30 January 2015

Vedanta Resources plc

Production Release for the Third Quarter Ended 31 December 2014

Q3 Highlights

·    Strong operating performance, with EBITDA at US$1.02 billion

·    Strong mined metal production at Zinc - India

·    Gross daily average production of 219 kboepd at Oil and Gas; production at Rajasthan normalised following planned maintenance shutdown in Q2

·    Strong operating performance at Aluminium and  newly commissioned  pot-lines are ramping up

·    Received approval to start the BALCO 1,200 MW power plant; commissioning activities started at the first 300MW unit

·    First 660MW unit of 1,980 MW Talwandi Sabo power plant commenced commercial operations

·    Iron ore mining leases renewed at Goa and Karnataka

·    Reviewing opex and capex plans across businesses to maximize cash flows in light of recent commodity price volatility

Tom Albanese, Chief Executive Officer, Vedanta Resources plc, said: "We made substantial progress during the quarter on enhancing production and starting up some of our new capacities. Vedanta's diversified and well-invested asset base, low cost of production and exposure to the
fast - growing Indian market puts us in a strong position to manage the volatility in the commodity markets."

Oil and Gas

Average gross production in Q3 FY2015 was 218,900 barrels of oil equivalent per day (boepd), 13% higher than Q2 FY2015 as Q2 was impacted by the planned maintenance shutdown at the Rajasthan facilities and a suspension of gas sales at the Ravva block, which have normalised in Q3.

The Rajasthan Block produced ~16.6 million barrels of oil equivalent in the quarter at an average of 180,010 boepd, with a facility uptime at 98.3%. The cumulative total Rajasthan production is ~266mmboe until the end of Q3 FY2015.

In the core Mangala, Bhagyam and Aishwarya (MBA) reservoirs which have 2.2bn barrels of discovered hydrocarbons in place, focus continues on infrastructure creation and prudent reservoir management for both, water flood and EOR implementation. The Mangala field polymer flood EOR project is progressing as per schedule, following the first polymer injection on 31 October 2014.

During Q3, the production volume from Aishwariya field ramped up to 30 kbopd, as per the approval. Execution plans are being prepared to develop Aishwariya further, through drilling, followed by an EOR program.

During the quarter, NE field in Development Area (DA)-2 commenced production, taking the total number of producing satellite fields to six.

During the quarter, the Ravva block produced an average of 27,783 boepd compared with 20,596  boepd in Q2. The increase was supported by volumes from 4 new infill wells, 2 side-track wells and 1 successful exploration well

The Cambay block produced 11,107 boepd, a sequential increase of 4% on account of successful ramp up post well surveys undertaken.

Gas development continues in line with the target to double current gas production of
12 mmscfd, through the existing gas pipeline, by Q4 FY2015.  Management committee approval on Raageshwari Deep Gas (RDG) FDP of 100 mmscfd is in advanced stages and work on execution, planning and contracting is underway.

Revenue for the quarter was US$565 million, post profit sharing with the Government of India in all the producing blocks. Royalty expense in the Rajasthan block was down 30%
y-o-y, driven by weaker crude prices. As a result, EBITDA for the quarter was lower by 44% at US$346 million.The overall operating expense in Rajasthan was at US$5.7/bbl, one of the lowest in the world.

Since the re-commencement of exploration in the Rajasthan block in March 2013, Cairn has established ~1.5 bn boe of hydrocarbons in-place with an additional ~0.6 bn boe discovered but yet to be tested; relative to the 3 year drill-out target of 3 bn boe.

Our oil fields are resilient to volatility in oil prices due to their low operating cost and high margin and continue to generate positive free cash flows. We are proactively focusing on reengineering some of our projects to optimize capex and further improve operating costs.

Zinc India

Mined metal production in Q3 was at 242,000 tonnes, up 14% and 10% compared with Q2 this year and Q3 last year, respectively. The increase was as per the mine plan of Rampura Agucha Mine (RAM), with higher production from the mine during the quarter, and better ore grades across all mines. The mined metal production is expected to increase further in Q4, taking the full year volume marginally higher than FY2014, as guided earlier.

Integrated refined zinc production was up 11% compared with Q2, on account of higher mined metal production. Integrated refined lead production was marginally lower than Q2.  

Integrated saleable silver production was 3% higher compared to Q2 and 4% lower compared to the corresponding quarter last year. The y-o-y decrease was on account of build-up of work-in-progress, partly offset by better grades from Sindesar Khurd mine.

The zinc metal cost of production (COP) before royalty during the quarter was US$813 per tonne, lower by 9% sequentially and 2% from a year ago. The y-o-y decrease in cost was due to higher mined metal production, lower diesel cost and higher acid credits, partly offset by lower quantity of linkage coal and increased employee expense on account of long-term wage agreement.

EBITDA was up 14% y-o-y at US$336 million on account of higher volumes and lower cost of production.

The SK mine expansion is progressing well, however the progress of Rampura Agucha underground shaft is slower than expected. The Board of Hindustan Zinc Limited has approved deepening of the Rampura Agucha open cast mine by 50 metres which will
extend the life of the pit to FY2020 and ensure a smooth transition from open pit to underground at Rampura Agucha. The pre-stripping work will start in the current quarter.

Zinc - International

Production at Zinc International was 6% lower compared with Q3 last year due to lower production from Lisheen, which will reach the end of its life in mid FY2016 and produced 41,000 tonnes in Q3 this year against 48,000 tonnes in Q3 last year. Production at Skorpion was higher due to an unplanned maintenance shutdown in the same period last year.

The Skorpion refinery has had a shut down during January 2015 due to a fire in the cell house, which will affect Q4 production for about 23 days. There were no injuries, and the refinery has resumed operations now.

COP was at US$1,364/tonne compared with US$1,257/tonne for the same period last year due to lower volumes and higher stripping at Skorpion.

EBITDA for Q3 was higher due to higher LME and sale of one Zinc parcel of ~ 11 kt from the previous stock. Further, in Q3 last year, some despatches from Skorpion and BMM had been deferred to the following quarter, impacting EBITDA by c. US$20 million.

At the Gamsberg Mine and Skorpion Refinery Conversion Project, announced in November 2014, we are in the process of completing the detailed design engineering work and finalizing the execution planning. We are also reviewing the opportunity to phase the project with lower FY2016 capex in the current low commodity price environment. 

We are also reviewing opportunities for extension of mine life at Skorpion.

Iron Ore

During the quarter, we have had good progress in Karnataka and Goa towards recommencing mining.

In Karnataka, we have received forest clearance and lease has been renewed. We expect to commence operations by February.

In Goa, the lease has been renewed for all our mines which were operating prior to the suspension of operations. We expect to commence mining in Q1 FY2016 after receipt of remaining approvals from the Government.

The value-added business continued to do well during the quarter, with 19% higher production of pig iron compared with the corresponding prior period at 166,000 tonnes .

EBITDA in Q3 was US$ 7.0 million as compared to US$ (4.6) million in the corresponding prior quarter, due to higher volumes as well as margins from the pig iron business.

Copper - India and Australia

The Tuticorin smelter continued to operate at high utilisation, with 99,000 of cathodes produced during the quarter. The 160MW power plant at Tuticorin continued to operate at a Plant Load Factor (PLF) above 90%.

Net unit cost of conversion at Copper- India was USc3.3/lb compared with
USc9.6/lb in the prior period due to lower petroleum prices and higher by-product realisations.

Revenue was lower by 12% compared with Q3 FY2014 at US$947 million mainly due to lower LME. EBITDA was 44% higher due to higher Tc/Rc and lower cost of production. Tc/Rc was higher by 36% at 22.6 c/lb.

The global Tc/Rc's for CY 2015 have been settled at higher levels compared to CY2014 and we expect to realise over USc 25/lb for FY2016.

Our CMT mine in Australia remains under care and maintenance and we are evaluating various restart options.

Copper - Zambia

During Q3, mined metal production was at 29,000 tonnes, 10% lower than the corresponding prior quarter due to ongoing remediation work at Konkola shaft 1 and 4. Shaft 1 is expected to begin hoisting again in March 2015, while works at Shaft 4 are expected to be completed by the third quarter FY2016.

We continue to be focussed on delivering an operational turnaround and to upskill the Copper- Zambia business through the introduction of experienced operators into critical positions. The Konkola Pivot initiative and improved maintenance practices delivered an improvement in equipment availability at Konkola which is expected to increase the extraction rates going forward.

At Nchanga, production was affected by some technical interruptions, equipment availability and lower grades.

At the Tailings Leach Plant, production continues to improve, in spite of lower grades from Nchanga underground.

Q3 cost of integrated production (C1) excluding royalty was 11% higher at USc 267/lb compared with Q3 last year primarily due to lower production.

Revenue in Q3 was 5% down compared with Q3 last year mainly due to lower LME and volumes. EBITDA was impacted by the higher cost of production.

The Zambian government introduced changes to the fiscal regime for the mining industry, effective from 1 January 2015. The changes include removal of the corporate tax system and raising royalties on open pit mines from 6 per cent to 20 per cent and underground mines from 6 per cent to 8 per cent. Q4 EBITDA impact on account of the new royalty rates is expected to be c. US$15 million.

We continue to engage with the Government to resolve the issues relating to VAT refunds. We are also reviewing our operations in the light of lower copper prices, the VAT refund issue and the changes to royalty regime.

Aluminium

During the quarter, the Lanjigarh alumina refinery operated at 98% utilisation and produced 244,000 tonnes due to improved bauxite availability.

In Q3, production at the 500kt Jharsuguda-I and 245kt Korba-I smelters remained above rated capacities.

COP at Jharsuguda-I was US$1,597 per tonne as compared to US$1,591 per tonne in Q3 last year and US$1,740 per tonne in Q2 FY2015. The significant improvement compared to Q2 FY2015 was on account of better availability of e-auction coal during the latter part of the quarter. COP at  Korba-I was US$1,904 per tonne as compared to US$1,709 per tonne in Q3 last year and US$2,089/tonne in Q2 FY2015 earlier. The increase over Q3 FY2014 was on account of higher coal cost due to tapering of coal linkage, while the significant improvement over Q2 FY2015 was on account of relatively better availability of e-auction coal. Improved coal availability, coupled with higher efficiency of the newly commissioned pots is expected to drive lower costs in Q4 at both the smelters.

During Q3, the new 325kt Korba-II smelter produced 20,000 tonnes with the 84 commissioned pots. We will ramp up the smelter to full capacity during the course of FY2016, subsequent to the commissioning of the 1,200 MW power plant, for which the consent to operate has been received in January 2015. Commissioning activities at the first 300 MW unit have started, and the unit will be commissioned in the current quarter and will sell power commercially. The second unit will be captive for the smelter, and is expected to be commissioned in Q1 FY2016.

We have commissioned over 50 pots at the 1.25 mtpa Jharsuguda-II smelter which are currently under trial run. We expect to commission further pots by sourcing power from the 2,400MW Jharsuguda power plant in the coming months, and plan to start 50% of the 1.25mt smelter during the course of FY2016.

EBITDA in Q3 was up 88% mainly on account of lower COP and higher premiums.

Power

The Jharsuguda 2,400MW power plant operated at a PLF of 41% in Q3, marginally higher than corresponding prior period. The low PLF at Jharsuguda was largely on account of lower demand and evacuation constraints. Power from the BALCO 270MW was entirely used for the 84 pots of the 325kt Korba-II smelter.

The first 660MW unit of the Talwandi Sabo power plant was capitalized on 1^st December after successful completion of trial runs. During the quarter, 259 million units of power was sold post capitalisation.  The second unit will be synchronised in the current quarter and the third unit in Q1 FY2016.

Average power COP for Q3 was INR 2.25/unit (USc3.64/unit) compared with INR 2.27/unit (USc 3.67/unit) for Q3 FY2014 and INR 2.27/unit (USc3.75/unit) for Q2 FY2015.

Average realisation for Q3 was INR 3.36/unit (USc5.42/unit) compared with INR 3.39/unit (USc 5.46/unit) for Q3 FY2014 and INR 3.53/unit (USc5.83/unit) for Q2 FY2015.

EBITDA in Q3 was higher by 4% at US$41.6 million, compared with the corresponding prior quarter to due to higher volumes.

Corporate

Coal Block Auctions

During Q3, the Government of India announced a policy and rules for auctioning and allocation of coal blocks. We are evaluating participating in these auctions to meet the coal requirements for our captive and independent power plants.

Mines and Minerals Development Regulation (MMDR) Ordinance, 2015

The Government recently promulgated an ordinance, revising the MMDR Act, which will be an enabler to the mining sector. The use of auction route in allocation of mining leases, with seamless transition from Prospecting Lease (PL) to Mining Lease (ML) is expected to streamline and expedite allocation of bauxite, iron ore and other mineral concessions.It also provides for setting up of a National Mineral Exploration Trust to promote mineral exploration and extension of mining tenure to 50 years and these would be helpful to the mining sector. The ordinance also provides that an amount equivalent to a maximum of 33% of the royalty paid is to be contributed towards local area development.

Financial Update

The Company's financial position remains robust, with total cash and liquid investments of approximately US$8.0 billion and undrawn committed facilities of US$850 million as at 31 December 2014. Gross debt and Net debt was at US$16.8 billion and US$8.8 billion at 31 December 2014, lower compared to US$17.2 billion and US$9 billion at 30 September 2014. As of 31 December 2014, FY2015 debt maturities included US$73 million at Vedanta Plc and US$ 1.2 billion of term debt at the subsidiaries, which are being refinanced at lower costs. In FY2016, Vedanta Plc has debt maturities of US$350 million of bank loans, and subsidiaries have maturities of US$1.1 billion. We have access to various sources of funding, and we continue to review refinancing and repayment options.

 Production Summary (Unaudited)

                                                                                                                                                   (in '000 tonnes, except as stated)

1.     Including Internal Gas Consumption

2.     Excluding captive consumption of 2,394 tonnes in Q3 FY2015 vs 1,927 tonnes in Q3 FY2014, 1,762 tonnes in Q2 FY2015and 5,845 tonnes in nine months period FY2015 vs 5,271 tonnes in nine months period FY2014.

3.     Excluding captive consumption of 402,000 ounces in Q3 FY2015 vs 324,000 ounces in Q3 FY2014, 291,000 ounces in Q2 FY2015and 975,000 ounces in nine months period FY2015 vs 897,000 ounces in nine months period FY2014

4.     Excludes trial run production of 433 million units

5.     VGCB refers to Vizag General Cargo Berth

Financial Summary (Unaudited):

                                                                                                                                                            (in US$ milllion, except as stated)

                                                                                                                                                                 (in US$ milllion, except as stated)

There will be a conference call at 9:00 a.m. UK time (2:30 p.m. India time) on 30 January 2015
where senior management will discuss the results.

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About Vedanta Resources plc

Vedanta Resources plc ("Vedanta") is a London listed diversified global natural resources company. The group produces aluminium, copper, zinc, lead, silver, iron ore, oil and gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Ireland, Liberia, Australia and Sri Lanka. With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of entrepreneurship, excellence, trust, inclusiveness and growth. For more information, please visit www.vedantaresources.com.

Disclaimer

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.