Vedanta performs well on good copper, zinc and aluminium

LUSAKA --Fuelled by high prices and improved performance across its divisions, London-listed Vedanta Resources Plc has reported an 80.6% increase in third quarter earnings over Q2 earnings.

Third quarter results published on Monday indicate that during the quarter ending December 31, 2006, earnings were US $1,760.4 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) hit a record US $724.3 million during the quarter, and US $2,014.8 million for the nine months to December 31, 2006. This reflects a quarter-on-quarter improvement of 173.7% and 235.2% year-to date.

Though Vedanta reported fairly good performance from its divisions, notably the India-based operations, it indicated that production at Zambia's Konkola Copper Mines (KCM) Plc was lower than expected. This was due to the forced shutdown of the Nchanga Tailings Leach Plant (TLP) after the miner, Zambia's largest, discharged acidic effluent into the Kafue River last November.

Vedanta reports that its aluminium division recovered fairly well from last May's temporary disruption due to power tripping at the power plant at the Korba II smelter, which produced 61,000 tonnes of cast aluminium in Q3 against 44,000 tonnes in Q2-equivalent to 245,000 tpa.

The statement adds that existing smelters at BALCO and MALCO produced about 37,000 tonne, in line with their rated capacity. Consequently, "Q3 revenues were US $279.7 million as compared with $117.0 million in the corresponding period last year on account of higher volumes and better price realisations. We continue to develop the export market, mainly in South East Asia and the Middle East, supported by additional volumes from the new smelter."

Vedanta has also obtained London Metal Exchange (LME) registration for aluminium ingots from the Korba smelter under the brand 'BHARATAL'.

The Indian and Australian copper operations also fared well with copper cathode production for Q3 at 86,000 tonnes, increasing by 6,000 tonnes over Q2 "mainly due to the de-bottlenecking initiatives at the Tuticorin smelter, which has increased capacity to 400,000 tpa... Mined metal production at our Australian mines of about 7,000 tonnes is almost at the same level as the corresponding prior period."

Revenues from these operations during the quarter were US $717.5 million, compared with US $448.0 million in the corresponding prior period, primarily due to higher volumes and higher metal prices.

During the quarter, Vedanta's Zambian operation-KCM-produced 35,000 tonnes of copper cathode as compared with 31,000 tonnes in Q2 "...but lower than our expectations. Cathode production at the leaching plant and mining production from Nchanga were affected by unforeseen environmental issues. While these issues have now been satisfactorily resolved, steady and cautious steps are now being taken to bring the leaching plant back to its normal levels of production. Several debottlenecking measures at the Nkana smelter have enabled us to achieve a record anode production of about 12,000 tonnes in December 2006."

KCM's Q3 revenues were US $211.4 million as compared with US $188.1 million in the corresponding prior quarter primarily due to higher prices. But Vedanta noted that operating costs at KCM are quite high, impacting overall performance.

On zinc, Vedanta reports 128,000 tonnes of mined metal in Q3 with production of refined zinc increasing 17.7% from 79,000 tonnes to 93,000 tonnes, chiefly "due to ramping up of the new hydro smelter and going forward in the fourth quarter, we expect to produce close to our rated capacity of 400,000 tpa." Zinc revenues were US $549.6 million.

Vedanta also updated on its projects, expecting to commission the alumina refinery at Lanjigarh by March 2007. The group also reported that de-bottlenecking of the Tuticorin smelter to increase its capacity from 300,000 tpa to 400,000 tpa has been completed with the smelter steadily ramping up. And with all major orde