Vedanta plans to double Zambia unit capacity

The Anil Agarwal-promoted Vedanta Resources, a London-listed metals and mining group, plans to double its copper smelting capacity at Zambia's Konkola Copper Mines (KCM) to 400,000 tonne per annum.

The company has also chalked up plans to start the Konkola Deep Mining Project (KDMP) to improve its ability to extract high grade copper from the mines.

A spokesperson for the company confirmed the development on KDMP but refused to comment on the doubling of capacity at KCM. But another executive maintained that "increasing capacity is a corollary to the KDMP".

According to the official, KDMP, which has been under consideration for a long time, will involve one new shaft to be sunk from surface to 1500m depth for ore and waste hoisting. A new ventilation shaft will be also sunk from surface to 660m depth. The existing shaft will be deepened from 1,070 m to 1,500 m depth for services.

"The investment for the project is estimated to be between $0.5-0.7 billion ", said the official.

Vedanta acquired a 51 per cent stake in Zambia's largest mine, KCM, in November 2004 for a cash consideration of $48.2 million, after South Africa's Anglo American Corporation pulled out of the venture, citing rising operation costs.

KCM's main business is copper mining, but it also has a pyrite mine and contract manages a smelting and refinery operation.

KCM has four main locations in Zambia: Chingola (Nchanga mine), Chililabombwe (Konkola mine), Nampundwe mines, and the ZCCM Smelter/refinery in Kitwe. At present, KCM has roughly 10,500 employees and 2,600 contract employees.

In 2002, weak copper prices drove Anglo to decide against further investment in the Konkola Deep Mining and finally lead to a majority stake being sold to Vedanta. As a result, Vedanta became the fifth largest producer of refined copper in the world.

"The copper available in the region is of high grade and with copper prices set to rise in nearby future, this investment will be good for the company", says a Mumbai based analyst who has been analysing Vedanta stock's for quite some time.

Many analysts believe that copper prices are headed for a rise as the mine development stalls. Early this May, Vedanta had commissioned a new facility in Tuticorin with a production capacity of 300,000 tonne per year.

The company has a domestic market share of some 40 per cent of copper sales.