Interview: Vedanta seeks to expand zinc output after price rally

By Barbara Lewis

LONDON (Reuters) - Vedanta may accelerate expansion of its African zinc operations to take advantage of prices that have reached their highest levels in a decade because of a shortfall following years of under-investment, its international zinc head said.

The rally in zinc prices to their highest since 2007 has helped to boost the overall profits of Vedanta, which has zinc projects in India, South Africa and Namibia.

It also has licences in Ireland and is discussing possible joint ventures to develop them following the closure in 2015 of the Lisheen mine it operated in the country, Deshnee Naidoo, chief executive officer of Zinc International, which groups Vedanta's assets in Africa and Ireland, said.

She said she was bullish about zinc prices and bullish about South Africa after Cyril Ramaphosa replaced Jacob Zuma as president last week.

"Some of the aged mines are starting to close, demand is growing. The market is in deficit for both zinc concentrate and metal," she said in a telephone interview with Reuters.

Analysts also see a shortfall this year of the metal, which is used to galvanise steel and which potentially can be used in batteries, although the technology is still being researched.

Vedanta's Zinc International complements the group's Hindustan Zinc Limited, which makes it India's biggest zinc producer.

The group says its appeal for investors is the access it provides to the huge potential of the Indian market, but it has also made clear its ambition to diversify internationally and has long been enthusiastic about South Africa.

Its chairman has acquired a roughly 20 percent stake in South African-focused major Anglo American.

Vedanta is already bringing on new production at Gamsberg in the Northern Cape region of South Africa, where output should start around the middle of this year, ramping up to full production of 250,000 tonnes annually in around a year's time.

In view of the strengthened zinc price, Naidoo said a second phase to bring production to around 400,000 tonnes per year could be accelerated. She said a decision would be taken "over the coming months".

Vedanta is also investigating whether it could mine underground in Namibia when its open pit operations at Skorpion Zinc will be exhausted around 2020.

This year, Skorpion is expected to produce approximately 90,000 tonnes of zinc, reaching approximately 130,000 tonnes by 2020.

If Vedanta decides underground operations would not be viable, Naidoo said the company would convert the Skorpion refinery, whose current capacity is 150,000 tonnes per year, to treat different ores, meaning it could process third-party material, thereby maintaining a foothold in Namibia.

"We really do not want to leave Namibia," she said.

(Editing by Adrian Croft)