Our Zinc business is operated by HZL, India’s largest integrated zinc-lead producer. HZL’s zinc operations include three lead-zinc mines, three zinc smelters, one lead smelter and one lead-zinc smelter in the state of Rajasthan in north-west India and one zinc smelter in the state of Andhra Pradesh in south-east India.

The performance of our Copper – Zambia business in FY 2008 is set out below.

Production Performance

Mined metal production from all our mines was 551,000 tonnes in FY 2008, an increase of 9.1% over FY 2007, primarily as a result of continuous improvement measures undertaken at all our mines.

The new 170 ktpa Chanderiya Hydro II zinc smelter was commissioned in December 2007, three months ahead of its schedule. The production ramp-up has been excellent and the plant achieved its rated capacity within the very first quarter after its commissioning. The above ramp-up enabled us to achieve total refined zinc metal production in FY 2008 of 426,000 tonnes, up by 22.4% compared with 348,000 tonnes in FY 2007, with our highest ever quarterly zinc metal production of 135,000 tonnes in the last quarter of FY 2008. The Chanderiya Hydro 1 smelter is also operating at its rated capacity and achieved the landmark LME registration for its zinc metal during FY 2008.

The production of lead during FY 2008 was 58,000 tonnes compared with FY 2007 production of 45,000 tonnes, an increase of 28.9%, with our highest ever quarterly lead metal production of 17,000 tonnes recorded in the last quarter of FY 2008. The increase was primarily due to production from the Ausmelt plant which is now stabilised.

The saleable production of silver during FY 2008 was our highest ever at 2.58 million troy ounces compared with FY 2007 production of 1.65 million troy ounces, an increase of 56.4%. This increase was primarily due to improvement in silver recoveries and higher production from the Ausmelt plant.

The Chanderiya pyro-smelter with approximate annual output of 90,000 tonnes is expected to undergo a planned plant maintenance and upgradation shutdown for about 45 days in the second quarter of FY 2009. Consequently, production volumes are likely to be lower by 12,000 tonnes.

Exploration

Ongoing exploration activities at HZL have yielded significant success with an increase of 28.7 million tonnes to its reserves and resources, prior to a depletion of 5.8 million tonnes in FY 2008. Contained zinc-lead metal has increased by 4.0 million tonnes, prior to a depletion of 0.6 million tonnes during the same period. Total reserves and resources at 31 March 2008 were 232.3 million tonnes containing 27.5 million tonnes of zinc-lead metal. The reserves and resources position has been independently reviewed and certified as per JORC standard.

The success of exploration has primarily been in the Sindesar Khurd and Rampura Agucha mines. The sustained exploration and aggressive drilling programme at Sindesar Khurd mine has successfully augmented the resource base to the current level of 37.0 million tonnes, making it the second largest ore body in HZL’s portfolio after Rampura Agucha, with potential for further additions, through ongoing exploration. In FY 2008, the drilling programme increased the strike length, by 300 metres, to 1,600 metres averaging 5.8% zinc, 3.8% lead and 215 ppm silver.

At Rampura Agucha, 28,000 metres of drilling in 32 holes were carried out to outline mineralisation below a depth of 550 metres. Of these, 29 holes intersected ore widths with significant grades averaging 15.5% zinc and 2.0% lead. Reserves and resources at Rampura Agucha have increased to 107.3 million tonnes at 31 March 2008.

The Group’s exploration philosophy has been to replace every tonne of ore mined with at least one tonne of resource. HZL has increased its exploration focus, through a team of 40 geologists employing the latest geophysical, geochemical and GIS technologies and high speed deep drilling equipment. This has resulted in the addition of 110.7 million tonnes of reserves and resources, before depletion of 22.1 million tonnes, in the last five years.

Unit Costs

Unit costs of production in FY 2008 excluding royalties measured in Indian rupee terms, the currency in which a majority of the costs are incurred were stable at INR 27,625 per tonne compared with FY 2007, due to higher operational efficiencies, increase in volumes and better realisation of by-products which were offset by higher energy prices and general inflationary pressures. However due to the significant appreciation of the Indian rupee against US dollar, reported costs excluding royalties were higher at $686 per tonne in FY 2008. Royalties, which are LME-linked, were $198 per tonne in FY 2008 compared with $256 per tonne in FY 2007.

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