Vedanta to expand aluminium capacity

Mumbai: Non-ferrous metals major Vedanta Resources plans to invest $9.8 billion to increase its aluminium production capacity to 2.6 million tonnes and emerge as the world’s fifth largest producer of the metal by 2012.

Mr Anil Agarwal, Vedanta Chairman, said the investment will be funded by the company’s cash holdings, internal accruals and a small portion of debt.

“We have at present Rs 30,000 crore in our balance sheet,” he said.

The investment includes $5.62 billion for expanding the capacity of its Jharsuguda facility, $2 billion for its Korba facility and $2.1 billion for Lanjigarh unit. Mr Agarwal pointed out that the cost of expansion for aluminium production would be $2,873 a tonne, as against the global average of $4,500 a tonne.

Vedanta expects to complete the acquisition of US mining company Asarco by the end of this year. In May 2008, Sterlite signed an agreement to buy selected assets from Asarco, claimed to be the third largest copper producer in the US, for $2.6 billion.

Vedanta, which acquired iron ore mining company Sesa Goa last year, plans to diversify from the non-ferrous to the ferrous segment by setting up a steel plant within the next five years.

“We are scouting for a joint venture partner for the proposed steel project,” Mr Agarwal said.

It plans to expand its iron ore production from the current level of 12.4 million tonnes to 25 million tonnes by 2011-12 at a cost of about $700 million. It will also be looking for mining assets in Africa.

In response to a question, Mr Agarwal said there could be a 5-10 per cent softening of prices of aluminium and copper in the near term.