The company will raise smelting capacity to be among world’s top five.
Vedanta Resources, the Indian mining company controlled by billionaire Anil Agarwal, plans to invest $9.8 billion to become the world's fifth-largest aluminum producer.
The company said today that it will raise annual smelting capacity to almost 2.6 million metric tonnes by 2012. It plans to build an aluminium smelter and power plant in India's Orissa state. Vedanta will also expand a refinery producing alumina, the raw material used to make the metal.
Vedanta is betting that Asian demand for the lightweight metal used in airplanes and to make beverage cans will continue to grow. Aluminium rose to a record in London in July and is up 9 per cent since the start of the year. Global use will outpace production, Deutsche Bank AG and Citigroup predict.
"We view this announcement very positively,'' Merrill Lynch & Co analysts led by Jason Fairclough in London wrote today in a note.
“Vedanta's core competency is in developing low cost, Indian aluminium smelting capacity with captive, low cost power.” Vedanta declined 29 pence, or 1.8 per cent, to 1,556 pence on the London Stock Exchange. The shares have fallen 24 per cent this year, paring the company's value to 4.5 billion pounds ($7.9 billion).
The Bloomberg Europe Metals & Mining Index, which tracks 14 stocks, was down 5.9 per cent today.
The increase in alumina output to 5 million tonnes will be achieved by adding an additional 600,000 tonnes to the existing 1.4 million-tonnes capacity at the Lanjigarh plant in Orissa by 2010 and building 3 production streams of 1 million tonnes a year each, Vedanta said. Alumina is refined from bauxite, an ore.
