VEDANTA Zinc International’s ambition to build a $1.5bn zinc smelter at Gamsberg hinges on securing an electricity price that will make the project commercially viable.
CEO Vijay Kumar told Miningmx in an interview on Monday that the company had yet to take a final investment decision on the smelter, although design work was under way.
It forms part of a broader plan to double Gamsberg’s zinc production to one million tons a year.
Gamsberg, near Aggeneys in the Northern Cape, is Vedanta Zinc International’s flagship South African operation and one of the world’s largest zinc deposits.
Its first phase was designed to produce 250,000 tons of zinc in concentrate a year, with the recently completed second phase doubling capacity to 500,000 tons.
Zinc is used mainly to galvanise steel against corrosion, making it important to construction, infrastructure and vehicle manufacturing. It is also increasingly used in battery technology.
Kumar said the company was engaging extensively with the government over the electricity requirements for the project. “We have put up our case right across almost every government institution, and most of the places we have got verbal support that everybody aligns with that particular philosophy,” he said.
Vedanta has previously indicated that it needs electricity at around 60c/kWh to make the smelter competitive. Asked about the gap between this and a figure of around 63c/kWh, Vijay said it should not be viewed as an insurmountable difference.
“These numbers are small gaps, which both the parties, when we look at our entire value chain, we can bridge that particular gap.”
He said preferential electricity tariffs had been extended to existing South African smelters and Vedanta expected similar treatment for the Gamsberg development.
The smelter, which Vedanta has previously estimated would require investment of about $1.5bn, is envisaged initially at 500,000 tons a year, with the potential to double to one million tons.
However, Vijay stressed that a final investment decision had not yet been taken.
“The project is in design stages,” he said. “Yes, we want to build a concentrator. We want to build a smelter, and that's why we are going ahead with the design thereof.”
Vedanta's immediate focus is ramping up the recently completed second phase of Gamsberg, which has lifted installed concentrator capacity to 500,000 tons a year. Vijay said the operation should reach that annualised production rate within the next two months.
The expansion ultimately cost more than initially anticipated. Vijay put investment in the second phase at “roughly 10 odd billion rands”, compared with earlier estimates of around R7bn.
He attributed the increase partly to the timing of the project and changes to safety and sustainability requirements, including those governing the tailings storage facility.
The next expansion would involve another 500,000-ton concentrator, taking Gamsberg towards one million tons of annual capacity.
Vedanta's confidence in further expansion is underpinned by extensive exploration since it acquired the asset. Vijay said its resource and reserve base had increased about ninefold over the past 15 years.
Concentrate shortage
He also pointed to tight global zinc concentrate supply as supporting investment in additional production and smelting capacity.
“There is a general shortage of zinc concentrates,” he said.
Vedanta's argument for domestic smelting is that South Africa should capture more of the value from Gamsberg's zinc rather than shipping concentrate abroad.
Kumar said tight global zinc concentrate supply also supported the case for investing in domestic smelting rather than shipping Gamsberg’s concentrate overseas for processing.
If others could generate value from the concentrate after it had travelled “halfway around the world”, he said, “why don't you do it right here, where this material is mined?”