Vedanta to set up Rs 7000 cr smelter

The London Stock Exchange-listed Vedanta Resources will invest Rs 7,000 crore to set up a 5-lakh tonne per annum aluminium smelter at Jharsuguda in Orissa.

Vedanta already has an ongoing alumina refinery project "" Vedanta Alumina "" at Lanjigarh in Orissa, at an investment of $800 million (Rs 3,600 crore). It proposes to set up a 5 million tonne per annum steel plant in Orissa, at an estimated investment of Rs 12,500 crore.

Speaking at a media conference in Mumbai today, Anil Agarwal, founder and chief executive officer of Vedanta Resources, said: "This is a major step towards our long term vision of creating a one million tonne aluminium capacity. The aluminium project will be set up in two phases of 2.5 lakh tonne each, along with a 1000 mw captive power plant."

The company has already initiated the project development work, including land acquisition, feasibility studies and obtaining government approvals, he added.

Vedanta Resources, after completing this aluminium project, will be the 8th largest company in the global aluminium industry. It will surpass National Aluminium Company to become the largest aluminium player in India.

"The aluminium produced in this new smelter will mainly be exported. However, a lot depends on the domestic demand scenario," Agarwal said.

The group will use a mixture of internal accruals and debt to fund this project. "We will have enough internal resources to fund this project. However, if need be, we are in a very comfortable position to borrow from the market," Agarwal said.

The company's ongoing 1.4 million tonne per annum Lanjigarh alumina project is 45 per cent complete.

"The alumina produced at Vedanta Alumina will be utilised for the increased capacity at Bharat Aluminium Company (Balco) and this (Jharsugdha) aluminium project."

The company is in the process of setting up a greenfield smelter at Balco's unit at Korba, which would take Balco's total capacity to over 3.6 lakh tonne per annum. The expansion project is expected to be completed by March 2006.

Reuters adds: Meanwhile, Vedanta will focus on Indian operations in the coming years and may look for opportunities to tie up with global firms, its chief executive said on Thursday.

"For us, India is a natural market," Anil Agarwal told Reuters in an interview. "India has a good potential in the mining sector and we can be one of the lowest cost producers in the world."

Agarwal said Vedanta was open to join hands with global players in setting up plants in India. "At the moment we are not in any serious talks with anyone, but we will be looking to set up something with international players, as and when some opportunity comes," he said.

Vedanta accounts for about 42 percent of India's copper output, 75 percent of its zinc production and 21 percent of the country's aluminium output.

"India is definitely a mining market. I estimate it's at least a $20 billion market," Agarwal said, adding the country could be ranked number three in the world among mining countries, after Canada and Australia.

He felt India could follow the example of those two countries, which developed their economies on natural resources.

Agarwal was bullish on the outlook of aluminium and copper metals.

"I am very positive because consumption of aluminium is increasing by a rate of about 3.5 to 4 percent in the world, but production increase is only 1.5 percent," he said.

Global prices of aluminium and copper are now quoted at $1,817 a tonne and $3,145 a tonne, and Agarwal said he expected prices to remain around that level due to the strong demand.