Vedanta to save INR 800 per tonne on securing bauxite from Kodingamali mines

After several rounds of discussion and year-long struggle, Vedanta Aluminium Limited finally sealed a deal with the OMC to haul bauxite from Kodingamali mines to Lanjigarh refinery, as reported on April 12, 2018.

According to the previous news, Vedanta had expected to pay high costs to transport bauxite from Kodingamali mines to Lanjigarh refinery due to the lack of direct rail route. The estimated cost was INR 1000 to INR 1200 per tonne. But now, as per the current report, the company is expecting to secure 0.8 million tonnes of bauxite from the OMC at INR 700 to INR 800 per tonne cheaper compared to the landed cost of bauxite at the Lanjigarh plant site.

In the first ever auction of bauxite at the country, Vedanta, Hindalco and Anrak Aluminium could seize 0.19 million tonnes of bauxite in total offered by the OMC from its Kodingamali mines. According to a government official, "Hindalco and Vedanta clinched the deal at the floor price which was the cost of raising bauxite plus 50 per cent margin for OMC"

The estimated mining cost for Vedanta is about INR 465 per tonne at the pithead excluding the royalty payment to the state government and statutory contribution to District Mineral Foundation (DMF) and National Mineral Exploration Trust fund (NMET), while for Nalco and Hindalco is INR 350 per tonne.

However, the pithead cost might rise by another INR 200 per tonne after the payment of royalty and contribution to DMF and NMET.

Lastly, given all the quotes in the first auction, the OMC is going to sell bauxite on long-term contract at the weighted average mining cost of INR 465 per tonne, until the next auction takes place after six months.