Sesa Goa drops 20% from all time high of Rs 490+ to below Rs 400…It’s a high Beta scrip…so volatility is expected

Dear Madhu,Hope this updated view on Sesa Goa answers your query you just posed on another blog….I’ve put it up as a seperate blog as it will serve a wider audience

In 2009,Sesa Goa had scaringly dropped to Rs 60 from levels of near Rs 175…and then burst away to record an all time high of Rs 490+….and in a matter of a few days now it has dropped below Rs 400

So what’s what’s unnerving Investors to unwind their positions in Sesa Goa?…a few weeks ago it was the ban on import of Iron ore of Fe content 60 and below announced by the Traders Association in China….I had blogged that this would not really impact Sesa Goa too much….but investors were unnerved and began reducing exposure…Price dropped to below Rs 430…and then came a bombshell from the Australian government…actually they had warned in January of sweeping tax changes in the Mining Industry…From July 2012 the Australian Mining Industry will face a higher tax of 40%  on the ‘super profits’ that they are making….US $ 2.8 Billion is expected to be the Tax collection from this Industry in 2012…BHP Billiton,Australia’s and the worlds biggest Mining Company expects their average tax rate on operating profits to go up to 57%……Mining Sector Sources opine it will lead to rising iron ore prices and China will have to absorb this…it may deter though,Overseas investments in Australia and impact the country’s competiveness….As expected,this tax hike announcement is facing very strong opposition in Australia…One view is that it is not fair to tax Mining Companies higher as their record profits have saved Australia the blushes in the Financial Mess that has enveloped the Developed Nations….also it is unfair to first allow billions of dollars in as overseas investments in ongoing mining projects and then hike the tax rate on profits that are expected to be generated  

China appears to be in a tearing hurry and is raking up steel capacity to record highs and therefore the demand for Iron Ore is robust and unabated…as long as this situation continues,Iron Ore Companies will continue making ‘super profits’….Sesa Goa is no exception here….just hope India does not follow suit like Australia and ramps up the tax rate on ‘super profits’ of Indian Mining Companies….what it has done ,however,is raise the export tax from 10% to 15% on iron ore slumps to try and ensure adequate domestic supply of Iron ore as India is on track to more than double it’s steel production from the current 54 million tonnes to a record 124 Million Tonnes in 2012/13 read more