(Adds details, background, analyst and activist quotes)
By Karen Rebelo
May 9 Vedanta Resources Plc said on
Friday it would not mine bauxite at a controversial project in
eastern India until it can win over local communities opposed to
India's Environment Ministry had already rejected Vedanta's
request to mine in the Niyamgiri hills of Odisha state following
persistent protests from local communities that consider the
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
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 state government
to find alternative sources. An agreement with the state
government guarantees the miner 150 million tonnes of bauxite,
Vedanta said in a statement.
The company's proposal to mine bauxite in the Niyamgiri
hills has angered rights groups globally after the indigenous
Dongria Kondh tribe said the region is home to their deity Niyam
"If Vedanta thinks it will be able to motivate the local
communities, it is impossible," said Prafulla Samantray, a local
activist who has petitioned against the project. "People have
protested, revolted against it. They will never allow mining."
In April 2013, India's top court ordered the state of Odisha
to submit a report based on the views of local villagers.
Residents of all 12 villages surveyed voted unanimously against
mining in the region.
Vedanta, controlled by one-time scrap metal dealer Anil
Agarwal, was one of three miners to drop out of the FTSE-100
index last year.
It has faced - and overcome - regulatory problems before in
India. After grappling alongside other miners with bans on iron
ore extraction in two states, Vedanta restarted mining in
Karnataka in December and plans to resume mining in Goa.
Vedanta's shares closed down 1.6 percent at 907 pence on the
London Stock Exchange on Friday.
(Additional reporting by Jatindra Dash in Bhubaneswar; Editing
by Robin Paxton)