SUMMARY

Group revenues in FY 2008 were $8,203.7 million, an increase of 26.2% compared with the previous year. Production across all our metals and the newly acquired Iron Ore Business increased significantly in FY 2008 as a result of better operational efficiencies, higher plant availability, improved mine management and the commissioning of the 170,000 tpa Chanderiya zinc expansion project and the first time contribution from Sesa Goa post acquisition. Sales also benefited from an increase in sales in domestic markets which generally yield higher contributions relative to export sales.

Operating costs were lower in all businesses except Copper-Zambia, despite ongoing cost pressures across the mining sector. This was achieved due to higher volumes, various improvements to enhance operational efficiencies and better by-product management. In the Copper-Zambia business, costs of production were higher compared with the previous year due to higher manpower costs, repair and maintenance costs and energy prices.

EBITDA at $3,010.4 million for FY 2008 includes $585.6 million from the new Iron Ore Business acquired during the year. Despite increased contribution from higher volumes and stable costs of production, EBITDA from our non-iron ore businesses was lower by $278.2 million compared with FY 2007, primarily due to the sharp appreciation of the Indian rupee against the US dollar by over 11.0%, lower LME zinc prices and lower TC/RC realisations. Volumes and costs contributed $300.0 million, which was more than offset by currency losses of $150.0 million, LME losses of $130.0 million, TC/RC realisation losses of $115.0 million and sales related losses of $180.0 million on account of hedging, lower TCs on zinc and lead concentrate sales and LME gains arising from the settlement of provisional to final prices in FY 2007 due to a sharp rise in LME prices in April and May 2006.

Our EBITDA margin was 36.7% compared with 41.6% in FY 2007, reflecting these factors and the change in business mix. The revenue and EBITDA mix in FY 2008 changed primarily due to an increase in contribution from the newly acquired Iron Ore business, which contributed 10.8% and 19.5% to Group revenues and EBITDA, respectively.

Our Aluminium business performed well with a production of 396,000 tonnes in FY 2008, our highest ever production and an increase of 12.8% compared with the previous year. This increase was primarily attributable to the increase in current density and current efficiency at our BALCO II smelter. Operating costs were lower in Indian rupee terms primarily due to better contribution from higher volumes and savings in procurement costs of carbon and other raw materials, partially offset by the general inflationary pressure on costs and higher coal prices.

The Lanjigarh alumina refinery produced 267,000 tonnes alumina out of a single stream operation, feeding our captive requirements. We successfully commenced commissioning Phase I of the 500,000 tpa Jharsuguda aluminium smelter, more than one year ahead of schedule and tapped the first metal in May 2008. Phase I of 250,000 tonnes capacity will be progressively commissioned during FY 2009.

The production of cathodes at our Copper – India/Australia business was 339,000 tonnes in FY 2008, our highest ever production and an increase of 8.3% compared with FY 2007. We achieved a record average annual recovery of 98.1% as a result of various initiatives to enhance operational efficiencies. Despite the pressure on gross conversion costs due to higher energy prices, net conversion costs were significantly reduced to 1.8 US cents per lb in FY 2008 from 6.1 US cents per lb in FY 2007 due to higher recoveries and the contribution from our sulphuric acid business. TC/RC realisations which were 15.7 US cents per lb in FY 2008 remained lower as expected due to market conditions.

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