9th Oct 2015 08:42
LONDON (Alliance News) - Vedanta Resources PLC shares rose on Friday after it reported a rise in production across most of its commodities in the first half of its financial year and said its net debt is expected to be below the USD8.0 billion mark as of the end of September.
Vedanta shares were up 9.6% 581.00 pence per share, the best performer on the FTSE 250.
The FTSE 250-listed multi-commodity company said oil and gas production net to the company in the second quarter of 2015 rose 6% year-on-year to 205,361 barrels of oil equivalent per day from 194,508 barrels. All of that production comes from India.
That brought first half oil and gas production to average 207,538 barrels of oil equivalent per day, a small 1% rise from 206,125 barrels a year ago. That lift was driven by its Ravva offshore oilfield increasing production 23% year-on-year, partially offset by production falling elsewhere.
To break it down, first half production from Ravva rose to 6,143 barrels of oil equivalent per day from 5,008 barrels, but this was partially offset by production at the Rajasthan field, its biggest contributor, falling 2% to 119,115 barrels per day from 121,211 barrels. Its Cambay field saw production drop 6% year-on-year to 4,028 barrels per day from 4,283 barrels.
Zinc production from India in the second quarter totalled 240,000 tonnes, up 13% year-on-year from 213,000 tonnes, and cost of production, excluding royalties, fell to USD771 per tonne from USD799 per tonne.
That brought first-half production to 472,000 tonnes, up 26% from 376,000 tonnes a year ago.
Integrated saleable zinc, lead and silver metal production from India during the quarter increased by 22%, 53% and 64% respectively year-on-year. Silver production benefited from higher ore grades and volumes from the Sindesar Khurd mine.
Zinc production from Vedanta's other operations outside of India totalled 63,000 tonnes, which was down 20% year-on-year from 79,000 tonnes, bringing first half production to 133,000 tonnes, also down 18% from 163,000 tonnes.
That large fall was caused by its Skorpion mine in Namibia experiencing an unplanned shutdown and a 30-day planned shutdown in the half, resulting in the mine producing 17,000 tonnes in the second quarter - its lowest month on record. Production from Skorpion in the first half was down 30% year-on-year.
Production from the Lisheen mine in Ireland fell 17% year-on-year in the first half as the company is winding production down. The mine is expected to cease operations in November.
Vedanta's zinc business is its biggest contributor to earnings.
Saleable iron ore production totalled 800,000 tonnes in the second quarter, all coming from the Karnataka mine in India. No production came from the Goa mine, also in India, during the quarter or the first half as the company had to secure new approvals to begin production.
That meant first half production totalled 1.0 million tonnes, again all from Karnataka, which was up from only 300,000 tonnes a year ago.
However, in August, its subsidiary secured the necessary approvals to start iron ore mining operations in Goa, which will now ramp-up going forward, it said.
Vedanta said the mining will recommence at Goa amid a challenging iron ore market environment and it said it is continuing to work with the Indian government to improve competitiveness of Indian exports.
In terms of iron ore sales, 600,000 tonnes were sold from Karnataka in the second quarter, up 5% year-on-year whilst first half sales rose 8% to 1.2 million tonnes from 1.1 million tonnes.
Pig iron production fell 2% in the second quarter to 150,000 tonnes from 154,000 tonnes due to planned maintenance activities, but first half production rose 7% year-on-year to 320,000 tonnes from 300,000 tonnes.
Copper cathode production, which comes from India and Australia, totalled 94,000 tonnes in the second quarter, down 6% year-on-year from 100,000 tonnes due to another maintenance shutdown at the smelter, which is now producing at normal levels again.
That brought first-half copper cathode production to 193,000 tonnes, which is up 16% year-on-year from 166,000 tonnes.
Copper production from Zambia in the second quarter was up 39% to 47,000 tonnes from 34,000 tonnes. In the first half, copper production totalled 90,000 tonnes, up 19% from 76,000 tonnes a year earlier.
Vedanta also said as from July 1, 2015, the government of Zambia has changed the mineral royalty rates for open pit operations to 9% from 20% and for underground operations the royalty has been lowered to 6% from 8%.
Aluminium production in the second quarter totalled 233,000 tonnes, up 5% year-on-year from 222,000 tonnes, but the company also saw hot metal prices at Jharsuguda-I fall by more than USD240 per tonne in the second quarter from a year earlier whilst prices in the second quarter at Korba- I dropped by more than USD400 per tonne.
First half production of aluminium came in at 464,000 tonnes, up 9% year-on-year from 424,000 tonnes.
Its power generation division, operating in India, produced 2.71 billion units in the second quarter, up 34% year-on-year from 2.02 billion units as first half power sales were up 25% year-on-year to 5.78 billion units from 4.62 billion units.
"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 our businesses," said Vedanta.
As a result of those initiates, the company said it has an improved cost performance and lower net debt. Vedanta said it expects net debt at the end of September to stand below USD8.0 billion, and the company said it is confident of meeting its covenants going forward.
By Joshua Warner; [email protected]; @JoshAlliance
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