Vedanta shelves Odisha bauxite plan pending local approval – by Karen Rebelo (Reuters India – May 9, 2014)

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REUTERS – Vedanta Resources Plc said on Friday it would not mine bauxite at a controversial project in Odisha until it can win over local communities opposed to its plan.

The Environment Ministry had already rejected Vedanta’s request to mine in the Niyamgiri hills of Odisha following persistent protests from local communities that consider the region sacred..

While Vedanta stopped short of saying it had abandoned the project, its decision to await the consent of local communities will require it to look elsewhere for the raw material to feed its alumina refinery in the same state.

Analysts said Vedanta’s announcement is an early hint of plans by Tom Albanese, the former Rio Tinto head who became Vedanta’s chief executive last month, to make the London-listed company a more attractive sell to international investors.

Vedanta, a company with a market capitalisation of $4.2 billion and base metal mines in several countries, relies on aluminium production – exclusively in India – for about 12 percent of its revenue.

Alumina, produced from bauxite, is used in turn to produce aluminium.

But Vedanta’s 1 million-tonne-per-year Lanjigarh alumina refinery in Odisha has struggled to source bauxite ever since it was commissioned in August 2007. The company has incurred high costs bringing in the raw material from elsewhere.

The refinery operated at only 91 percent of its capacity in the quarter ended March 31, producing 227,000 tonnes of alumina.

“I would imagine they would try and look elsewhere to source their bauxite as it’s quite important, to make the business viable, to have their own local sourcing,” said Ben Davis, a mining and metals analyst at Liberum.

Vedanta said it was working with the Odisha government to find alternative sources. An agreement with the state government guarantees the miner 150 million tonnes of bauxite, Vedanta said in a statement.

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