Vedanta to cut capex by $2-bn after Niyamgiri mining ban

08 Oct 2010

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Vedanta Resources Plc, the mining conglomerate controlled by UK-based billionaire Anil Agarwal, will cut its spending programme by as much as $2 billion over the next two years after failing to get clearance to mine bauxite in the Niyamgiri hills of Orissa.

The capital expenditure revision ''will have an impact of between $1.5 billion and $2 billion,'' chief executive officer Mahendra Singh Mehta said on an analyst conference call on Thursday. ''These numbers are very tentative as of now; these numbers will be developing as we go forward.'' Vedanta had committed an investment of over Rs36,000 crore for the expansion project in Orissa.

Vedanta has suspended work on its Lanjigarh alumina refinery expansion as a result, and deferred the first metal tapping at the Jharsuguda-II and Korba smelter projects, the London-based company said in a statement. The refinery, which currently has an installed capacity of 1.4 million tonnes per annum (mtpa), was to be expanded to 6 mtpa. Simultaneously, the company was also deferring the start of aluminium smelter capacity of 1.6 mtpa.

The plan to mine Orissa's bauxite, used to make aluminium, would help reduce raw-material costs at its refinery. On 10 August the company won state approval for a Rs37,500 crore ($8.47 billion) expansion to increase smelting and refining capacity sixfold. Later that month the environment ministry dismissed the mining plan on concerns that it would affect tribes and wildlife.

While Vedanta is in talks with the Orissa government to get alternative sources of bauxite, the refinery will continue to operate at 1 million tonnes a year with ore from Bharat Aluminium Co and others, the company statement said.

Vedanta produces copper, iron ore and zinc, as well as aluminium. It reported record-high zinc and aluminium output in the quarter ended 30 September, with zinc rising 25 per cent from a year earlier to 176,000 metric tonnes, and aluminum climbing 35 per cent to 162,000 tonnes. The company agreed in May to pay Anglo American Plc $1.34 billion for zinc mines in Africa and Ireland.

Iron ore output was stable in the quarter, at 3.2 million tonnes, while sales of the steelmaking material increased 25 per cent to 2 million tonnes.
Mehta said the company witnessed lower sales of iron ore from Karnataka due to a state government ban on exports.

Production at the company's Tuticorin smelter in India totalled 68,000 tonnes, 25 per cent lower than a year earlier, because of a planned 22-day maintenance shutdown that began 22 June, it said.

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