Vedanta banks on Jamkhani coal block to lower aluminium production cost

Once operational, the coal block will save power costs by 10-15%, get company closer to its avowed aluminium Cost of Production of $1,500 per tonne

Production from its captive Jamkhani coal block is expected to help Vedanta Ltd inch closer to its avowed aluminium Cost of Production (CoP) of $1,500 per tonne.

Vedanta Ltd had bagged the Jamkhani block at competitive auctions in Odisha. Endowed with 220 million tonnes (mt) deposits, the block promises long-term coal security. Power is a critical input in aluminium smelting and typically accounts for around 40 per cent of the metal production cost.

“We have now signed the Coal Mines and Development and Production agreement with the Government of India in respect to the Jamkhani Coal Block in Odisha. Steps are now being taken towards operationalizing this block. This has potential to reduce our power costs by 10 to 15 per cent. With our plans to increase coal linkages through participation in future options, enhancing bauxite sourcing to exploration of new resources, captive alumina capacity ramp-up and other cost reduction initiatives across the value chain, we are inching closer to our target CoP of $1,500 a tonne,” Srinivasan Venkatakrishnan, chief executive officer (CEO), Vedanta Ltd said at the company’s recent conference call.

The Jamkhani coal block is Vedanta's second captive one after Chotia in Jharkhand that has a rated capacity of one million tonne per annum (mtpa). The Chotia block is operating at almost its full rated capacity. The company aims to commence mining from this Jamkhani block within a year of getting the requisite letter from the state authorities. Initially, Vedanta aims to extract 2.6 million tonnes per annum from the block.

Coal materialisation for Vedanta has improved after the monsoons. The Chotia mine recorded output of 278,000 tonnes in the December quarter of this fiscal.

“In terms of alumina availability, the recent Supreme Court order allows us to bid for Nalco (National Aluminium Company) alumina and this has the potential to increase our domestic sourcing of bauxite”, he added.

In the aluminium sector, Vedanta made significant improvement, pruning its aluminium CoP to $1691 per tonne down nine per cent quarter-on-quarter and lower by 18 per cent year-on-year (y-o-y). Improvement in coal performance and ramp up in alumina output at the company’s Lanjigarh refinery in Odisha contributed to the falling cost in aluminium making. Alumina production hike was supported by higher local bauxite sourcing. Vedanta sources bauxite from state owned Odisha Mining Corporation’s (OMC) Kodingamali mines under a long-term pact signed by the two entities. Locally sourced bauxite feeds 50 per cent of the refinery’s requirement.

“Noteworthy, our aluminum business continues to benefit from improved integration and our interventions currently witnessing costs comfortably below $1,600 a tonne in January. And if you recall, that is a reduction of around $600 a tonne within just over a year”, Venkatakrishnan said at the conference call.