Vedanta may have to wait longer for bauxite from L&T

 

Mumbai: A senior official in the Odisha government said there is no timeline for granting mining leases to two crucial mines of Larsen and Toubro Ltd (L&T), in what suggests Sesa Sterlite Ltd may have to wait longer before it gets bauxite from the construction company under a memorandum of understanding.

 

 

“Their prospecting licence is over. Their report is furnished. Mining lease is not yet granted to them,” D.K. Mohanty, director of mines in the Odisha government, said when asked where L&T’s clearances stand.

Asked about the timeline for grant of the mining leases, Mohanty said he had “no idea”.

 

 

Prospecting licences are given to miners for carrying out exploration so that the reserves and the ore body are identified. After this, fresh applications have to be made for a mining lease.

 

 

Sesa Sterlite, the Indian unit of London-listed Vedanta Resources Plc., is desperately look

ing for bauxite supplies for its 1 million tonne (mt) alumina refinery in Lanjigarh in Odisha’s Kalahandi district, with its plans to mine the Niyamgiri hills waiting for a central government approval.

 

 

In December, the refinery had to be shut, owing to a shortage of bauxite. It reopened in the middle of this year.

 

 

Earlier this year, 12 villages surrounding the Niyamgiri hills reportedly gave a thumbs down to Vedanta’s mining plans after the Supreme Court directed them to furnish their responses to the central government.

Vedanta chairman Anil Agarwal was last week cited by Business Standard in Bhubaneswar as saying the Odisha government may help them source bauxite from L&T, which has two mines—Sijimali and Kutrumali—in Odisha with estimated bauxite reserves of 300 mt.

 

 

“As per an agreement, we can source bauxite from L&T mines. The chief minister said such a proposal is under consideration and a decision will be taken soon in this matter,” Agarwal was quoted as having said in the newspaper.

 

 

The company has the largest installed capacity for aluminium metal (made from alumina) in India, at 745,000 tonnes, at its Chhattisgarh and Odisha smelters and investments have been made to increase the Odisha smelter capacity to 1.1mt.

Questionnaires sent to the spokespersons of L&T and Vedanta were not answered.

 

 

Vedanta’s struggle for bauxite can be seen in the light of a natural resources crunch in India where social opposition and vociferous environmentalists have slowed many mining projects.

 

 

Mines director Mohanty said Vedanta has 32 applications for bauxite and laterite in Odisha that are for prospecting licences and mining leases, and these are all under process.

 

 “They are being examined and based on merit they will get it,” Mohanty said.

 

Two analysts said they were skeptical about a quick bauxite linkage from L&T.

“The benefit from these bauxite mines to Sesa Sterlite will be known only after the terms of production, pricing, regulatory clearances, etc., are known,” said Bhavesh Chauhan, senior research analyst–metals and mining, at Angel Broking Ltd. “Hence, until further updates, we maintain our estimates and neutral view on Sesa Sterlite.”

 

 

Another analyst said it may take two-three years for the plan to take shape.

“It is at an initial stage. It may take two-three years at least to get the bauxite to the Vedanta plant,” said Giriraj Daga, senior research analyst at Nirmal Bang Equities Pvt. Ltd.

 

 

After a mining lease is obtained, it could take up to two years to develop the mine and get clearances, Daga said, adding that he sees Sesa Sterlite’s share price at Rs.210 in about a year.

 

 

On Thursday, shares of Sesa Sterlite gained 0.57% to close at Rs.175.25 on BSE, while the benchmark Sensex gained 0.56% to close at 20,534.91 points. The BSE metal index gained 0.95% to close at 9,248.10 points.

 

 

Since the company’s merger on 22 October, Sesa Sterlite has lost 11.69%, while the Sensex lost 1.58% and the metal index gained 0.69%.

Rahul kumar Gupta

PGDM,1st Year...

Source:-MINT.