2008 HIGHLIGHTS

2008 was another excellent year for Vedanta. A significant increase in volumes across all our metals combined with productivity gains and stable operating costs delivered industry-leading growth and returns for our shareholders.

We continue to offer a unique investment story by delivering expansion projects ahead of schedule and within budget, in a challenging environment. We have significant near term organic growth projects across all of our businesses.

We achieved record revenues for the fifth consecutive year of $8.2 billion, up 26.0% over last year. EBITDA was in excess of $3.0 billion for the first time, with free cash flow of $2.2 billion, up 47.0%. We generated excellent returns for our shareholders, as evidenced by a strong ROCE of 45.6% and a TSR performance of 58.9% in FY 2008. Since our IPO, we have delivered a TSR growth of nearly 470.0%.

2008 STRATEGIC ACHIEVEMENTS

There were three significant strategic achievements in the year. In April 2007, we acquired a 51.0% stake in Sesa Goa, India’s largest producer-exporter of iron ore, a commodity with attractive fundamentals. In June 2007, our Indian subsidiary, Sterlite Industries completed its US ADR offering, successfully raising $2.0 billion, the largest ever IPO by an Indian company in the US at that time. In April 2008, we completed the purchase of an additional 28.4% stake in KCM in line with our strategy of consolidating minorities.

At the time of our listing in 2003, we set out a four-pillar strategy to secure an industry-leading growth profile. We continued to make significant progress in 2008 against this strategy.

The first pillar of our strategy is to optimise the performance of our existing assets improving production and reducing costs. We made good progress this year with, for example, the substantial increase in our zinc-lead reserves and resources on the back of a strong exploration effort, the completion of the debottlenecking project in our Zinc business and the 17.0% increase in production in Sesa Goa. The overall result of several ongoing efficiency initiatives has helped maintain stability in operating costs and increase in productivity and volumes. 

The second pillar of our strategy is to pursue organic growth opportunities. We are making excellent progress in our $8.8 billion investment programme to increase capacity in all our base metals to 1.0 million tonnes per annum.  We are delivering projects at industry-leading benchmark capital costs, within budget and ahead of schedule.

We commissioned our 1.4 mtpa Lanjigarh alumina refinery in July 2007, the largest new refinery in India in over two decades. We successfully tapped the first metal from Phase I of the 500 ktpa Jharsuguda Aluminium project in May 2008, more than one year ahead of schedule, with Phase II on track. Our 170 kt zinc smelter at Chanderiya was commissioned in December 2007, three months ahead of schedule.

Our 7.5 million tonne Konkola Deeps expansion project and the 300,000 TPA Nchanga smelter project are on course for completion on schedule, which will significantly increase our total copper capacity and will improve the operational and financial performance of our Zambian operations.

We also recently announced expansion projects that will increase our total integrated zinc-lead capacity to 1,065,000 TPA, making us the world’s largest integrated zinc-lead producer. This expansion is also expected to gradually increase our silver production from 2.8 million oz to over 16.1 million oz per annum.

In our commercial energy business, the 2,400 MW independent power project at Jharsuguda remains on track for progressive commissioning from September 2009.

Finally, we continue to evaluate additional organic growth opportunities. The abundance of bauxite and coal in India, combined with our proven track record in project delivery, presents an exciting growth opportunity.

The third pillar of our strategy is the consolidation of minorities and the further rationalisation of the Group structure. In April 2008, we successfully completed the acquisition of the 28.4% stake in KCM, taking our total shareholding in KCM to 79.4%. In respect of the acquisition of the Indian Government’s stakes in BALCO and HZL, significant progress was achieved during the year and we anticipate a positive resolution soon.

The fourth pillar of our strategy is to leverage our established skills and seek additional investment opportunities. In April 2007, we acquired a 51.0% controlling stake in Sesa Goa, India’s largest producer-exporter of iron ore, marking our entry into a bulk commodity that has attractive longer-term fundamentals. We have already delivered excellent growth and returns with this business and aim to grow Sesa Goa into a 25 million tonne producer of iron ore within the next few years.

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