Nalco banks on long-term raw material security for alumina, aluminium ops

Coal mining to take off in 2020, Pottangi bauxite mine to go on stream in 2023

State run producer National Aluminium Company (Nalco) is betting on long-term raw material security to extend the longevity of its alumina refining and aluminium smelting operations.

Nalco aims to put on stream its second bauxite mining lease of Pottangi in 2023. This captive mine will feed its fifth stream of alumina refinery at Damanjodi currently under expansion. The Pottangi mining lease along with the Panchpatmalli mines having balance deposits of around 160 million tonnes (mt) would offer ample bauxite to ensure the refinery operations for the next 25 to 30 years. Aside from bauxite, Nalco aims to begin mining from its captive Utkal-D coal block from calendar 2020- a milestone that promises to prune its cost of aluminium production by 25 per cent.

“The gram sabha for the Pottangi mine operations has been held. DGPS (Differential Global Positioning Survey) for the mine is also completed. We have public hearing scheduled on December 17. The mining plan has been approved by IBM (Indian Bureau of Mines). We aim to open this mine in 2023. With an annual capacity of three million tonne per annum (mtpa), it will feed the fifth stream of our refinery”, said Nalco's chairman & managing director T K Chand.

Nalco has pledged Rs 5600 crore on adding a fifth stream of one million tonne capacity to its alumina refinery at Damanjodi in south Odisha. Work on side grading and soil testing has already commenced. Presently, Nalco is operating the refinery at more than its normative capacity of 2.1 mtpa.

Besides bauxite mine, Nalco is looking to hasten production from its allocated coal blocks- Utkal-D & E. The process of selection of Mine Developer cum Operator (MDO) is underway. Coal mining is scheduled to start from calendar 2020. Separately, Nalco has appealed to the Ministry of Coal to allocate Utkal-C and Mandakini-A coal blocks.

“Opening up of the coal blocks is going to be a game changer. It will bring in incremental profit of Rs 600 crore for Nalco”, Chand said.

Last month, Nalco's smelter plant at Angul faced distress after coal despatches from Mahanadi Coalfields Ltd (MCL) paralysed. Nalco was forced to shut off 80 pots due to lack of ample coal to power the smelting unit. Since July when MCL's Bharatpur open cast project suffered a shutdown in operations for two weeks following a strata failure triggering landslide

Apart from coal, Nalco is eyeing profit of Rs 60 crore per annum from its joint venture with Gujarat Alkalies & Chemicals Ltd (GACL) on a caustic soda cum captive power plant (CPP) at Dahej (Gujarat). The project is being taken up as a backward integration initiative of Nalco.

In Q2 of this fiscal, Nalco's performance was underwhelming as it logged a rare quarterly loss of Rs 28 crore. The navratna company had to provision for excess and unforeseen expenses- Rs 23 crore towards electricity dispute and Rs 145 crore incurred for power and fuel purchase costs.

“Still, we were able to maintain profitability in H1 of this financial year at a time when our competitors faced erosion of profits. Globally too, aluminium smelters are making cash losses as prices continue to be subdued”, said the Nalco CMD.

He feels both aluminium and alumina prices will gain strength in Q4. While aluminium prices are expected to rise to $1800-1850, alumina prices are forecast to be in the range of $300-350 per tonne.

Chand, who superannuates on November 30, has led Nalco through turbulent times, battling business headwinds. He was instrumental in obtaining Pottangi bauxite mining lease for the PSU. His canny strategy to sell almost the whole of surplus alumina in export markets helped Nalco to post a record net profit of Rs 1732 crore in 2018-19. Chand has invested diligent efforts to implement Nalco's all-weather business model to keep the company immune to cyclical vagaries of metals sector.