Mines in the Indian state of Goa were ordered on Tuesday to close temporarily after a government-backed inquiry estimated illegal trade in iron ore had cost more than $6.0 billion in five years.
The state Mines and Geology department directed all mines to suspend their operations until further notice as the government begins a probe into the alleged irregularities.
The suspension could hurt India's iron-ore exports, about 80 percent of which go to energy-hungry China, analysts said.
Last Friday a report from an inquiry by a panel headed by former Supreme court judge Justice M.B. Shah reported that 90 mines operating in Goa were illegal as they did not have the necessary environmental clearances.
The report claimed illegal iron-ore mining in Goa -- the country's main export hub -- had cost nearly 350 billion rupees ($6.25 billion) from 2006 to 2011.
The report blamed the state, central government and private miners for the scandal, which Shah said plundered the environment and facilitated an "unrestricted, unchecked and unregulated export of iron ore to China".
The allegations echo similar problems in the southern state of Karnataka where the Supreme Court imposed a ban on iron ore mining following allegations of fraud worth $3.6 billion from 2006 to 2010.
Following the government notice, Sesa Goa, India's largest private iron-ore producer and exporter, said it has stopped ore extraction from all of its mines in Goa.
The company, majority-owned by London-listed Vedanta Resources, said it would submit all documents to ensure an early restart of its operations.
Sesa Goa shares closed down 5.63 percent to 160.1 rupees.
Nationally, the left-leaning Congress government is under pressure after the national auditor highlighted billions of dollars in lost revenue due to a policy of gifting away coal mining rights instead of auctioning them.
The repeated scandals in the mining sector have shone a light on the government's management of natural resources and the nexus of corruption that exists between regulators, politicians and business owners.
Mining is Goa's second-largest industry after tourism, employing 75,000 people directly and in related services, particularly transport.
Back in June, Human Rights Watch detailed damage to the environment and local communities in Goa and Karnataka in a report that slammed the failure to regulate the "out of control" mining industry.
Exports of iron ore from India, once the world's third-biggest supplier, fell more than 40 percent to 12.11 million tonnes in the April-June quarter, data showed last week, due to the economic slowdown in China and falling global prices.
"Illegal mining is a real concern. The suspension may impact business models of local private firms if it is not lifted soon," said Ritesh Shah, mining and metals analyst with Espirito Santo Securities.