Vedanta May Process South African Zinc Ore in Namibia

Base Metals Investing

Due to South Africa’s continuing issues with the power grid, Vedanta warns it may move its zinc processing to another country.

International miner Vedanta (NYSE:VEDL) may begin processing its zinc ore from its Gamsberg mine outside of South Africa if the country is not able to solve its power problems in a timely fashion.

CEO of Vedanta unit Vedanta Zinc International Deshnee Naidoo expressed concerns regarding the reliability of South Africa’s power grid, which has experienced rolling blackouts while Eskom, the state power company, pushes down the economy through its debts.

“If we can’t make it work here, we will have to look at other geographies,” Naidoo said in an interview with Reuters. “My concern is about government’s ability to deliver power.”

Vedanta opened up the Gamsberg mine back in February 2019 with hopes that the mine would produce over 214 million metric tons per year of zinc ore with a grade range of 6 to 6.5 percent. During the company’s second quarter, Gamsberg produced 24,000 metric tons of zinc.

The miner is considering processing its ore in Namibia, but doing so would require the company to adapt the processor currently there, according to Naidoo.

Back in March, the company had to shut down its Skorpion zinc refinery in Namibia following a strike by its mining contractor. This pause in work was meant to allow ore stocks to build up to adequate stock levels.

The refinery shut down was extended earlier this month and the plant will remain closed until the end of February 2020.

Gamsberg and Skorpion are not the only Vedanta projects to catch a snag this year.

The company also suspended operations at the Nchanga copper mine in Zambia due to the cost of import duties on vital supplies for processing. Konkola Copper Mines (KCM), the company managing the asset and wholly owned by Vedanta, has been locked in a dispute with the Zambian government after the president ordered KCM to liquidate back in August. The government made this ruling, arguing that KCM had breached the terms of its license, which the company denies.

Vedanta’s share price has struggled this year, having dropped by 27.73 percent since January. The company’s share price did do well between February and April, but has since lost the gains it made during that time.

Zinc has also struggled in price, following a similar pattern to Vedanta’s. The metal’s price began to rise early this year, but after April zinc’s price began to dip, losing the gains it made during the first four months of 2019.

On November 26 at 11:48 p.m. EST, Vedanta’s stock traded for US$8.08 in New York. In London, zinc traded for US$2,334 per metric ton.

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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.

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