Vedanta Awaits Bauxite to Revive $9 Billion Aluminum Project

Vedanta Resources Plc (VED), controlled by billionaire Anil Agarwal, is counting on a court verdict next month to secure raw material and revive a faltering $9 billion aluminum project in India.

The Supreme Court on Dec. 3 may grant unit Vedanta Aluminium Ltd. access to a bauxite mine in Odisha, helping it to cut production costs by almost 24 percent, Chief Operating Officer Mukesh Kumar said today in a phone interview. 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 $3.65 billion.

The 1 million metric ton-a-year refinery is operating at 60 percent capacity with ore purchased from domestic suppliers, Kumar said. Vedanta has halted plans to expand its smelting capacity to 2.6 million tons, awaiting approval to mine bauxite, he said.

A 15 percent decline in aluminum prices from this year’s peak has worsened the company’s finances. While the three-month forward aluminum price is $2,014.50 a metric ton on the London Metals Exchange, Vedanta Aluminium’s cost of production is about $2,100 ton, Kumar said today.

“Captive bauxite will change the entire economics of the complex,” Kumar said. “We are seeking the government’s help to purchase alumina from National Aluminium Co. and in the interim survive by selling power from our captive plant.”

About 4 tons to 5 tons of bauxite ore are needed to extract 2 tons of alumina, from which 1 ton of aluminum can be produced, according to the European Aluminium Association.

To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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