* Goa to set up committee to review mining operations
* Inquiry could take a few months to complete -industry
* Iron ore exports seen falling if ban stays for long
* Sesa Goa, Sterlite fall more than 5 pct after move
(Adds quotes, details, analyst comment)
By Siddesh Mayenkar
MUMBAI, Sept 11 (Reuters) - India's Goa state temporarily
halted iron ore mining from Tuesday to check if operations were
legal, a move that is expected to further dent exports from the
country and support flagging global prices.
Shares in miners, such as Sesa Goa Ltd and
Sterlite Industries, fell more than 5 percent on
worries over cuts to output and exports by India - the world's
former No. 3 supplier of the steelmaking ingredient.
India's iron ore exports, which mainly head to China, have
already halved because of government taxes aimed at keeping
output for the domestic steel industry and efforts to stop
illegal mining.
Tumbling global prices, down a third since July and now near
levels last seen in 2009, have also deterred exports.
The move by Goa to suspend mining activities came after an
expert panel formed by the federal government found "serious
illegalities and irregularities" in mining operations.
State officials in Goa, India's second-biggest iron ore
producer which normally supplies about 50 million tonnes a year,
said the inquiry could take several weeks while industry sources
suggested it might be months.
"We are trying to do it with priority and we will expedite
everything," said Prasanna Acharya, director of mines and
geology in Goa's mines department, declining to give a time
frame for the checking process.
The state will set up a committee to review mining before
giving approval to resume operations. Iron ore already produced
or stored at ports can be moved, the government said in a order
late on Monday.
"Our contacts in India say they expect this to last not more
than one to two months," said Graeme Train, commodities analyst
at Macquarie in Shanghai. "As soon as the mines show that they
have all the permits then they can just start producing again."
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FACTBOX-Top iron ore exporters, importers
Iron ore seen in mild rebound in H2
TIMELINE-India's moves to curb ore exports
Indian iron ore exports since 2000/01:
link.reuters.com/nan29s
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MINING SHARES DROP
Sesa Goa, which gets most of its iron ore from Goa, said
business would suffer but it hoped the halt would be
short-lived. Its shares fell as much as 7 percent on Tuesday.
"There will be a delay in operations. We are hopeful this
impasse will end fast. It is monsoon and not much production
happens at this time, but there will be a slight impact in the
near term. We hope to make up in the rest of the year," Sesa
spokesman R Krishnagopal said.
Shares of non-ferrous metals producer Sterlite, which is set
to merge with Sesa Goa to create Sesa Sterlite -- the eventual
umbrella unit for other subsidiaries of the Vedanta Group, were
4.6 percent lower at 94 rupees.
Margins for miners in Goa have been hit hard as a 30 percent
export tax, high freight rates and low global iron ore prices
have made shipments unviable.
Also, operations usually slow during the June-to-September
monsoon season as rains hamper mining and transportation.
"The suspension ... albeit temporary, is likely to
exacerbate the decline in Indian iron ore exports and provide an
upside trigger to spot iron ore prices," Deutsche bank analysts
said in a research note.
Exports from neighbouring Karnataka, which together with Goa
sells about 75 million tonnes a year overseas, remain stalled as
it has failed to comply with a Supreme Court order to lift a ban
on shipments, introduced to curb illegal mining in the state.
Shares of JSW Steel, which uses iron ore in steel making,
fell as much as 2.4 percent on worries the Goa halt would
further dent domestic supplies. Steel makers in India have been
operating below capacity due to lack of raw materials.
In the seven months to July, India remained the third
biggest exporter of iron ore to top market China, but volume
dropped by 44 percent to 30 million tonnes.
But in July alone, South Africa edged out India in terms of
exports to China, with shipments of over 4 million tonnes versus
India's 2.5 million tonnes.
"Overall the impact (of the Goa halt) looks like it's going
to be quite limited. It doesn't look like this is shaping up to
be another Karnataka," Train said.
(Additional reporting by Abhishek Vishnoi, Prashant Mehra and
Manoj Dharra in MUMBAI and Manolo Serapio Jr. in SINGAPORE;
Editing by Jo Winterbottom and Himani Sarkar)
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