Vedanta Res 1H Net Pft $350M; Renegotiating Asarco Terms -2-

Vedanta Resources Chairman, Anil Agarwal, Thursday commented: "Vedanta continues to deliver on its strategic priorities. In the first six months of this year, we have delivered strong volume growth in Aluminium, Iron-Ore and Zinc and further diversified our earnings. "In addition, the core strengths of the Group, strong cash flows, low cost operations and the ability to deliver new capacity at industry benchmark low costs ? position us well for a period of lower metal prices", he said. "We have delivered revenues of nearly US$4bn and EBITDA of nearly US$1.3 billion in the first half of this year. Record volumes were offset by falling Zinc prices and rising input costs", he said. "We generated US$796 million of free cash flow and spent US$1,416 million on expansionary capital expenditure. Our group cash position, including liquid investments, at the end of the half year was US$5.4bn. Our strong financial position, cash flow and structural cost advantages underpin our confidence and plans to invest in our next stage of growth", he said. "In an environment of industry wide cost increases, I am delighted that we were able to reduce costs in our Copper-India and Zinc businesses. We remain firmly in the lowest cost quartile in each of these businesses. Aluminium production costs are set to fall substantially with the commencement of bauxite mining at Lanjigarh in 2009. "Costs in Zambia were higher, but we remain confident that the new Nchanga smelter, the commissioning of the Konkola Deeps projects and other cost initiatives will lower costs going forward. "In our Iron Ore business, our rigorous debottlenecking programme allowed us to minimise the disruption of the monsoon period to deliver record shipments for the first half. "A better performance of the Pig Iron and Met Coke businesses also contributed to an excellent result, partially offset by higher logistics costs and the impact of export duties. We expect costs of production to fall across all our businesses in the second half of this financial year. Agarwal added: "We continue to make excellent progress in our industry leading organic growth programme. Capacity is being added at benchmark low costs and all our projects are on time and within budget. We have commenced the commissioning of the Nchanga copper smelter in Zambia and our expansion projects at HZL to increase integrated production to over 1mtpa are well underway. The Indian Supreme Court cleared the bauxite mining project at Lanjigarh in August 2008, and we are progressively commissioning our Jharsuguda aluminium smelter. "Becoming India's leader in aluminium India is positioned to become one of the world's largest producers of aluminium, with the 6th largest reserves of bauxite globally and the 4th largest reserves of coal worldwide. Vedanta's existing presence in the resource rich Orissa region, together with its excellent track record of executing projects ahead of time and at low capital costs, make it ideally placed to lead the development of these reserves", he said. The group added: Zinc and Iron Ore businesses in the six months ended Sep. 30, 2008 ("H1, 2009") was the result of additional volumes from expansion projects, the de-bottlenecking of operations, better operational efficiencies, higher plant availability and improved mine management. The group has begun commissioning of the first phase of Aluminium expansion project at Jharsuguda, have ramped up the new zinc smelter at Chanderiya without delay and have significantly increased capacity in iron ore business. With Iron Ore business posting robust growth, have also diversified our product portfolio with all of businesses making meaningful contributions to Group EBITDA, it said. The group added: We have made excellent progress on our expansion projects during H1, 2009. The group commenced trial production of aluminium at new Jharsuguda smelter in this period, a year ahead of schedule. The first stream of the alumina refinery at Lanjigarh is fully operational. The Supreme Court of India cleared the bauxite mining project at Lanjigarh in August 2008. The group was the successful bidders for a 1,980 MW thermal power plant in Talwandi Sabo, Punjab in India. All other projects are progressing well and the group expect to commission them on schedule. The group added that in recent months, global economic conditions have considerably deteriorated with the outlook remaining uncertain, at least in the short to medium term. Across the mining industry, the group has witnessed a sharp decline in commodity prices. With increasing costs some companies have already started cutting down production and have deferred their expansion plans. In such times, the group relys on key strengths which are diversified commodity basket, the ability to keep costs low, the proven ability to complete expansion projects on time and at a low costs, and maximizing output from existing assets. To mitigate the impact of lower selling prices, we are targeting a further reduction in operating costs through various measures including reviewing some temporary cut down in production at some of the high cost operations. In the short to medium term, the group expects some of the major input costs to reduce in line with the recent drop in oil prices and other commodity prices supplementing efforts. Given our strong balance sheet and funding position, Vedanta does not currently plan to change long term strategy in terms of continuing with major expansion plans. At a time when capital is scarce, we had cash and liquid investments totalling $5.4bn at Sep. 30. Furthermore, the group generated robust cash flows in H1, 2009 by converting 62.6% of EBITDA into free cash flows. Netdebt to equity ratio is negative, it said. (END) Dow Jones Newswires