Indian billionaire Anil Agarwal wins Ramaphosa's backing for South African zinc smelter

Indian billionaire Anil Agarwal's Vedanta has won the backing of South African President Cyril Ramaphosa for a multibillion-rand zinc smelter in the Northern Cape, a project that would turn ore from the group's Gamsberg mine into refined metal at home instead of shipping it abroad as concentrate.

Ramaphosa pledged his government's help to get the smelter "off the ground" at the opening of the mine's second phase near Aggeneys on Friday, saying it would create "new opportunities for industrial production, local procurement and employment."

He also acknowledged the main obstacle. "We recognise that an investment of this magnitude requires commercially viable electricity, reliable infrastructure and other enabling conditions," he said, adding that the government "must work with Vedanta and other partners" to put them in place.

Cheaper power on the table

Electricity is the deciding cost for any zinc smelter, which uses large amounts of power to refine the metal. Electricity Minister Kgosientsho Ramokgopa said his department supports the project and will negotiate a tariff with the company. "We are going to make their dream of building a smelter possible," he said.

State utility Eskom has granted tariff discounts to several mining companies this year. Ramokgopa did not say what terms Vedanta might get.

South Africa has had no zinc refinery since Exxaro Resources shut its Zincor plant in Springs, east of Johannesburg, more than a decade ago, so the zinc mined in the country leaves as concentrate.

Vedanta has not given a capacity, cost, site or timeline for the smelter. Priya Agarwal Hebbar, Agarwal's daughter and chair of the group's Indian zinc unit, Hindustan Zinc, described it as a "smelter-refinery complex" that would follow the completion of Gamsberg's second phase.

A 1 million-tonne ambition

The smelter is part of a larger plan. Agarwal Hebbar said Vedanta wants to build an integrated zinc business in South Africa producing about 1 million tonnes a year, backed by new smelters, downstream manufacturing and the Namakwa special economic zone. If fully realised, she said, the plan could create "thousands of new jobs."

"Over the last 15 years, Vedanta has invested R89bn in South Africa's economy," she said. That is about $5.3 billion.

The second phase of Gamsberg, which cost about R10 billion ($600 million), doubles the mine's ore-processing capacity to about 8 million tonnes a year and lifts output to about 500,000 tonnes of zinc a year, making it one of the largest zinc operations in the world. The mine, about 20 kilometres east of Aggeneys, has a life of about 30 years and reserves of about 655 million tonnes of ore.

Vedanta owns 74% of the operation through Black Mountain Mining, and Exxaro owns the remaining 26%. The group's total investment commitment in South Africa stands at R21 billion ($1.26 billion), equal to about 13% of the Northern Cape's economy.

"We want the benefits to stay in Namakwa, through local jobs, local suppliers and skills development," said Vijay Kumar, chief executive of Vedanta Zinc International.

Agarwal, 72, started out as a scrap-metal trader in Mumbai in the 1970s and built Vedanta into one of the world's biggest producers of zinc, aluminium and oil.