produced about 21 MT of iron ore in the last fiscal and expects output to grow in the current financial year as it targets the 50 MT mark in next 2-3 years. The company is actively scouting for properties in India and overseas.
"Cash is not a constraint for us. Constraint is that of a good property. Our appetite for acquisition is strong," he said. Sesa Goa had acquired the mining assets of V S Dempo for Rs 1,750 crore last year. The company is currently sitting on a cash pile of nearly Rs 7,000 crore.
The company has a iron ore reserves of 353 million tonnes and is undertaking a Rs 556 crore expansion project at its Goa premises.
"We are expanding pig iron capacity to 6.50 lakh tonnes from the present 3.75 lakh tonnes. We are taking metallurgical coke capacity to 5.50 lakh tonnes from 2.50 lakh tonnes. We are also setting up a 30-MW power unit. The expanded line will go on stream during the first quarter of the next fiscal," he added.
