Focus on structural cost reduction helped diversified metals and mining titan Vedanta Ltd to prune Cost of Production (CoP) of aluminium by 12 per cent to $1769 per tonne during April-December of this fiscal.
In the period under review, Vedanta Ltd achieved 24 per cent surge in alumina output at its Lanjigarh alumna refinery in Odisha. As local bauxite now meets half of the company's requirement, Vedanta has managed to cut down costs of both alumina and aluminium manufacturing. Between April and December 2019, Vedanta slashed cost of alumina making by 16 per cent to $281 per tonne. Vedanta has inked a long-term agreement with Odisha Mining Corporation (OMC) to source 70 per cent of bauxite produced by its Kodingamali mine in Rayagada. The balance 30 per cent of OMC's bauxite production from this commercial mine in put to online sale at bauxite auctions conducted twice a year. Vedanta is also eligible participate at electronic auctions. Separately, it aims to bid for the bauxite blocks to be offered for auctions, especially in Odisha and Chhattisgarh.
Also, Vedanta's thrust is on maximizing coal linkages through participation in fifth and sixth tranches of online coal auctions. It is eyeing coal security of 90 per cent as against 72 per cent currently. Vedanta's captive coal mine of Chotia has already commenced production and is operating at peak rated capacity. Moreover, Vedanta Ltd has entered into Coal Mines Development and Production Agreement (CMPDA) with the Government of India.
Vedanta was recently declared the successful bidder for Odisha's Jamkhani coal block located in Sundargarh district. The company aims to commence mining from this coal block within a year of getting the requisite letter from the state authorities. The Jamkhani coal block has geological reserves of 222 million tonnes (mt) of which mineable reserves are 14 mt. Initially, Vedanta plans to extract 2.6 mt each year which may be ramped up later. Since the Jamkhani coal reserve is located close to Vedanta's aluminium smelting units at Jharsuguda- a standalone smelter and a Special Economic Zone (SEZ), it is expected to help the company achieve cost competitiveness in metal production. Vedanta is eyeing aluminium production cost of $1500 per tonne in the near term.
To cut down on steep logistics costs, Vedanta is shifting from road to rail. Also, it is looking to stitch strategic partnerships with key suppliers in the form of long-term contracts.