Vedanta hits production high spot at Black Mountain

JOHANNESBURG (miningweekly.com) – Diversified mining company Vedanta has achieved its highest quarterly production in four years at Black Mountain in South Africa, where the Gamsberg zinc project is on track to begin production towards the middle of next year.

In addition, mobilisation on the Skorpion pit layback, in neighbouring Namibia, started last month, the London-listed and India-rooted company said on Wednesday, when it presented preliminary results for the 12 months to March 31.

Black Mountain, the zinc, lead, silver and copper producer Vedanta acquired from Anglo American in 2010, hit the production high in the three months to March 31.

During the company’s financial year to March 31, overall Vedanta group revenue increased by 7% to $11.5-billion on firmer commodity prices and volume ramp-up, and earnings before interest, taxation, depreciation and amortisation (Ebitda) increased by 37% to $3.2-billion.

The Ebitda margin of 36% was well up on the 28% of the last financial year, driven by firmer commodity prices and operational efficiencies.

Free cash flow after capital expenditure of $1.5-billion was down on the $1.8-billion of last year.

Gross debt rose to $18.2-billion in the period from $16.3-billion, on temporary borrowings of $1.2-billion, for the payment of a special dividend, but was reduced by $1.4-billion after March 31.

The final dividend of 35c a share took the total dividend for the financial year to 55c a share, yielding 6.5%.

Underlying profit was 1.1c a share compared with last year’s 131.9c a share loss.

Vedanta, which earlier this year was being associated with a move towards Anglo American because of the 11%-plus acquisition of Anglo equity by Volcan Investments, headed by Vedanta chairperson Anil Agarwal, has done well with the South African assets it acquired from Anglo seven years ago.

It achieved two-year payback on the $1 338-million it paid for Anglo’s zinc assets in 2010 and got going with the building of the Gamsberg mine, in South Africa’s Northern Cape, which had been on the drawing boards for decades.

Gamsberg is regarded as being of the "utmost importance”, with Vedanta reporting that more than 15.5-million tonnes of waste rock had been removed and contractors mobilised on site. 

The first phase of the project, the company reported, is expected to have a mine life of 13 years, replacing the production lost by the closure of the Lisheen mine, in Ireland, and restoring volumes to over 300 000 t/y.

There was also potential for further expansion at the Gamsberg North deposit. 

After first production in the middle of next year, ramp-up to full production of 250 000 t/y is expected in nine to 12 months. 

At Skorpion, the Pit 112 project was progressing and all equipment would be in place by the first quarter of next year.

Involving high-wall pushback of the existing pit, this project would increase the mine life from half a year to three years and increase current reserves from 0.9-million tonnes, at a grade of 6.5%, to 4.2-million tonnes at a grade of 9.9%. 

The cost of production is expected to be a higher $1 500/t on appreciating local currency, higher throughput and investment in exploration. 

Strategic priorities include carrying out a project study for Swartberg Phase II and Gamsberg Phase II to extend the life of the Black Mountain complex.

Vedanta Zinc International and Copper Mines of Tasmania CEO Deshnee Naidoo, formerly of Anglo American, heads the Southern African and Tasmanian operations and has managed to get the Gamsberg project under way by cutting $200-million off the project’s original capital estimate to take it down to $400-million.

The company is planning to use revenue generated during the Gamsberg project’s first phase to help fund its second phase, which will probably include a new 300 MW to 350 MW zinc refinery at a cost of nothing less than $500-million to $600-million.

The contract awarded to Aveng Moolmans by Black Mountain Mining to establish and mine the Gamsberg opencast zinc operation involves the setting up and commissioning of a concentrator plant and associated infrastructure for the opencast mine, which is located on one of the world’s largest undeveloped zinc deposits, 20 km east of the town of Aggeneys.

Engineering solutions provider ELB’s Engineering Services is overseeing the construction of the process, power and water plants at the project.

While all this has been taking place, Agarwal’s use of Volcan to acquire billions of pounds worth of Anglo shares has made global headlines.

As reported by Mining Weekly, a seven-year employee share ownership plan (Esop), involving 6% of Black Mountain shares being issued to an employee-held trust, was established last month following talks with the National Union of Mineworkers.

The Esop’s Voorspoed Trust comprises three union-appointed trustees, one Black Mountain representative trustee and an independent trustee. Half of the shares were acquired by the trust through a contribution from Black Mountain at no cost to the 702 employees involved.

Vedanta, which produces aluminium, copper, zinc, lead, silver, iron-ore, oil, gas and commercial energy, has operations in India, Zambia and Australia, besides Southern Africa.

It states that it places emphasis on partnering with all its stakeholders based on its core values of trust, sustainability, growth, entrepreneurship, integrity, respect and care.