The Hindu Business Line : Vedanta building strength in cost competitiveness

VEDANTA Resources's investment of up to Rs 17,000 crore in expansion of its metal capacities is in the backdrop of strong demand for base metals both in the domestic as well as overseas markets.

Even as prices of leading metals such as aluminium are expected to remain firm on strong consumption, Vedanta Resources has said that it is building its strength in cost competitiveness.

"With the setting up of a 500,000-tonne aluminium smelter in Orissa, Vedanta will be the lowest cost producer of aluminium," said Mr Tarun Jain, Director (Finance), Sterlite Industries (India) Ltd.

Vedanta is already the lowest cost producer of copper, zinc and lead. It produces copper at six cents per pound.

"Our cost of production for aluminium is around $800-900 per tonne while prices are ruling around $1,800 per tonne. So we have a good margin. A drop in aluminium prices would not impact us as we are at the lowest level at production costs," he added.

According to Mr Anil Agarwal, Founder and CEO, Vedanta, consumption of aluminium is expected to grow at four per cent while production only at 1.5 per cent. "Aluminium, therefore, will be the metal of the near future."

Of the Rs 17,000-crore investment plan, Rs 15,000 crore would be in the aluminium sector alone.

India's mining prospects are very good with a market estimated to be around $20 billion. "India has natural resources of good quality. There is a need to give a major thrust to mining," Mr Agarwal said.

Although the Vedanta group says that it will look for funds for the new Rs 7,000-crore greenfield smelter in the ratio of 40:60 debt equity, company officials said that cash accruals and accumulated profits are well over the investment requirements.

The group, which has a 51 per cent stake in Balco, has already made a call option to acquire the remaining 49 per cent from the Government. The group is expected to do the same for Hindustan Zinc, in which it holds 64.9 per cent stake.

It has already commenced work on the 10-14-lakh tonne alumina refinery at Lanjigarh, Orissa. Up to 45 per cent of the work is complete, Mr Agarwal said. But the group does not have the final approval for mining.

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