Sesa Sterlite Limited: Consolidated Results for the First Quarter Ended 30 June 2014

FinancialHighlights

OperationalHighlights

ConsolidatedFinancialPerformance

EBITDA margins at Aluminium business continued to improve due to higher premiums and cost control; Zinc India was impacted adversely by higher costs coming from lower volume; Cairn India was also lower due to profit petroleum increase. On an overall basis, while favourable oil prices, LME, premiums, and currency depreciation helped increase EBITDA, lower volumes in Zinc & Power, higher COPs, higher profit petroleum, and Australian mines closure resulted in a modest EBITDA increase of 3.5%.

Thus, net interest was lower in current quarter as compared to corresponding previous quarter as well as sequentially, largely due to higher other income.

During Q1, average daily gross production was 217,869 barrels of oil equivalent (boe), 3% higher than the corresponding prior period, driven by ramp-up at the Rajasthan block.

The Enhanced Oil Recovery (EOR) programs at the Mangala field is on track to commence first polymer injection by the end of FY 2015. Development projects at Barmer Hill (BH) and gas development at Rajasthan Deep Gas (RDG) field continue to be on track. We have also drilled 7 successful exploration and appraisal wells at Rajasthan during the quarter.

We extended a significant existing gas play, with multi-TCF potential, in and around the RDG field, and are acquiring equipment to double RDG production volumes by Q4 FY2015. Front end engineering and tendering for construction of new pipeline and facilities for the gas development are underway. The Bhogat terminal, marine facilities and the Salaya-Bhogat pipeline are under pre-commissioning, and gas has been introduced into the Bhogat terminal.

At BH and satellite fields, we undertook our largest tight oil development activity to date. We pumped c.250,000lbs of proppant in Northern BH and commenced production from the Mangala BH and Aishwariya BH fields during the quarter.

In Q1 FY2015, production at Cambay was at 10,765 boepd, with an uptime of 99.7%.Production was higher on account of successful well intervention measures undertaken in the previous quarter. Production at Ravva was at 23,940boepd, supported by volumes from 3 new 4D-infill wells, with a plant uptime of 99.7%.

During Q1, mined metal production was 31% lower than the corresponding prior quarter, in line with our mine plan at Rampura Agucha (RAM), which involves lower mined metal production in the first half of the year as we excavate more waste than ore. With improving open pit grade cycles, we expect to have higher production in the second half of this year. The full year production of mined metal is expected to be marginally higher than FY 2014.

Integrated production of refined zinc, lead and silver was lower than the corresponding prior period and in line with the mined metal production in the quarter.

During Q1, total underground mine development completed was 15% higher across mines. The RAM and Sindesar Khurd shaft projects are progressing well. At RAM, we continue to transition from open pit to underground mining, which started production in FY2014 and is currently ramping-up. We are also evaluating mine design and planning for further extension of the open pit. Overall, the expansion to 1.2mtpa of mined metal at Zinc-India is progressing well.

Refined Zinc metal production at Skorpion was marginally lower than the corresponding prior quarter. Zinc-Lead mined metal production was lower due to drop in grades as per mine plan sequencing and shutdown of mill for maintenance at BMM.

We are evaluating the installation of a roaster at the Skorpion Refinery to treat sulphide ores from BMM and other neighbouring mines, and the detailed feasibility study for the refinery conversion is expected to be completed this financial year. We are conducting feasibility studies on Gamsberg and Swartberg to extend the mine life at the BMM mining complex.

At Karnataka, the production was 0.01 million tonnes on account of a slow pace of sales through the e-auction process. However, e-auctions have picked up recently and we expect to produce at our provisional annual capacity of 2.29 million tonnes during the year.

Production of pig iron and metallurgical coke were 33% and 49% higher at 146,000 tonnes and 126,000 tonnes, respectively as compared with the corresponding prior period as production ramped up.

Copper cathode production at the Tuticorin smelter was lower than the preceding quarter at 66,000 tonnes, due to a planned 23-day maintenance shutdown and the smelter has ramped up well subsequently. Revenue and EBITDA are not comparable as the smelter was temporarily closed for most of the corresponding prior quarter. EBITDA is lower compared to Q4 FY2014 due to lower volumes and higher COP, driven by higher one time maintenance expenses, lower acid realisation credits.

The Lanjigarh alumina refinery operated at 93% of its rated capacity and produced 233,000 tonnes in Q1, which is higher by 6,000 tonnes as compared to Q4 last year. The numbers for the corresponding prior period are not comparable as the plant was not operational then.

In Q1, production at the 500kt Jharsuguda-I & 245kt Korba- I smelters remained stable. The Jharsuguda-I smelter operated above its rated capacity despite recent grid failures.

Availability of domestic coal is expected to be lower with lower e-auction volumes, which could result in higher imports, higher coal prices and higher power costs of smelters in the coming quarters.

During the year we plan to start the first phase of 50 pots of the 1.25 mtpa Jharsuguda-II smelter with the available surplus power from the 1,215 MW power plant, and subsequently ramp up further capacity with power from the 2,400 MW power plant after receiving necessary approvals.

Regarding the BALCO coal block, we have now received the forest diversion and the Rehabilitation and Resettlement (R&R) approvals, and are working with the State Government for execution of the mining lease.

During Q1, power sales were 18% lower primarily due to lower sales from Jharsuguda 2,400MW plant on account of lower power realisation and transmission constraints. The Jharsuguda 2,400MW plant operated at a Plant Load Factor (PLF) of 45% in Q1 as compared with 54% during the corresponding prior period. Power sales from the BALCO 270MW power plant were lower as it supplied power for the ramp up of the 325kt Korba-II smelter.

The first 660 MW unit of the Talwandi Sabo Power Plant is under commissioning, with the reliability run of the unit planned during Q2. The other two units are expected to be commissioned towards the end of FY 2015.

In Q1 the company achieved 1.78 mn tonnes volume at the Vizag port as compared to 1.11 mn tonnes a year ago. The performance of the company was affected by severe shortage of Railway rakes leading to poor evacuation of cargo and hence limited space availability.

Vizag General Cargo Berth (VGCB) has good business opportunity due to large demand of imported coal. However evacuation of coal due to shortage of railway rakes is a bottleneck. VGCB has obtained permission for road evacuation of 1MMT/Year from the AP Pollution Control Board and this would help in attracting road bound customers.

Debt numbers in the tables above are at book value

Sustainability is at the core of Sesa Sterlite’s strategy, with a strong focus on health, safety and environment and on enhancing the lives of local communities.

This press release contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “should” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different that those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

SOURCE Sesa Sterlite Limited