Reuters | Oct 7, 2010 | 3:24pm IST
India-focused miner Vedanta, which posted mixed second quarter output data, has postponed expansion of aluminium operations after India rejected a plan to mine the raw material to make the metal. In August, India denied London-listed Vedanta a permit to mine bauxite in Orissa over environmental concerns. "Since final clearance was not granted for bauxite mining at Niyamgiri, we have reviewed our capital expenditure programme," Vedanta said in its quarterly production report.
The impact on capex was tentatively estimated at $1.5 million to $2.0 billion over the next two years, chief executive Mahendra Mehta told a conference call. The launch of the second phase at the Jharsuguda smelter and a new Korba smelter were being temporarily deferred as well as work on an expansion of its bauxite refinery.
In September, the environment ministry said it had found serious violations at Vedanta’s refinery that uses bauxite to make alumina, an intermediate product. Vedanta, which is continuing to operate the plant at a production rate of 1 million tonnes per year, had planned to expand the refinery’s annual output to 6 million tonnes.
Vedanta shares rose 0.6 percent to 2237 pence by 0906 GMT, compared to a 0.4 percent fall in the British mining index. The shares have underperformed the mining index by 23 percent this year as the group has been hit with setbacks. "On balance (the news) is negative, but most of this bad news was already known to the market and the expansion cuts should come as no surprise," said analyst Andy Davidson at Numis Securities in London.
ALUMINIUM OUTPUT UP
The company’s production report showed aluminium output in the three months to the end of September, its fiscal second quarter, grew 35 percent to 162,000 tonnes as the Jharsuguda smelter continued to ramp up. Vedanta had wanted to expand Jharsuguda to produce 1.25 million tonnes a year and for Korba to make 325,000 tonnes a year. Alumina production at Lanjigarh fell 10 percent to 171,000 tonnes.
Vedanta posted mixed output data in its two most important product, iron ore and zinc. Refined zinc production jumped 25 percent to 176,000 tonnes, mainly due to the launch of a new smelter at Rajpura Dariba. Output of saleable iron ore slipped 3 percent to 3.2 million tonnes. Iron ore is the group’s most profitable product, accounting for 43 percent of core earnings in the first quarter while zinc made up 28 percent of profit.
Copper cathode output in India fell 25 percent to 68,000 tonnes, due to a planned 22-day shutdown for bi-annual maintenance at its Tuticorin smelter while copper production in Zambia jumped 65.7 percent to 58,000 tonnes mainly due to increased custom smelting. India’s Supreme Court gave Vedanta, permission to proceed to reopen Tuticorin, the world’s ninth largest copper smelter, on Oct. 1 after a lower court ordered it closed due to environmental concerns.