1. Vedanta trims opex, capex in Q2; says market outlook challenging

Vedanta trims opex, capex in Q2; says market outlook challenging

Vedanta Resources said it has reduced capital and operating expenditures in the July- September quarter as the mining conglomerate tries to tackle volatile market conditions as well as subdued metal prices globally.

By: | London | Published: October 9, 2015 2:49 PM
Vedanta

Vedanta said market conditions are expected to remain challenging in the short term. (Express Photo)

Vedanta Resources on Friday said it has reduced capital and operating expenditures in the July- September quarter as the mining conglomerate tries to tackle volatile market conditions as well as subdued metal prices globally.

Billionaire Anil Agarwal-led mining giant said market conditions are expected to remain “challenging in the short term”.

Presenting its production figures for the second quarter of 2015-16, Vedanta Resources Group CEO Tom Albanese said: “We are continuing to drive efficiency improvements and optimise opex and capex across the business.

“While the near-term market outlook is challenging, we believe we have the right mix of commodities to benefit from future demand in India and globally.”

He added however that the Group’s diversified asset portfolio has delivered a strong operating performance during the quarter, including record production from its tier-1 Zinc mines.

On the financial side, the London Stock Exchange-listed firm in a statement said: “In light of the current market conditions, we are focused on optimising our opex and capex, increasing free cash flow and reducing net debt.”

During the quarter, several initiatives and programmes to generate cash savings, including a reduction of working capital have been implemented across businesses. These initiatives have resulted in an improved cost performance and lower net debt at the end of the quarter, it added.

On its iron ore business, Vedanta Resources said that in Goa, the remaining approvals were received for production of saleable ore of 5.5 million tonnes per annum (MTPA) during the quarter and mining restarted during the quarter.
Production will progressively be ramped up in the third quarter of 2015-16. The first export shipment is expected in October 2015, it added.

In Karnataka, production in third quarter was higher at 0.6 million tonnes (MT). Production of pig iron was lower at around 150 kilo tonnes (KT) primarily due to planned maintenance activities at the plant.

In the aluminium business, the 325 KT Korba-II smelter produced 19,000 tonnes during second quarter FY’16 with 83 pots operational. However, the ramp up of further pots has been temporarily put on hold due to weaker LME and premium.

The high cost rolled product facility at BALCO which produced about 46,000 tonnes in 2014-15 has been temporarily closed, which will result in cost saving.

In the Oil & Gas business during the July-September quarter of 2015-16, average gross operated production and working interest production were up 6 per cent and 4 per cent y-o-y at 205,361 boepd (barrels Of oil equivalent per day) and 128,021 boepd, respectively.

Production at Rajasthan was up 3 per cent y-o-y at 168,126 boepd, primarily driven by inline reservoir performance at Mangala and production from additional infill wells in the Aishwariya field.

In the second quarter of 2015-16, gas production from RDG field increased to an average rate of 30 mmscfd from 19 mmscfd in the first quarter FY’16, recording a peak production of 34 mmscfd. This was largely on account of optimisation of existing infrastructure, Vedanta Resources said.

In the second quarter of FY’16, both the offshore assets registered a gross average production of 37,236 boepd, an increase of 19 per cent y-o-y. Production at Ravva grew 27 per cent to 26,064 boepd due to consistently higher gas production, effective infill drilling campaign and prudent reservoir management.

Cambay saw a production growth of 5 per cent, driven by effective reservoir management practices including well intervention campaign undertaken in the last quarter.

On Aluminium business, Vedanta said 1.25 MT Jharsuguda-II smelter produced 19,000 tonnes in July-September with 80 pots operational.
“We are in discussions with the Government authorities for using power from the 2,400 MW power plant for further ramp up of pots of the first line of 312 KT at this smelter, and expect the ramp up to commence in Q3 FY’16,” it added.

Due to non-availability of captive bauxite and cost optimisation drive across the business, production capacity at the Lanjigarh alumina refinery has been reduced to a single stream and it will now operate at a capacity of about 800 KT.

The alumina COP (Cost Of Production) for the month of September dropped by 20 per cent to around USD 299 per tonne against USD 340 per tonne in Q1 as a result of this optimisation.

Copper cathode output was 94,000 tonnes in Q2 FY 2016, 6 per cent lower y-o-y, primarily due to a maintenance shutdown at the smelter.

Additionally, there was a shutdown in late September that will impact the cathode production for Q3 FY 2016. The smelter is now producing at a normalised level, it said.

Refined zinc metal production at Skorpion was at 17,000 tonnes, lower than the corresponding prior quarter due to an unplanned shutdown and a 30 day planned maintenance shutdown that commenced on September 16, it said.

Zinc-lead mined metal production at Lisheen was lower due to the ramp down at Lisheen, which is scheduled to cease production in November 2015.

COP in July-September stood at around USD 1,477 per tonne was higher compared with USD 1,409 per tonne in Q1 2015-16, as lower cost Lisheen mines ramp down together with lower refined production from Skorpion, Vedanta Resources said.

On its Power segment, the firm said Jharsuguda 2,400 MW power plant operated at a PLF (plant load factor) of 32 per cent in Q2 2015-16, lower than the year-ago period and Q1 FY’16 primarily due to lower demand and softer power rates.

TSPL’s Power Purchase Agreement with the Punjab State Electricity Board (PSEB) compensates based on the availability of the plant. The balance two units are expected to commence production in second half of 2015-16. MALCO power plant operated at lower PLF due to lower demand.

Of the two 300 MW IPP units of the 1,200 MW Korba Power Plant, the first 300 MW unit has been commissioned. The second unit is expected to be commissioned in Q3 FY2016.

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