Sesa Goa will spend about Rs1,500 crore in its mining business during the next two years to reach an annual production capacity of about 50 million tonnes

Vedanta Resource group company Sesa Goa Ltd on Tuesday said that it will spend about Rs1,500 crore in its mining business during the next two years to reach an annual production capacity of about 50 million tonnes (MT), reports PTI.

"For reaching 50MT, the figure would be about Rs1,500 crore," Sesa Goa managing director PK Mukherjee said during an analyst conference call when asked about the company's capital expenditure plans for the next two years.

The company has an annual capacity of around 20MT and is targeting an additional 5MT by March 2010.

About the company's diversification and expansion plans, Mr Mukherjee said, "We have a prospecting licence (PL) in Jharkhand. We have already applied to convert the PL into mining licence (ML) and at the same time we are quite close to getting an access to land area. Once the land is there, then we will start talking about collaboration, as far as value-addition projects are concerned."

Vedanta Resources had indicated that Sesa Goa, which is already into manufacturing of pig iron, could further diversify into steel making.

Asked if Sesa Goa expects further hike in export duty on iron ore, Mr Mukherjee remarked, "The steel lobby is continuously talking about curbing the profits of iron ore (companies). I will request in this forum (that) this is not the way to tinkle with tariff and the duty structure."

By the end of the last quarter, Sesa Goa had cash and cash equivalent of Rs5,505 crore.

Further, the company is bullish about the domestic and overseas demand for its mineral and expects an annual production of 5-7MT of iron ore in 2010-11.

Moreover, for the next fiscal, the company expects the benchmark long-term contract rates to rise by 20%-40% from the current levels, Mr Mukherjee said.

The prices at which Australian mining giants Rio Tinto and BHP Billiton supply iron ore to Japanese and South Korean steel mills form the global benchmark rate.

In the current financial year, global benchmark rates, followed by India's largest iron ore producer NMDC, stand at about $61 a tonne for iron fines and around $72 a tonne for lumps.

Sesa Goa, which channelizes its chunk of exports to China, is cautious about temporary slackening in demand from the neighbouring country on account of sluggish industrial activity during the Lunar New Year Celebrations, which start next month.

However, on a long-term basis, Mr Mukherjee remained positive on demand for Indian iron ore from Chinese steel mills, which primarily helped it to clock a net profit of Rs827.50 crore for the quarter ended 31st December. The company notched up a net profit of Rs470.70 crore for the corresponding period a year ago.