The Jharkhand government order follows the Centre's July 18 directive asking states to clamp down on mines operating under second or third deemed renewals.
Tata Steel has shut down its Noamundi mine in Jharkhand on the orders from the state government, sources told CNBC-TV18. The decision may come as a major blow to the company as the mine contributed over 30 percent of its iron ore requirements.
The Jharkhand government order follows the Centre's July 18 directive asking states to clamp down on mines operating under second or third deemed renewals.
The decision is likely to hit 12 out of the state's 17 operational iron ore mines, including those of SAIL , said media reports.
Tata Steel has been looking at 14-15 million tones of iron ore to meet its steel requirement. From Noamundi itself, the company gets close to about 5 million tonnes, and was looking to further its supply from this mine, which was shut over the weekend. Thus, the company will now have to rely on the inventory or may have to source some from Odisha, which may come at a higher price.
Reacting to the development, Giriraj Daga, Analyst at Nirmal Bang, said that there is no doubt that the mine is big for Tata Steel, with contributing over 30 percent of iron ore, but is hopeful that the matter may get resolved in the next 20-30 days.
"At this point we are not making any cut in the numbers, but would like to see how things pan out. Meanwhile the company can continue to work from its Odisha plant or the current inventory," he said, adding that if the impasse continues for over a month or so then they may revise the numbers.
Tata Steel stock price
On September 08, 2014, at 14:13 hrs Tata Steel was quoting at Rs 515.15, up Rs 2.15, or 0.42 percent. The 52-week high of the share was Rs 578.60 and the 52-week low was Rs 266.15.
The company's trailing 12-month (TTM) EPS was at Rs 75.41 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 6.83. The latest book value of the company is Rs 629.60 per share. At current value, the price-to-book value of the company is 0.82.
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