Vedanta Resources PLC controlled by billionaire Mr Anil Agarwal is counting on a court verdict next month to secure raw material and revive a faltering USD 9 billion aluminum project in India.
Mr Mukesh Kumar COO of Vedanta Resources said that the Supreme Court on December 3rd 2012 may grant unit Vedanta Aluminium Limited access to a bauxite mine in Odisha helping it to cut production costs by almost 24%. The project in the eastern state includes a refinery, a smelter and a power plant.
The government in August 2010 rejected Vedanta's plan to secure bauxite from the nearby Niyamgiri hills, citing concerns it would affect tribes and wildlife. The shortage has left Vedanta Aluminium with accumulated debt of USD 3.65 billion.
Mr Kumar said that the 1 million tonne per year refinery is operating at 60% capacity with ore purchased from domestic suppliers. Vedanta has halted plans to expand its smelting capacity to 2.6 million tonnes awaiting approval to mine bauxite. A 15% decline in aluminum prices from this year's peak has worsened the company's finances. While the three-month forward aluminum price is USD 2,014.50 per tonne on the London Metals Exchange, Vedanta Aluminium's cost of production is about USD 2,100 tonne.
He said that "Captive bauxite will change the entire economics of the complex. We are seeking the government's help to purchase alumina from National Aluminium Company and in the interim survive by selling power from our captive plant. About 4 tonnes to 5 tonnes of bauxite ore are needed to extract 2 tonnes of alumina from which 1 ton of aluminum can be produced.