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Vedanta is feathering its nest in South Africa, announcing a feasibility study on a zinc-smelting refinery at its flagship Gamsberg zinc ore complex.
Vedanta Resources (LSE:VED) is feathering its nest in South Africa, announcing a feasibility study on a zinc-smelting refinery at its flagship Gamsberg zinc ore complex in Northern Cape province.
The major diversified miner said in a press release on Wednesday (May 2) that building a refinery would make Gamsberg a “fully integrated zinc production site, with the mine, concentrator and smelter-refinery complex at single location, making it the first integrated zinc manufacturing facility in South Africa.”
Zinc prices have been on the rise since the end of 2015, boosting profits for Vedanta and incentivizing it to invest more in its zinc projects in South Africa and Namibia.
The base metal is currently trading at US$3,100 per tonne on the London Metal Exchange, a number it’s clawed its way up to from a low of US$1,500 at the end of 2015.
Chart via lme.com.
The company said it plans for the first phase of the smelter-refinery complex to have a capacity of 250,000 tonnes per year of finished zinc metal, and as the Gamsberg mine ramps up the smelter will be expanded at the same time to meet demand.
“The feasibility study will evaluate the infrastructural requirements of the complex — the beneficiation facility will require around 200MW of additional power, and additional water supply. Both of these would mean significant large-scale investment,” Vedanta said in the announcement.
The refinery will require an additional investment in Gamsberg of between US$700 and US$800 million. To begin with, Gamsberg is expected to produce 4 million tonnes of ore per year, with first production expected in mid-2018.
Currently 2,700 workers are employed at the site, with 700 workers needed once construction is completed. According to the company, the site has the potential to “trigger a new wave of industrialisation and economic development” in what has traditionally been an underdeveloped part of South Africa.
Gamsberg is being developed by Black Mountain Mining (BMM), a Vedanta Zinc International-owned company with copper, lead and zinc mines operational nearby.
One of BMM’s other mines, the Deeps Shaft at Aggeneys, currently produces 102,000 tonnes of zinc per year, but it’s expected to cease operations in 2020.
The feasibility study will also take into consideration previous studies by Vedanta looking into developing a “zinc cluster” of Vedanta-controlled zinc operations in the region.
Another Vedanta asset — the Skorpion zinc mine in Southern Namibia — is already host to an integrated zinc refinery. However, the mine is due to cease operations in 2020.
“The potential exists for the conversion of this 150,000 tpa refinery to co-treat sulphide and oxide concentrates from Gamsberg and other sulphide concentrate raw materials from nearby,” said the company. “Should these projects proceed, this Southern African zinc cluster has the potential to be one of the world’s largest zinc supply regions.”
On Wednesday, Vedanta’s shares on the London Stock Exchange closed up 3.04 percent at GBX 746.20.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.