R10bn Vedanta investment positions zinc mine to become one of world’s largest

The Northern Cape’s ambition to become a new industrial growth hub received a R10 billion boost on Friday with the inauguration of Vedanta Zinc International’s Gamsberg Phase 2 expansion near Aggeneys.

Vedanta, the resources group controlled by Indian businessman Anil Agarwal and his family, flipped the switch on the next phase of its zinc expansion project, one of SA’s largest mining investments of the last decade.

Read: Vedanta reopens Gamsberg zinc mine in South Africa [2021]

The project is a major shot in the arm for the Namakwa Special Economic Zone (SEZ), inaugurated in 2024 with the aim of turning the area’s substantial mineral resources into higher-value products.

The company says it now accounts for 55% of Namakwa’s GDP and 6% of the Northern Cape’s economy.

“The Northern Cape is exceptionally well positioned to become one of South Africa’s next major centres of industrial growth,” said President Cyril Ramaphosa, who officiated at the launch.

“The Northern Cape must become known not only for the wealth beneath its soil, but for the industries, innovation and prosperity that grow above it.”

Doubling production capacity

The first phase began in 2019, transforming Gamsberg from a long-undeveloped zinc deposit into an operating open-pit mine and concentrator capable of processing four million tonnes of ore a year and producing 250 000 tonnes of zinc-in-concentrate.

Phase 2 doubles the mine’s annual ore-processing capacity to about eight million tonnes, increasing its zinc-in-concentrate production capacity to 500 000 tonnes.

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Source: Supplied

The company plans to expand production further to one million tonnes of concentrate a year, which would make Gamsberg one of the world’s largest zinc concentrate producers, alongside resources giants such as Glencore and Teck.

The next step could be a zinc smelter, enabling SA to process the concentrate into refined metal locally.

Ramaphosa backs the ambition but acknowledges that it would require competitively priced electricity and reliable infrastructure.

“We recognise that an investment of this magnitude requires commercially viable electricity, reliable infrastructure and other enabling conditions. Government must work with Vedanta and other partners to address these requirements,” he said.

Jobs and investment

The Department of Trade, Industry and Competition (dtic) views the concentrator expansion as an important step towards processing more of SA’s mineral wealth locally, with Gamsberg serving as an anchor for the Namakwa SEZ.

Maoto Molefane, the department’s acting deputy director-general for investment and spatial industrial development, said the zone had secured its first major investment just two years after being designated.

“The R10 billion investment has led to an increase in the total value of SEZs-based operational investments, which is now estimated at just above R50 billion. More importantly, the investment has created more than 400 direct jobs, thus increasing the total permanent jobs created through the SEZs programme to more than 30 000.”

Read:

Vedanta warns it may have to process ore outside South Africa [2019]
Vedanta’s South African smelter plans not derailed by load shedding [2018]

Gamsberg forms part of Vedanta’s wider southern African zinc business, which includes the nearby Black Mountain operations and Namibia’s Skorpion Zinc mine and refinery, currently under care and maintenance.

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The group is also pursuing the Gergarub zinc project in Namibia and further development at Swartberg. In India, its Hindustan Zinc business operates an extensive network of mines and smelters in Rajasthan.

Zinc is essential for galvanising steel, helping protect it against corrosion. The Gamsberg Phase 2 expansion comes amid firmer prices, with the London Metal Exchange’s three-month zinc price at about $3 700 a tonne on Friday, down roughly 9% from its early-September peak.

High energy costs have put pressure on smelters in Western markets, while increased Chinese exports have helped ease supply constraints.

More mining investment

The Gamsberg investment follows several other major projects in the Northern Cape.

Kumba Iron Ore is investing R11.2 billion in a processing upgrade at Sishen that will allow it to recover more value from lower-grade ore and increase its output of premium iron ore.

Orion Minerals is redeveloping the Prieska copper-zinc mine, also in the Northern Cape, backed by a $250 million financing agreement with Glencore, while also pursuing its Okiep copper project.

Read: Vedanta mulls $800m Zinc smelter for SA mine [2018]

The Gamsberg expansion provides a boost to the dtic’s SEZ programme, which offers qualifying companies a preferential corporate tax rate of 15%, infrastructure and investment support, as well as customs and value-added tax (Vat) relief.

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