High On Oil And Gas; Low On Iron Ore, Copper And Zinc

It can be dubbed as a global conglomerate’s performance score sheet.

Vedanta Resources (VED.L) may have reported significant increases in its production of oil, copper, aluminum, lead and silver in 2012-13, but its iron ore, zinc and alumina output in the same period were dismal. While iron ore production was down to zero, copper and zinc, too, had fared badly.

The company continued to pin the blame for the zero production of iron ore during the second half of the fiscal year to the mining ban in the Indian states of Goa and Karnataka.

In a statement, the company said its ore production, operated through subsidiary Sesa Goa, was down 73 percent to 3.7 million tons. The company’s iron ore operations in Karnataka, on the other hand, have now been completely shut down for almost 18 months following India’s Supreme Court ban on mining.

A report in the Business Standard said alumina production at the company’s Lanjigarh refinery in India’s eastern state of Odisha had dropped by 43 percent in FY13, at 527,000 tons, following the company’s decision to shut down the alumina refinery due to lack of bauxite. This was the reason why in the fourth quarter of last year, the alumina production at this unit was zero.

Vedanta said it continued to engage the Odisha state authorities for allocation of bauxite as per its existing agreement with the Odisha state government. It was also working on obtaining bauxite from other sources. However, total aluminum production in the period went up by 15 percent.

Nearly 60 percent of Vedanta Resources, a London-listed conglomerate, is owned by founder Anil Agarwal. His stated aim is to turn Vedanta into another Rio Tinto or BHP Billiton. As of now, Vedanta ranks 7th in the world among mining giants, with operations in metals like copper, coal, zinc, gold, iron ore and oil, spread across four continents.

In 2012-13, Vedanta’s refined zinc production, managed through Hindustan Zinc Ltd (HZL), was reported to be down 11 percent at 677,000 tons. Production of lead and silver, which is also done by HZL, were up 26 percent and 69 percent, respectively.

Zinc production at its international operations brought over from Anglo American Zinc fell by 4 percent, at 426,000 ton as against 444,000 tons in the previous year.

There was good news on the oil front. Vedanta reported a 19 percent growth in its crude oil production at 205,323 barrels of oil per day last fiscal year. Cairn India, the oil-producing arm of Vedanta, stepped up its crude oil production from its Barmer block in the desert state of Rajasthan by 32 percent in 2012-13 at 169,390 barrels a day.

The company said that following the clarification from the government of India that exploration would be permitted in development areas, exploration drilling was commenced in the Rajasthan block in February, and this step would ultimately realize the basin potential of 300,000 barrels per day.

Besides, Vedanta’s production of copper from its India and Australia divisions was up 15 percent at 26,000 tons in FY13, while integrated production at its Konkola Copper Mines, Zambia, increased by 16 percent at 1,60,000 tons.

Power was another sector where Vedanta had scored highly.

Power sales were 36 percent higher at 8.8 million units during the year, primarily because of higher power generation and sales from three units of the Jharsuguda 2,400-MW power plant. Sterlite Energy Ltd and Malco increased power production by 34 percent and 46 percent, respectively.

by Sohrab Darabshaw