Vedanta 3Q EBITDA Jumps On Prices, Output

Metals and mining company Vedanta Resources PLC (VED.LN) Monday said its third-quarter earnings before interest, tax, depreciation and amortization, or EBITDA, had jumped, crediting higher prices paid for its commodities and larger volumes produced.

But while production across all the metals Vedanta produces in India rose, output from the company's Zambian assets suffered after production was hit by environmental problems.

Vedanta's EBITDA was $724.3 million for the three months to Dec. 31 2006, compared with $264.6 million for the comparable period in the previous financial year. The number outstripped an average expectation of $698.4 million expected by seven analysts surveyed by the company.

FTSE 100-listed Vedanta produces a range of metals, with key products including aluminum, copper, zinc and lead. Its main operations are in India.

The production and earnings update got a mixed reception from analysts.

One analyst, who asked to remain nameless, said the results looked "pretty solid to us," adding that the numbers were "pretty much in line with our expectations."

Vedanta's shares "should trade pretty positively" Monday, the analyst added.

At 0841 GMT Vedanta's shares were trading up 3.6% or 42 pence at 1152 pence, outperforming a mixed mining sector.

But another analyst, while saying the company had posted a "reasonably good" set of numbers, with a strong performance from its Indian assets, highlighted the problems in Zambia.

Costs at Konkola Copper Mines - Vedanta's Zambian business - are "astronomically high," the analyst said, calculating that they are running at $1.71 per pound of copper. "I think you need to see a bit of progress there to get radically positive on the stock." The second analyst pointed to the stock of copper miner Kazakhmys PLC (KAZ.LN) as providing better exposure to base metals - pointing out that it is cheaper on the basis of price to earnings ratio.

In terms of production, the biggest increase on the same quarter last year came for the company's aluminum division, which produced 98,000 metric tons, up from 60,000 tons in the third quarter of last year. The first analyst said this performance offset the disappointing showing in Zambia.

Copper cathode production in Zambia was 35,000 tons, down from 46,000 tons in the third quarter of the previous year. A mine effluent spillage late last year caused the company's copper leach plant to be closed and 50,000 residents in a local town to be left without water. The company said the environmental issues had been resolved and "steady and cautious steps are now being taken to bring the leaching plant back to its normal levels of production," Vedanta said in its press release.