London-listed Vedanta Resources Group company Sesa Sterlite beat street expectations on bottomline and operating front while topline was in line. The company’s consolidated profit fell 15 percent year-on-year to Rs 1,587.5 crore, impacted by Cairn earnings, higher tax expenses, power & fuel and depreciation costs.
Tom Albanese, chief executive officer, Sesa Sterlite says the company is pleased with its copper segment performance and is targeting doubling the copper capacity at Tuticorin and ramping up aluminum capacity at Jharsuguda .
In an interview to CNBC-TV18, Albanese says he expects iron ore mining to start sooner in Karnataka than in Goa.
Below is the verbatim transcript of Tom Albanese’s interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18.
Reema: Copper treating charges as well as refining charges have come to about 22 cent per pound. Are you optimistic there that the Treatment Charge (TC), Refining Charge (RC) will move towards that 25 cents per pound and also if you could give us an update on the proposed capacity expansion?
A: Yes, we have been quite pleased with our copper smelting business at Tuticorin this year. We’ve had almost a perfect storm combination where subsequent to a planned outage earlier in the year, we did some necessary maintenance. We came out of it with some the highest productivity levels not only for the Tuticorin smelter but also as benchmark to the global sector for that type of smelter.
So it’s been running at full capacity, exceptional performance at a time as you say with strong TC/RCs and also the bye product pricing that we are getting for sulphuric acid, has been higher than what we have seen for the past couple of years. So its been a particularly profitable business for us in this environment and what we’re seeing here and to some extent the new concentrates that are coming in to the market that are keeping copper prices down have also had the effect of raising TC/RCs because we have more concentrates in the market than globally there is smelting capacity so Tuticorin’s at the right place and right time.
Sumaira: You spoke about your copper capacity, so can we understand now that you will be going ahead with hiking your copper capacity in the near future?
A: We certainly would like to be in a position to expand our capacity and in this market with a very strong global competitive position of the Tuticorin business; we would like to be doubling that business. We have the global markets available, we are well-positioned and this puts more copper into the Indian market, so it is very consistent with the Make in India theme.
Therefore, from our perspective it would add jobs, it would add industry in part of India, industry that needs the jobs and certainly we are working with the state government and I hope to be in a position at some point of time when we have all the requisite approval so we can expand that facility.
Sumaira: Your aluminium business has delivered good performance this time but we need a bit of clarity with respect to your 1.25 million tonne per annum (mtpa) Jharsuguda aluminium smelter. For power were you able to apply to the Orissa government to convert from independent power producer (IPP) to captive power plant (CPP) and also are imports now being considered for your bauxite usage?
A: In the aluminium business we have seen stronger LME market compared to year gone and certainly nice attractive physical premiums for the metals. We are incentivised to give as much production as we can. We have had a quite conscious strategy over the past year where rather than trying to solve all the supply chain, all the power issues at one go; we been looking for progressive solutions to bring in few lines at a time, look for individual power blocks that are available, certainly our own capacity and you have seen both the Jharsuguda and you have also seen Bharat Aluminium Company Limited (BALCO) and as we have the power available, we will look for solutions.
There might be incremental solutions to bring more capacity on and my objective is each quarter you will see more and more capacity coming in and we have been successful so far. It is slow but it’s a steady progress and certainly better progress that we had over the past couple of years.
In Jharsuguda we have been able to bring in more than 50 parts as we said we would and we are continuing to creep up the overall capacity and as we look forward, we recognise that we have quite a bit of power generating capacity and we are looking at solutions which would involve using some of the power generating capacity which is now set for IPP purposes, for the purposes of CPP power generation and we look at that on a unit by unit basis, we do have to recognise that we have coal linkage allocation with a different on a unit by unit basis, so we been looking optimizing that and we would hope to be in a position over the next few months where we can be seeing a ramp up in capacity and I would certainly like to see a material increase in the overall capacity of Jharsuguda in the next fiscal year.
With respect to bauxite, we are working with the government. We had a successful clearing last year for the expansion of Lanjigarh. We are now running Lanjigarh at almost four loud capacities of million tonne per year but the plant itself is capable of running close to 2 million tonne per year with an environment approval, even before we look at expanding it beyond that. So we would like to be in a position to get those approvals, so we can ramp those up.
We are now in a position where we are sourcing as much bauxite and other feed stocks we can from Orissa and from Chhattisgarh and around India and to that extent we can find that we are looking to Australia, we are looking to west Africa to place the balance. I do not that that is a long-term optimal solution because sea freight are more expensive, it is certainly not good for Indian economy and for us to be importing bauxite when we have bauxite right in our regional area. So we are looking for local bauxite solutions. We would also like to see progress on the bauxite and in particular with the recent approved mining ordinances and Mines and Minerals Development & Regulation (MMDR) has put us in a position and hopefully to see competitive auctions taking place and we would like to see with those competitive auctions some streamline processes that we can be procuring bauxite leases in a competitive transparent basis and certainly aligned with our commitment for best practice environmental standards and the commitment of those communities with the development in those cases where we do see resources.
Reema: Have you requested the Orissa government to convert your power plant from IPP to CPP?
A: We are certainly in regular updated discussion with the Orissa government and we are working with them. I think it is good collaborative situation, it is a win-win between what we want to do and what the Orissa government wants to do in terms of seeing job increases and over the next couple of months, it is a matter of notifying the government of our intent and we will be proceeding away which is consistent with the interest of the government.
Reema: Your international zinc delivered a steady performance but your Lisheen mine will be shut down in FY16 so will that hamper your volumes likewise we understand a lot of the big international zinc mines could be shut down so would that be a good thing for global zinc prices as well as for Hindustan Zinc?
A: Over the past few months, we have heard about lowering oil prices, lowering iron ore prices and lowering copper prices but it should also be appreciated that other commodities - we have talked about aluminium particularly zinc, we have largest zinc mines that are scheduled to be exhausted particularly Century which is the largest zinc mine in the world but also our own Lisheen mine in Ireland, which is scheduled to be exhausted sometime later this calendar year and with that, will come an extended deficit in supply and we expect to see tightening in markets.
We have already seen an anticipation that with stronger zinc prices which has certainly helped our Hindustan Zinc business and helped our zinc international businesses. What we are doing in this environment is not just standing still. As we talked about Hindustan Zinc it has been working to both expansion of our production and convert to underground and just two weeks ago the Hindustan Zinc board approved the additional expansion in this environment and second with zinc international, we are looking at opportunities to bring a new mine into production in South Africa at Gamsberg which will be leveraging of our existing zinc refining facilities in southern Namibia. So we are looking at a complex of zinc mining and smelting in that general area of the northern Cape and Southern Namibia, which is going to be good certainly for our continued presence and growing presence in the zinc market. However, I don’t think it is very good for those regional economies. It is a very rural area with jobs scarce and so, so that has certainly been welcomed by both the South African and the Namibian governments.
Sumaira: I want to focus a bit on the restart of iron ore production in Goa, will the export duty on iron ore hit profitability and the second part to my question is when can we see iron ore production restarting in Karnataka?
A: I think first of all starting at Karnataka base, we would be expecting production to be started sooner there than in Goa. We would hope to see in the early part of February -- maybe as early as the next week or two that we can begin resuming production based upon getting the requisite lease approvals from the state of Karnataka. We would like to be in a position where we can be mining as many times as we can but it is probably going to be lower than USD 2.3 million tonne cap that we had in those mines at Karnataka.
In Goa, we have seen good progress by the state in terms of the lease approvals and lease extensions from the SC ruling of last year. We still need to work with the Central government in Delhi.
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