Vedanta is looking to invest in its SA operation

SOUTH Africa is on the investment radar for diversified global metals miner Vedanta Resources, which announced yesterday that it was constructing a large zinc mine at Gamsberg, while it was also keeping faith with its copper mines in Zambia, despite their current weak performance.

Vedanta has operations in other countries such as India and Australia, while its resource portfolio also includes aluminium. But it is in Africa where its commitment has of late been focused, amid increasing investments in the region having intensified progress at its South African zinc project.

“Our zinc project in Gamsberg, South Africa, is under active construction as we prepare to mine one of the world’s largest deposits of zinc. Given strong zinc market fundamentals, this venture looks increasingly well-timed and we look forward to production going live in 2018,” said Vedanta Resources chairman Anil Agarwal.

Analysts at FocusEconomics said in a Consensus Forecast for Commodities report for May 2017 that “growing concerns regarding global zinc supply following the closure of several large mines in 2016 has allowed zinc to outperform most other base metals” this year.

Analysts project that zinc prices will average $2 753 (R35 650) per metric ton by the end of the year.

“Prices are expected to rise modestly going forward, with the supply deficit expected to persist as stocks continue to dwindle.

“The maximum average price projected for the fourth quarter in 2017 is $3 527 per metric ton,” the FocusEconomics analysts said.

The strategy to heighten the focus on the South African zinc mine comes amid a slowdown in revenues and production at Vedanta’s copper mines in Zimbabwe. Lower equipment availability and higher electricity tariffs in Zambia last year have not helped its copper operations.

One of the Zambian copper operations, Nchanga Copper Mines, has also been under care and maintenance since 2016, and lost production suppressed output for the year to end March.

Agarwal admitted that the Zambian operations experienced “operational challenges” although the focus was now on ramping up volumes to as much as 210 000 tons in the current year to end March 2018.

During the period under review, average copper prices marginally declined by 1 percent to $5 152 per ton, but this adversely affected the Zambian operations’ profit position by a massive $15 million, officials at Vedanta said.

A prolonged weakness in the kwacha, which sagged by as much as 2.5 percent, has also been blamed for the performance of the company’s Zambian copper operations.

Mined copper metal production from Zambia was 23.5 per- cent lower at 94 000 tons due to lower production from the Nchanga underground mine.

This drove down revenues for the period by 10 percent to $874m, which translated into stronger ebitda (earnings before interest expenses, taxes, depreciation and amortisation) position of $6m, compared with an ebitda loss of $18m the previous year.

The smelter raised custom production volumes by 31 percent to 84 000 tons, but this was mainly due to “improved third party concentrate availability” and installed ability “to handle feed rates greater than 70 tons per hour” at the smelter.