The results of Odisha Mining Corporation’s (OMC) first-ever bauxite auction were a boon for Vedanta, who finally secured a steady stream of affordable bauxite ore for its refinery at Lanjigarh.
The deal is currently projected to have OMC providing 800 thousand metric tons of bauxite to Vedanta over the course of the current financial year at a discount of between US$10 and US$12 per metric ton below the cost of bauxite the plant is now using. This is a long hoped-for outcome for the firm, which has searched in vain for some time to find sufficient bauxite ore for the plant at an acceptable price.
Vedanta has imported bauxite ore from both distant Indian states and from suppliers in Guinea. The proposition has been expensive, leading the firm to operate the 2-million-metric-tons-per-annum refinery at half capacity for several years.
Thanks to the new deal, the refinery will step up production in the coming years. Though the OMC mine has permission to bring 3 million metric tons of bauxite to the surface annually, logistical bottlenecks will restrict production to 1.26 million metric tons in the mine’s first year of production.
In addition to the deal struck by Vedanta, OMC also reached agreements with Hindalco and Anrak Aluminium. Hindalco secured an agreement to buy 105 thousand metric tons at a cost of US$7.08 per metric ton, while Anrak has agreed to buy 65 thousand metric tons at US$7.23 per metric ton. Vedanta struck a deal for an additional 20 thousand metric tons for US$7.08 per metric ton in a separate deal.
“Hindalco and Vedanta clinched the deal at the floor price which was the cost of raising bauxite plus 50 per cent margin for OMC,” explained an unnamed government official to domestic media.
At present, Nalco and Hindalco are paying around US$5.36 per metric ton from their own captive bauxite mines. According to local media, the pithead cost of bauxite ore is forecast to increase by US$3.06 per metric ton once royalties and other taxes come into effect in the near future.