Hindalco said to face threat of Baphlimali mine closing

Hindalco Industries Ltd., India’s second- largest producer of aluminum, may have to halt mining at its biggest bauxite reserve after part of the land was recently deemed forest, requiring a new permit, people with knowledge of the matter said.

The company needs to obtain approvals by 9 March and is running out of time, one of the people said. Hindalco has already filed the papers and the eastern state of Odisha, where the mine is located, needs to decide whether to extend the deadline, another person said. When Hindalco won the lease more than a decade ago, the area wasn’t marked as forest land, both said, asking not to be identified as they aren’t authorized to speak on the subject.

Failure to get the license in time may either force Hindalco to cut aluminum production or import ore, which may further dent earnings at a time prices of the light-weight metal are at a six-year low. The company, controlled by billionaire Kumar Mangalam Birla, is grappling with debt that has more than doubled to about $11 billion in the last four years as cheaper imports from China weigh on profit.

Forest permit

The Mumbai-based metals producer started operations in the Baphlimali mine in 2013 and was informed about two years later that it needs a permit to excavate 230 hectares (568 acres) of forest land out of the total 1,388.74 hectares, one of the people said. It may take at least a year to win the forest permit, the person said.

Pragnya Ram, the Mumbai-based spokeswoman for Hindalco, didn’t respond to an e-mail or answer calls made to her mobile phone. Debidutta Biswal, special secretary at Odisha’s Forest Department, declined to comment.

A Forest Department circular issued in March last year noted that while approving mining leases, substantial forest areas included in contracts with companies such as Hindalco were recorded as non-forest land. The lease winners were given a year from the date of issue of the notice to get permits to mine those forest areas.

Lack of bauxite has already stymied operations at Vedanta Ltd.’s aluminum unit in Odisha with its smelters operating below capacity. The ore is processed into alumina first, which is then used by smelters to make the metal. Hindalco reported a profit of Rs854 crore ($125 million) in the year ended 31 March 2015, the lowest in six years.

Stock decline

Shares of Hindalco have slumped 21% in 2016, extending last year’s loss of 46% as global prices tumbled amid an economic slowdown in China.

The bauxite ore from the mine feeds Hindalco’s 1.5 million- tons-a-year Utkal Alumina refinery in Odisha, which in turn supplies the output to the company’s smelters in Aditya in the same state and Mahan in the central state of Madhya Pradesh.

A slowdown in China’s economy has led to a global aluminum glut, forcing many producers to idle capacities. Some of the world’s surplus has been flowing into India at lower prices, and domestic producers have sought a doubling of import taxes from the government.