"Vedanta Resources plc Q4 & FY-2014 Production

Results Conference Call"

April 10, 2014



MANAGEMENT: MR. TOM ALBANESE - CEO, VEDANTA RESOURCES PLC

MR. SK ROONGTA - CEO, ALUMINIUM & POWER BUSINESSES, VEDANTA RESOURCES PLC

MR. DD JALAN - CFO, VEDANTA RESOURCES PLC MR. KISHORE KUMAR - CEO, AFRICA-BASE METALS BUSINESS, VEDANTA RESOURCES PLC

MR. A.N. JOSHI - IRON ORE BUSINESSES, VEDANTA RESOURCES

PLC

MR. S.L BAJAJ - IRON ORE BUSINESSES, VEDANTA RESOURCES

PLC

MR. ELANGO - CEO, CAIRN INDIA BUSINESS

MODERATOR: MR. ASHWIN BAJAJ - DIRECTOR, INVESTOR RELATIONS, VEDANTA RESOURCES PLC


Vedanta Resources Plc

April 10, 2014

Moderator: Ladies and Gentlemen, Good Day and Welcome to the Vedanta Q4 & FY-2014 Production Results Conference Call. As a reminder, all participant lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing '*' then '0' on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr.
Ashwin Bajaj. Thank you. And over to you sir.
Ashwin Bajaj: Thank you, Melissa. Ladies and Gentlemen, Good Day. This is Ashwin Bajaj - Director of Investor
Relations for Vedanta. Thank you for joining us today to discuss our Production Results for the
Quarter and the Year-Ended 31st March, 2014.
Let me introduce our management team present with us today; we have our new CEO - Mr. Tom Albanese; Mr. DD Jalan - our CFO; Mr. SK Roongta - CEO of our Aluminium and Power Businesses; Mr. Elango - CEO or our Cairn India business; Mr. Kishore Kumar - CEO of our Africa- base Metals Business; and Mr. S.L Bajaj and A.N. Joshi from our Iron Ore Businesses. Tom will make his initial remarks and then we will be happy to take your questions. So with that I like to hand
it over to Tom.
Tom Albanese: Thank you, Ashwin and thank you operator. For some of you, Good Afternoon and for others Good morning. It has been exciting half year for me at Vedanta even though I have been Chief Executive only for a week and a half. I joined as a Chairman of the holding company Vedanta Resources Holding in September and that has given me the opportunity to work with the company with the executives, with the employees, and for all size to get to know each other well. I did hit the ground running and since then I have been chairing the monthly ExCo meetings and have been involved in the detailed reviews of the business performance and operating decisions since last September. And as some of you would know I did spend a lot of my time as I have been with visiting the sites, walking the underground mines and getting a firsthand perspective of all of Vedanta's infrastructure-related businesses.
So may be first impressions; I have seen teams of people that are hard working, eager to learn, open to embrace new ideas and change, and I would say overall a dynamic organization that has made some rapid strides in the past. In terms of CSR and despite what we read sometimes in the internet I have been pleasantly surprised by the quality and basically the level of care on the ground especially at Lanjigarh where there have been controversies and I think the reality is much better on the ground than it has been widely perceived. That being said though, in terms of work place safety while there have been some improvements of Vedanta over the years, I think this is an area particularly fatalities where we can do better and I have been spending quite a bit my personal time with all the executives and management teams talking about work place safety and taking it to the new level and certainly
bringing it on par with the senior miners in the sector.
So maybe I will start with some priorities: When I took over as Chief Executive from the 1st of April my priorities have been really first and foremost to drive operational excellence and improved

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business performance. And really second to focus on enhancing and improving the Vedanta brand which includes several aspects such as safety, CSR, etc. Certainly, my focus areas from an operational perspective would be to really start because businesses they are not pulling their weight and really we will talk about those a bit more in detail but that will include restarting Iron Ore operations in Goa , that will include delivering an operational turn around for the Copper business in Zambia, and number three, increasing production in Alumina business and work on bauxite sourcing. We have spent quite a bit of capital in Aluminum and we have not yet seen the production coming from that. Initially, I would say in the areas of working from strength to even more strength, I have been spending time with the team in Hindustan Zinc, as they are managing the transitions from the open pits to the underground mine at Zinc India and making its ultimate mine capacity to 1.2 million tons of Zinc and Lead. And second working with Elango and Elango's team in optimizing exploration production ramp up at the Rajasthan Oil & Gas field, which we have to say is one of the best onshore local scalable prolific assets and certainly from everything I have seen and people I have talked with both inside the company and outside the company significant exploration upside, and of course the bulk of it being
oil for the local market.
We are here now to review the 'Production Results' for the 4th quarter and the full year of Vedanta's fiscal year 2014 and those highlights include: Record full year production in oil and gas as the Rajasthan block ramped up and reach the production rate milestone 200,000 barrels per day as exit production level. Number Two - increase in the full year production in refined metal and stable production of mined metal at Zinc India. Number Three - tapping first metal at the 325,000 Korba-III Aluminum Smelter at BALCO. And of course Number Four - the Tuticorin smelter has performed
well, in an environment of good TC/RCs, the utilizations in line with the 3rd quarter.
So now let us go section-by-section and have a quick review and then we will open the floor to any questions that any of you may have on the line. So starting with Zinc India - at Zinc India we did deliver stable metal production volumes and high operational efficiencies at our smelters and that they drive higher full year integrated volumes. Mined metal was lower in the fourth quarter in line with the mines plan as we gave some priority to mine development. Metal, as you know, we are transitioning from the open pit the underground mining at Rampura-Agucha which is a high quality mine, and during the past half year I have been actually quite pleased with the progress on the ground in terms of ramping up the primary mine development at the RA mine and optimizing eventual transition from
open pit mining to open-cuts to underground.
Moving offshore to Zinc International: Production was in line with the 3rd quarter as we did see the volumes get recovered at Skorpion, while Black Mountain and Lisheen delivered lower volumes. We are working to extend the operating lives of the assets, and I think at Lisheen, this may not be more than 1 to 2-years, and certainly we are hoping for the exploration result to change there, and that will depend on the availability of Ore. At Skorpion, we are trying to extend the pit, and put in to roaster to treat sulphide ore and that would allow us to potentially tap in to Black Mountain some concentrate and then other assets in the nearby molten asset so far dealt. And certainly I think whether I am looking at it from Southern Namibia or the Northern Cape we look at the expandability of the projects and operations as you look at the cluster between BMM and Skorpion.

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Moving on to Oil and Gas, we delivered a total production of 224,000 boepd with Rajasthan contributing a record 191,000 boepd, and as we would have wanted to see we crossed that production rate milestone in 200,000 boepd in March, and that was driven by infill drilling across all the major fields. The Rajasthan infill have delivered a total production of over 200 million barrels of oil since starting production only about 4.5-years ago and that certainly demonstrates the quality and the consistency of the assets including the prolific nature of the basin, and you would have to say very
strong capability and determination of the management team.
On the technical side we brought Mike Yeager formally of BHP Billiton petroleum onboard, and he has been helping build capacity and capabilities as we proceed with the development and exploration
particularly at Rajasthan.
Moving on to Iron Ore, at Karnataka we have had an annual capacity of 2.29 mtpa, and we mined out
1.5 mt since restarting operations on the 28th of December. However, sales were low due to mismatch and pricing expectations between the buyers and the sellers despite of its overall shortage of Iron Ore in the state and so we only sold about 30,000 tonnes during the year. At Goa, we did participate in auctions of inventory; we sold about 300,000 tonnes, but we started physically dispatching these in April, and hence we booked its revenues in the 4th quarter. As you know mining in the State of Goa has been reviewed by the Supreme Court and overall cap on mining seems likely as the expert committee has suggested to the court the state's outputs be limited to 20 mtpa or may be a bit more until scientific study is completed within the next year. The industry is expecting the court to order soon and mining to take place thereafter - perhaps that is after the monsoons. And to demonstrate the importance of Iron Ore for us I am actually in Goa enjoying the weather as we speak; I am here with the management team spending the day today and tomorrow reviewing those expected start-up plans
and the broader business of Iron Ore.
Copper India - the Tuticorin smelter operate a high 98% utilization and demonstrate a good operating
performance.
As we did announce early at the interims we have scheduled to have biennial
maintenance shutdown of the smelter for 22 days I believe in May in the 1st quarter.
Moving down to Tazmania CMT had a couple unfortunate incidents,
and the mine remains
temporarily shut. We are working with the authorities to safely resume those operations. As I said from the beginning of my comment, safety is a very priority for me and for us, and I will be personally visiting CMT.
Moving down to Africa in Copper Zambia: We are working on turn around the Copper Zambia business and I have personally been to the Zambia 6 times over the last 6-months. Over the past few months Vedanta has been supporting this business financially as we see significant value in the high grade resource potential, and again as we do what we need to do in terms of improving the overall capability and reduce the overall cost levels we have a long mine life ahead of a cyclical, and certainly we are and I am committed to see it through those near-term challenges. Commercially, copper producers in Zambia are facing challenges with the withholding of VAT credit by the government and increase the power tariffs announced recently. KCM also continues very low levels of mechanization

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as compared to its peers in the Zambian copper belt overall and globally and a volume ramp up is the key driver to improve the profitability of the business. KCM is the largest foreign direct investment by UK company; into Zambia; it is the largest private employer, and one of the largest tax payers of Zambia. The Government of Zambia and Vedanta are aligned in the thinking that the success of KCM is of importance to all stakeholders in Zambia and outside the stakeholders and I have personally been involved in engagement with the Government of Zambia, its various ministers, and other key stakeholders to work together constructively for the long-term. In the last quarter at KCM we have had some unfortunate incidents resulting in stoppages of production at Konkola shaft 1 & 4. Shaft No.4 commenced operations in the mid shaft level during the quarter while the operation is at the bottom shaft level are expected to resume during the current quarter. The Shaft No.1 we closed it down after some safety inspections and we did commenced operations again in April. For COP F&D the pits remain closed, and overall mined metal production is 19% lower during the course of this year. Going forward it will take us about 1 to 2 quarters to get back to normal operations. We put some new people into the underground mining team, and again I am giving them my personal support in doing what needs to be done, and we have some foundation work - something's simple and straight forward, and I do think it is worth making those investments so that a few quarters out we can be ramping back to where they should we producing. So we will be working on delivering those higher operational efficiencies, and again these basic equipments improvements there is going to be no sort of fancy things, no silver bullets, but some equipment maintenance that is going to be improving the time that individual worker spend at the phase and the range of activity so that we can get the
production to where it should be.
Moving on
to Aluminium: The Aluminium smelters continue to operate efficiently at high
utilizations. We did restart the 325,000 Korba-III smelter in the 4th quarter, and we will be
progressively
commissioning the plant over the current fiscal year.
We have started the
commissioning process the Jharsuguda 1.25 million tonnes smelter and casthouse, and we do expect to be putting pots of the first line of smelter on line during the first quarter, and we are certainly in discussions with the local government for sourcing bauxite.
And to close on Power, as you know the power industry in India continues to face headwinds of weak market demand, exaggerated by evacuation constraints, particularly between states at low prices. Better integration of the grids across the country would certainly help improve utilizations. At TSPP
we have synchronized the first unit and expect to commence trial runs in the first quarter.
So with that I would like to open the floor for questions and please note we are not going to provide near-term production guidance on this call, and we will be giving some to the extent that we will in
the upcoming earnings calls. Thank you. And operator I turn it over to you for questions.
Moderator: Thank you. Ladies and Gentlemen, we will now begin with the question-and-answer session. We have
the first question from the line of Liam Fitzpatrick from Credit Suisse. Please go ahead.
Liam Fitzpatrick: Two questions; first on KCM; and then secondly on Power and Aluminium. Just on KCM, you are not going to give us any production guidance, but can you give us an idea of the liabilities that have been

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built up in this business, specifically how much the headco or the parent has a loan in KCM, and also any excessive sort of local credits into that business that builds up? And secondly on Power and Aluminum, can you give any stay on when you expect to be able to make a decision on potentially
starting up some of the dormant aluminum capacity?
Tom Albanese: Maybe I will start off with KCM and then certainly Kishore will answer those questions about the liabilities on the balance sheet, Vedanta's overall funding for the liabilities, and may be local credits particularly with local vendors. I want to say from my own perspective I have been involved with the discussion with the banks and I think that the team has made some very good progress I would be quite pleased with that, and that does reinforce the fact that the banking community sees the potential
and the value of what we are doing at KCM. With that over to you, Kishore.
Kishore Kumar: Thank you, Tom. As you mentioned last time we had support taken from Vedanta to the extent of
$100 million that was brought into the business in terms of support to the various liabilities that we have, and to give you an idea of the liabilities that is overdue to the creditors basically between the custom suppliers as well as the local creditors, we had a overdue credit of about $120 million which was due at the end of January, which obviously we are liquidating with the support of what Vedanta has supported now, and in addition we have also lined up with the bankers the additional lines of credit which is going to come into fruition in the current quarter and that will support liquidation of all the liabilities of the mines with whom we are taking feed for our custom concentrate. So that in nutshell would bring the overdue creditors to practically zero by end of this quarter and then
subsequently we will carry on doing the performance and manage our working capital.
Tom Albanese: Moving on to Power and Aluminum and I think we have the CEO -Mr. Roongta answer this, we are really focusing on BALCO at 325,000 tonne pot line in Jharsuguda, the 1.25 mt component, and as I said before the last quarter we started the process of putting lines on it or the pots on at BALCO and we would anticipate here in the coming months in the same at Jharsuguda, and I would say that from my perspective the direction I have given to Aluminum business is just progressively to plan out that we just keep adding production on a quarter-by-quarter basis over the next several quarters, not too fast but doing on a basis so we can allow the lines to properly stabilize. We will certainly be seeing milestones that need to be met in terms of having power for the various blocks but we can be
implanting for that in advance… so with that may be Mr. Roongta you can go to in detail.
S.K. Roongta: Coming to smelter capacity at BALCO as Tom has said that we have already started commissioning process for our new smelter of 325 kt, and first metal has already been tapped, and in the current year we hope to complete the total commissioning of this new smelter. So with that the total capacity of BALCO smelter will get utilized. Coming to Jharsuguda 1.25mt smelter we have already started the process of commissioning of the first line of the 1.25mt smelter, and we expect that first metal will be tapped sometime in this quarter. And after first line of this new smelter of the total four lines
stabilizes, then we will evaluate our options going forward sequentially for the subsequent lines. So
no specific
time limits have been set, but as Tom has said, our plan is to go sequentially
commissioning after one line and subsequent lines, but we will evaluate our options after completing the first line.

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Moderator: Thank you. The next question is from the line of Anna Mulholland from Deutsche Bank. Please go ahead.
Anna Mulholland: I had a first question on Zambia, and then secondly on power sales or power demand. On Zambia, could you perhaps try to give us some more color or quantify the amount of production that you lost through the shaft closure after your safety inspections? And secondly what's the cash cost impact is or you expect to be from the power tariff increase? And on the power sales I am just wondering if you could give us an update on the weak market demand you talked about in your statement that has been something you have spoken about for the last few quarters, and I am wondering what isthe main
drivers behind that?
Tom Albanese: Kishore, may be you can focus on the production impact that we have had from shaft-1 and 4, then
Mr. Roongta you could talk about where we sit in terms of the overall supply/demand balance, I guess that is primarily in Odisha.
Kishore Kumar: In Konkola for the quarter we had a disruption for almost a month period, which is roughly about
4,000 tonnes of production in terms of copper metal in concentrate, which we lost because of the shaft closure, and of course there is impacts to the cost directly because the standing cost remains almost the same level as what we had in Q3 but the production volumes have been down.
S.K. Roongta: On Power, as you know that primarily from Jharsuguda and BALCO we are in short-term power sales, because eventually we have to use all our power for our smelter operations. And in short-term power sales market, there are new players which have come. So availability of power in short term market is much more than the demand, and the demand is lower primarily due to the fact that distribution companies are not going for full purchase of power, though there is a latent demand from their consumers, because for every additional power purchase they are losing, they have to sell at a lower cost, and that is an issue which gets to the reform in power sector. But going forward as the economy improves, we expect that power demand will look up, but in the short term market I suppose for some time this issue of balance between demand and supply will continue, and that will continue
to drive the market to remaining weak for some more months.
Tom Albanese: Anna, as you know this is a regional picture in India, and as you look at places like Punjab where
TSPL as it begins commissioning at the various highest markets, so I do not think we are going to have the same issue in Punjab that we have seen in Odisha.
Moderator: Thank you. The next question is from the line of Tim Huff from RBC. Please go ahead.
Tim Huff: Just had two questions on iron ore if possible; one is on the 20 mt cap that you mentioned beyond the Supreme Court process, is there going to be another process beyond any potential approval there between actually the court approval and actually starting up operations I guess that is a first question? And then the second question also on Iron Ore. Longer term the 27.5 mt recommendation, it is said in the release that is under 12-months study, does that also require a court approval process at the end of the study?

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Tom Albanese: I think Mr. Joshi if you can address all aspects of that. Again, I think we should recognize the part of the reason for the cap would have been the cumulative impact of roads and communities and the environmental issues and probably what was realistically and while west type situation back before the closure we put in place and certainly is incumbent on us and all producers to be behaving suitably environmentally responsible and minimize, what would I call that 'environmental impact,' and
certainly from my own perspective we would be arguing for those caps and be progressively removed.
A.N. Joshi: As Tom said that the caps are always dynamic and even courts have said that it can begin at 20 and it could go further after the more intense study. So we cannot guess when it will come, but after the court order there will be one or two months' time, within which we should be able to get our clearances.
Tom Albanese: So again what you expect though is that once we have hopefully received this court order with likely cap then there are other steps within government environmental approval before mining actually proceeds.
A.N. Joshi Yes, there are clearances required from state, there are clearances required from MoEF, and so all those have to come in before we start the operations.
Tom Albanese: And clearly we have the upcoming monsoon season so there was a question becomes whether it starts
before or after the monsoon season.
A.N. Joshi: It will be most probably after monsoon.
Moderator: Thank you. The next question is from the line of Menno Sanderse from Morgan Stanley. Please go ahead.
Menno Sanderse: Two questions please; first, Tom on KCM; is anything in your last 6 visits that makes you doubt that the original design capacity is actually achievable? And what do you think has helped for the ramp up back force so long - is it construction issues, is it operational issues, is it regulation? And secondly on Zambia, how big are the outstanding receivables on VAT and is there actually a path visible now to a resolution around the VAT receivables? And a third one around Zinc, in FY-'14 the emphasis shifted a little bit to primary mine development away from production and therefore it came in a little bit
below the target, is that something that is going to continue in FY-'15?
Tom Albanese: Menno, I will start off by taking my own questions of KCM's capacity, and then if you are looking
for my impressions on that one, and then ask Kishore to comment on the Zambian path, and then I
will close with my assessment of Zinc in the next fiscal year. First of all,
CM there is no question
that the shaft has the capacity, and there is no question that the smelter in the surface facilities have the capacity, the constraint with the overall level of underground capacity, and the fact that the development never really kept up with the pace to deliver the tonnage in my view, and so we effectively have a bottle neck in the underground. Now to address that bottleneck in the underground, we really have two things; it is not a great issue, it is strictly a volume issue. We do have to complete the full conversion to the trackless mining that is to have a continued modernization underground.

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We have had as you know the need to dewater ahead of ourselves is very wet mine, and I think to some extent, our rate of advancing the underground development will also be aligned with the water management. We have a good progress quarter-on-quarter but we had a set-back in 2009 when we had a power outage for a week, and that really did create quite a bit of flooding overhead and previously dewatered, and I think frankly we are still catching up on that. So bottom line it is going to be focusing on increasing the production from the underground infrastructure, and once we have that we will have the hoisting capacity, then we will have the surface capacity ready to go. Kishore, do
you want to add anything to that… certainly on the value added tax at Zambia.
Kishore Kumar: In the current year, actually, Tom, in addition, we also are investing significant capital sum in Konkola underground in terms of mechanizing some of the areas which you mentioned earlier to bring the overall mine development in line with some of the best mines that work in the world. So that is something which would happen during the current year. And in terms of the government's refund on the VAT, we have engaged the government as a chamber of mines, there have been several representations done over the last quarter, and KCM at this point of time in the end of March, we have about $92 million of our cash stuck in the VAT refund process, and this of course as a industry not only for us, but all exporters we have a similar concern, and the Minister of Mines as well as the Minister of Finance have been constantly engaged, and they are assuring us that they should try and find a solution in the next couple of quarters. No definite time plan given as yet, but, yes our process of engagement has been fruitful, and there has been a solid hearing from the government's side on the
concerns of the exporters, that is where we are.
Tom Albanese: Now moving on to Hindustan Zinc, in the fiscal year '14 we have been concentrating our primary mine development, and as the team you would have heard from me I was concerned about our level and pace of development at the end of calendar 2013 but certainly I have been encouraged over the past couple of months of their progressive ramp up in that underground development on month-by- month basis. So there we are on track. As we look ahead we are going to be exposing in the next tranche of ore in the open pit as the current lay back begins to expose that ore in the higher grade portion of the pit over the next couple of quarters. So I think we are on good track and certainly there is some good work on optimizing how we ultimately manage the transition from open pit to
underground.
Moderator: Thank you. The next question is from the line for Prasad Baji from Edelweiss. Please go ahead.
Prasad Baji: On Zinc International business, you mentioned that you are taking measures to extend the operational life. So, what is the color on this, have we done more exploration, have we ncreased reserves, and to
what extent, and does this also include outcome on the Gamsberg project?
Tom Albanese: I will make a first cut and then Kishore probably is better to answer…I think Zinc International is going to be focusing at Skorpion and Black Mountain. I think we have seen some encouraging results from exploration, but that is a process that we will continue over the next several quarters, and I think at Gamsberg, we have been updating the engineering and looking for ways to actually bring that in, in the current market environment. I just want to say for Zinc, of all the LME metals probably Zinc

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has the most positive assessment in terms of forward-looking where those prices are going to be in the coming years, as some large chunky supply including unfortunately likely Lisheen begins to fade out between 2015 & 2017. So, I think Zinc is a good metal to be in and I think we will have some
good opportunity between Hindustan Zinc and Zinc International.
Kishore Kumar: It is very important that since we acquired in 2011, we have invested significant sums of money in all the three assets - in Ireland, Namibia and South Africa. We are happy to say that we had significantly extend the life of mine with Lisheen from 2013 to about end of 2015 which has been done and that is what Tom mentioned earlier, roughly a year or two extension has been done in Lisheen and we have exploration projects in and around our assets but we do not have any confirmation as yet on the potential today. As far as Namibia is concerned, we have extended the life of mine from 2015-16 to
2017-18, so that has been another extension of 2-2.5 years and as we speak similar potential asset around that part of TPL that exploration is going on, and in Black Mountain, the big project of Gamsberg is one in which we have done definitely feasibility studies is underway, we are likely to complete DFS over the next 3-4 months period and then a decision to be brought to the board. So, as of now, in all the locations, we have definitely 2-3 year life, both in Lisheen and Ireland, whereas in the case of South Africa, our life is up to 2017-18 in the current deeps mine, and we have the opportunities in a neighboring mine called the 'Swartberg' which is a lead and zinc mine is extension of the current mine, and we are continuing doing exploration and looking at a final feasibility to be
completed later on this year. That is where we are as far as all the three assets are concerned.
Moderator: That was the last question. I would like to hand the floor over to Mr. Ashwin Bajaj for closing comments.
Ashwin Bajaj: Thanks, everyone for joining us today, and please call us at 'Investor Relations' if you have any further questions.
Moderator: Thank you. Ladies and gentlemen, on behalf of Vedanta, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.

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