Vedanta Resources : Proposed entry into 41 revenue sharing contracts

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Vedanta Resources plc

Proposed entry into 41 revenue sharing contracts with the Government of India

· Vedanta Limited awarded 41 exploration blocks in India pursuant to Open Acreage Licensing Policy at a total bid cost of US$551 million.

· Transaction is a related party transaction under the UK Listing Rules and is expected to complete in the third quarter of 2018; the Company is in the process of obtaining the requisite approval from the Company's shareholders.

Vedanta Limited, in which Vedanta Resources plc (the "Company"and, together with its subsidiaries, the "Group") indirectly holds a 50.1% stake, has been successfully awarded 41 exploration blocks in sedimentary basins throughout India (the "Blocks") pursuant to the Indian Open Acreage Licensing Policy ("OALP") at a total aggregate bid cost of US$551 million (the "Transaction"). The OALP is a government-led initiative organised by the Directorate General of Hydrocarbons of the Government of India ("GoI").

The 41 blocks awarded to Vedanta Limited comprise 33 onshore blocks and eight offshore blocks. Subject to approval from the Company's shareholders (as described below), Vedanta Limited will enter into 41 revenue sharing contracts ("RSCs") with the GoI to effect the Transaction. A licence permitting exploration, development and production operations of all types of hydrocarbons will be granted pursuant to the terms of the relevant RSC in relation to each Block.

The exploration period shall consist of two phases: (i) the Initial Exploration Phase; and (ii) the Subsequent Exploration Phase. In total, the exploration period will be a duration of six years for all Blocks, subject to any extension granted. The development and production period of each contract will be a maximum of 20 years from the date of grant of the petroleum mining lease following discovery of previously unknown deposits of hydrocarbons and approval of the relevant field development plan, subject to any extension granted.

The directors of the Company (the "Directors") believe that the Transaction complements the Group's existing strategy to focus on production growth. The OALP is the first major auction of hydrocarbon blocks to take place in India since 2010 and provides an opportunity for the Group to acquire new acreages from all available areas in the sedimentary basins of India. The objective of licensing the Blocks is to acquire fresh seismic data and drill exploration wells to establish resources and reserves of oil and/or gas.

The bid cost of US$551 million represents Vedanta Limited's total committed capital expenditure on the Blocks during the exploration phase and will be satisfied in cash using the Group's existing cash resources. It is expected that this capital expenditure will occur over a period of approximately three to four years. Vedanta Limited has also committed to completing a minimum work programme within the first three consecutive years. Failure to fulfil part or all of the committed work programme requirements in respect of any Block will result in liquidated damages being payable by Vedanta Limited to the GoI pursuant to the relevant RSC.

Vedanta Limited will (in case of any commercial discoveries in any Block, and subject to the terms of the RSCs and applicable law)share a specified proportion of the net revenue from each Block with the GoI. Pursuant to the RSCs, the average (unweighted) revenue share for the Blocks shall be 33 per cent. for the initial two years in the case of onshore Blocks, three years in the case of shallow water Blocks or five years in the case of deep and ultra deep water Blocks. Following these initial periods, the revenue share payable to the GoI shall vary depending on the amount of revenue received. Further details on the mechanics for calculating the revenue share in relation to each Block are contained in the circular to be despatched to the Company's shareholders, as referred to below.

The Directors do not expect the Transaction will have any material impact on the Group's earnings for the financial year ending 31 March 2019.

The GoI is a related party of the Company by virtue of it holding substantial equity interests in the Company's subsidiaries, Hindustan Zinc Limited and Bharat Aluminium Company Limited. The Transaction therefore constitutes a related party transaction under the UK Listing Rules of the Financial Conduct Authority (the "FCA") and requires UK shareholder approval. A circular will be published and despatched to the Company's shareholders, setting out further details of the Transaction and convening a general meeting of the Company to seek shareholder approval (the "Circular"). Subject to shareholder approval being obtained and entry into the RSCs, the Transaction is expected to complete in the third quarter of 2018.

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Important notice

This announcement has been issued by and is the sole responsibility of the Company. The information contained in this announcement is for background purposes only and does not purport to be full or complete. The information in this announcement is subject to change without notice. Subject to the UK Listing Rules, the Disclosure Guidance and Transparency Rules of the FCA and the Market Abuse Regulation (EU) No. 596/2014, the issue of this announcement shall not, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information in this announcement is correct as at any time subsequent to the date of this announcement.

Certain information contained in this announcement, including any information as to the Group's strategy, plans or future financial or operating performance constitutes "forward-looking statements". These forward-looking statements can be identified by the use of terminology such as, "aims", "anticipates", "assumes", "believes", "budgets", "could", "contemplates", "continues", "estimates", "expects", "intends", "may", "plans", "predicts", "projects", "schedules", "seeks", "shall", "should", "targets", "would", "will" or, in each case, their negative or other variations or comparable terminology. Forward-looking statements appear in a number of places throughout this announcement and include, but are not limited to, express or implied statements relating to the Group's business strategy and outlook; the Group's future results of operations; the Group's future financial and market positions; expectations as to future growth; general economic trends and other trends in the industry in which the Group operates; the impact of regulations on the Group and its operations; and the competitive environment in which it operates.

By their nature, forward-looking statements are based upon a number of estimates and assumptions that, whilst considered reasonable by the Directors and the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those indicated, expressed or implied in such forward-looking statements. Forward-looking statements are not guarantees of future performance. Any forward-looking statements in this announcement reflect the Directors' and the Company's current view with respect to future events and are subject to certain risks relating to future events and other risks, uncertainties and assumptions. The forward-looking statements contained in this announcement speak only as at the date of this announcement. The Directors and the Company disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in their expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the UK Prospectus Rules, the UK Listing Rules, the UK Disclosure Guidance and Transparency Rules of the FCA and the Market Abuse Regulation (EU) No. 596/2014 . You are cautioned against placing undue reliance on any forward-looking statement in this announcement.

Lazard & Co., Limited, which is authorised and regulated by the FCA in the United Kingdom, is solely providing sponsor services (as such term is defined in the FCA Glossary) to the Company in connection with the Transaction and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Transaction. Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this announcement, any statement contained herein, the Transaction or otherwise.

A copy of the Circular when published will be available from the registered office of the Company and on the Company's website at www.vedantaresources.com. Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.