TOM ALBANESE, CEO, VEDANTA LIMITED, IS COMMITTED TO CREATE A GLOBAL DIVERSIFIED NATURAL RESOURCES COMPANY HAVING STRONG ROOTS IN INDIA
by Jayashree Kini-Mendes
It’s not given to every leader to be
able to shoulder the responsibilities of leading a multi-billion dollar mining company with vast assets in the country and abroad. More so, when mining, per se, is struggling to recalibrate and faces a host of unresolved challenges such as dipping demand, rising stakeholder expectations and shifting regulatory rules. It was in the midst of such numerous challenges that Tom Albanese joined Vedanta Limited as CEO in 2013.
The former CEO of Rio Tinto, Albanese, who holds a Masters in Mining Engineering from the University of Alaska, brings with him a discipline that includes safety and integrity — a culture that was hitherto stigmatised in the global mining industry. This severity is what is helping him to constantly improve operational excellence, bring in cost management and enhance Vedanta Limited’s sustainable value for its stakeholders. He has also made it his chief aim to create a truly natural resources company in India that can compete with the best in the world. Albanese believes that for global behemoths the solution lies in diversification, integration and scaling up of resources. “India has abundant natural resources, with some minerals having one of the largest of reserves. Considering the current commodity environment with volatile prices, a low-cost mining structure will benefit producers.”
Low-cost mining may be an oxymoron, but Albanese knows what he is saying. He is aware that access to finite resources must be respected in order to uphold inter-generational equity. It is for this reason that the conglomerate has constantly stressed on technology and innovation to generate operational efficiency, increase waste utilisation and make operations safe and sustainable.
Goodwill hunting
The natural resources industry is one of the oldest economic occupations in the world. Even today, it forms the core basis of socio-economic development. In India mining contributes to around 2.5% of the GDP and is considered a core sector. Consider this: Vedanta Limited is India’s largest and the world’s second largest mining company for zinc. It has one of the largest custom copper smelter and is the largest producer of copper rods in India, besides being the largest aluminium producer in India with a capacity of 2.3mtpa and 47% market share in India’s primary aluminium industry. Other major mining operations also include iron ore and zinc-lead-silver.
Cognizant of the environmental impact of mining and the adverse effects on the health of the people living nearby, the management of Vedanta has stepped up initiatives to maintain a strong focus on sustainability. Albanese says, “Mining is a land intensive activity and the richest deposits of minerals are mainly in ecologically sensitive zones. These regions are also culturally diverse. Over the past few decades, engineering and technology have advanced considerably. Reliance on these technologies by companies has made mining operations much less intrusive, safe and sustainable.”
But Albanese has had to battle much more than that. Over the last two decades, Vedanta Limited has proved to be a skilful surfer and adept at catching the successive waves of economic growth in India at just the right moment. The company has constantly sought opportunities to grow, and Albanese says, it’s a continuous process. Simultaneously, it has a strong will to improve the quality of its assets and looks at ways of reducing costs in the metals and mining businesses. “Our diversified assets not only allow us to hedge against volatility across the commodities basket but also provides for scalability. Simplification of our corporate structure continues to be a strategic priority for us,” adds Albanese. The last has come through strategic appointments of key people who will serve the different sectors the company operates in.
Across its businesses, Vedanta has sought to build up some of the most prolific Tier-1 assets with a low-cost production model, operated by a talent pool of professional workforce. Recently, it proposed to set up an aluminium park in Jharsuguda district of Odisha, on an estimated land of 240 acres. Abhijit Pati, CEO, aluminium, Vedanta Limited, says, “The park has the potential to attract over Rs 1,000 crore investments which can be operationalised within a short frame of time, owing to benefits such as plug and play. This will serve as a market for downstream products and generate more than 17,000 jobs.” The aluminium park will be adjacent to Vedanta’s 1.6mtpa smelter along with 3,600MW of power generation facilities. Simultaneously, it has also announced its intention to increase production capacity at the Lanjigarh refinery, followed by increasing aluminium output. The refinery has received the nod from the state government to source bauxite from the Kodingamali mines in Odisha. The mines, owned by the Odisha Mineral Corporation (OMC), will provide ample raw material at competitive pricing with a shorter transportation time.
Considering that it also mines iron ore in Goa and Karnataka, the next obvious move to growth (with ready available raw material) is a steel plant. And if all goes well, you might hear of one coming up at Jharkhand. Kishore Kumar, CEO, iron ore business, Vedanta Ltd, says, “We are awaiting the grant of mining lease under section 10 A (2b) by the state government after which work on setting up an 1mtpa pig iron and ductile iron (DI) pipes will start. We are looking at an investment of Rs 1,700 crore.” Work is in progress on the pre-planning activities for the new plant that will generate direct employment for at least 2,000 people in Jharkhand.
Vedanta Limited has also followed a policy to ensure that its practices are at par with global benchmarks with a strong focus to be the best among the peer industries. When its copper mining division, a sector that is precariously known to impact drinking water aquifers, and contaminate farmland while putting public health at risk, bagged an award for demonstration of best practices and innovation in environment management system, it just goes to prove how much the company has done in the way of sustainability. P Ramnath, CEO, Sterlite Copper, finds that highly rewarding. He says, “We have always strived to demonstrate best-in-class environment performance in terms of air, water and solid waste management. We ensure that our operations are zero liquid discharge with solid waste minimisation driven through innovative approach. Our air emissions are at par with global benchmarks. We generate gypsum and slag as by-products in our operations and both are used for sustainable applications such as road construction, cement production, brick manufacturing, abrasive applications, etc.”
Similarly, the company is seeking a smooth transition to underground mines from open cast. Sunil Duggal, CEO, Hindustan Zinc Ltd, says, “The transition to underground mining is progressing well and production from underground mines has ramped up significantly. We have signed two MoUs with South African companies for development and supply of equipment, and transfer of technology, to improve safety and productivity at our mechanised underground mines. On the mining front, we expect the share of underground mining to increase from 40% in FY16 to 60% in FY17. Although this may raise our production costs, we expect the per tonne zinc cost to remain stable. We also expect costs to decline as the company will commission state-of-the-art shafts in two of our flagship mines.”
Building on concrete foundations
In order to create long term value and be globally recognised, Vedanta Limited has created a transparent engagement with stakeholders to better understand the expectations. The company’s commitment to Social License to Operate (SLO), Free Prior Informed Consent (FPIO) and other similar mechanisms has ensured that the consent of the local communities is respected, adds Albanese. “We are leveraging technology and innovations to deliver operational excellence and remain at the lowest cost quartile while ensuring long-term sustainability of operations. We are focused on structural debt reduction and maintaining a healthy cash flow,” he adds.
Hence, the group simplification. This is strategic to the company as it allows them to consolidate their resources under a single roof and provide a robust model to insulate themselves against broader market risks. “Optimisation of existing assets is another key area where we have focused on. In 2015, we underwent a brand expansion, integrating all our subsidiaries under the ‘Vedanta’ brand,” says Albanese.
Integration has also helped the company understand the cost factor and according to Albanese, “our focus during this volatile period has increased on organic growth, operational excellence and supply chain efficiencies.”
Through the decade, Vedanta has invested over $30 billion in India on growth projects. It is simultaneously investing in some of the most exciting regions in the African Continent. The Gamsberg project in South Africa is considered to possess one of the largest known zinc reserves in the world.
But for now, Albanese is banking on the government’s Make in India campaign and the efforts in that direction that, he says, will promote transparent mine auctions and speedy execution under MMDR act and bring renewed focus on mineral exploration.
Albanese’s moves will not only help the company win global recognition, but also prove that he continues to remain a skilful mining chief.