Vedanta's alumina cost hits two-year low on availability of coal, bauxite

Enhanced availability of coal from linked mines as well as peak output from its captive Chotia block has helped Vedanta achieve cost competitiveness in manufacture of alumina.

By the end of June this year, Vedanta’s cost of alumina at Odisha’s Lanjigarh refinery fell to a two-year low of $284 per tonne, a drop of 17 per cent year-on-year (y-o-y). In volume terms, the alumina production was the highest ever, showing a spike of 37 per cent y-o-y.

Vedanta’s Chotia coal block in Chhattisgarh operated at peak capacity of 1 million tonne per annum. Also, the materialisation of linked coal improved from 66 per cent in FY19 to 72 per cent at the end of Q1FY20. In Q1FY19, Vedanta barely managed to secure coal materialisation of 49 per cent, the company’s investor presentation showed.

Higher local bauxite sourcing also aided Vedanta’s efforts to prune Cost of Production (CoP) of alumina. Under a long-term linkage arrangement with the Odisha Mining Corporation (OMC), Vedanta is sourcing 70 per cent of the bauxite extracted from the former’s commercial bauxite mine at Kodingamali mine. The bauxite feeds Vedanta’s alumina refinery at Lanjigarh installed at the foothills of the bauxite laden, but ecologically fragile Niyamgiri mountain range. The remaining 30 per cent of OMC’s production is offered to bidders at bauxite auctions conducted twice a year.

Vedanta is currently working on the ramp-up of the Lanjigarh refinery. The expansion is planned in a staggered manner with the first phase envisaging expansion of capacity to 2.7 million tonnes per annum (mtpa) and then scaling it up to 4 mtpa before the final peak rated capacity of 6 mtpa. The capacity upgrade will cost Vedanta Rs 6,400 crore.

Apart from stepping up local bauxite sourcing, Vedanta is also securing its overseas supplies. The Anil Agarwal-led Vedanta has already inked an agreement with Emirates Global Aluminium (EGA) for importing four million tonnes of alumina each year.

EGA’s wholly-owned subsidiary Guinea Alumina Corporation (GAC) is building a bauxite mine and associated export facilities in Guinea, in one of the largest greenfield investments in the country in the past 40 years. Much of Guinea’s bauxite is of the highest quality.

Moreover, in order to achieve long-term bauxite security, Vedanta also aims to bid for the upcoming bauxite blocks to be opened up for online auctions in Chhattisgarh, Jharkhand and Odisha.