Q2 Highlights
- Oil & Gas: Q2 production up 6% and H1 production in line with guidance
- Rajasthan production 3% higher at 168,126 boepd
- Ravva and Cambay production 19% higher at 37,236 boepd
- Zinc-India: Strong mined and refined metal production; integrated silver production up 64%
- Aluminium: Stable volumes from existing smelters; cost reduction initiatives in progress; further pots at Jharsuguda - II smelter to ramp up in Q3
- Iron Ore: Mining operations recommenced at Goa
- Copper India: Stable operations at 94% capacity utilisation
- Power: Unit - 1 of Talwandi Sabo achieved 86% availability
- Continued optimisation of opex and capex to maximise free cash flow and reduce net debt
Tom Albanese, Chief Executive Officer, Vedanta Limited, said, “
Our diversified asset portfolio has delivered a strong operating performance during the quarter, including record production from our tier-1 Zinc mines. 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.Oil and GasAverage gross production for H1 FY2016 was at 207,538 barrels of oil equivalent per day (boepd), slightly up by 1% year-on-year (y-o-y). The increase in production was mainly driven by consistent performance of our offshore assets – Ravva and Cambay, through effective reservoir management practices and better than expected results from the Ravva infill drilling campaign.
In Q2 FY2016, average gross operated production and working interest production were up 6% and 4% y-o-y at 205,361 boepd and 128,021 boepd, respectively. Production at Rajasthan was up 3% 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. At Mangala EOR, the injection ramp up plan is on track and work on the drilling and surface facilities is ongoing. Gross production from DA (Development Area) -1 and DA-2 averaged at 147,443 boepd and 20,683 boepd, respectively.
In Q2 FY2016, gas production from the RDG field increased to an average rate of 30 mmscfd from 19 mmscfd in Q1FY16, recording a peak production of 34 mmscfd. This was largely on account of optimization of existing infrastructure.
In Q2FY2016, both the offshore assets registered a gross average production of 37,236 boepd, an increase of 19% y-o-y. Production at Ravva grew 27% 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%, driven by effective reservoir management practices including well intervention campaign undertaken in the last quarter.
Zinc IndiaDuring Q2, mined metal production was at 240,000 tonnes 13% higher y-o-y. The increase was driven by higher ore production across all mines. Refined metal production during the quarter was higher than mined metal production primarily on account of conversion of existing inventory and enhanced smelter efficiency. Integrated saleable zinc, lead and silver metal production during the quarter increased by 22%, 53% and 64% respectively y-o-y. Silver production benefited from higher ore grades and volumes from the Sindesar Khurd (SK) mine.
The cost of production (COP) of zinc excluding royalty was lower at c.US$771 per tonne compared with US$802 per tonne in Q1 FY2016. The contribution towards District Mineral Foundation has been notified by the Government of India at 30% of royalty paid for the existing mines, effective 12 January 2015.
Zinc InternationalRefined zinc metal production at Skorpion was at 17,000 tonnes, lower than the corresponding prior quarter due to an unplanned shutdown and a 30 day planned maintenance shutdown that commenced on 16th September. Zinc-lead mined metal production at Lisheen was lower due to the ramp down at Lisheen, which is scheduled to cease production in November 2015. COP in Q2 FY2016 at c. US$ 1,477 per tonne was higher compared with US$ 1,409 per tonne in Q1 FY2016, as lower cost Lisheen mines ramp down together with lower refined production from Skorpion.
At the Gamsberg project, pre- stripping commenced in July 2015 as per the rephased plan. As previously announced, the project is being developed using a modular approach, with project execution carried out in a phased manner that allows flexibility to manage the capital expenditure programme.
At Goa, the remaining approvals were received for production of saleable ore of 5.5 mtpa, during the quarter and mining restarted during the quarter. Production will progressively be ramped up in Q3 FY2016. The first export shipment is expected in October 2015.
At Karnataka, production in Q2 was higher at 0.6 million tonnes. Production of pig iron was lower at c.150kt primarily due to planned maintenance activities at the plant.
Copper ― India and AustraliaCopper cathode production was 94,000 tonnes in Q2 FY2016, 6% 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 FY2016. The smelter is now producing at a normalised level. The 160MW power plant at Tuticorin operated at lower Plant Load Factor (PLF) of 76% in Q2 compared to 94% last year due to reduction in power off-take by the Tamil Nadu Electricity Board (TNEB) on account of seasonally lower demand.
AluminiumThe Lanjigarh alumina refinery produced 272,000 tonnes in Q2, 20% higher than the corresponding prior quarter. The production was stable at the 500kt Jharsuguda-I and 245kt Korba-I smelters.
The 325kt Korba-II smelter produced 19,000 tonnes during Q2 FY2016 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 c. 46,000 tonnes in FY2015 has been temporarily closed, which will result in cost saving. We will continue to sell ingots and wire rods from BALCO.
The 1.25 million tonnes Jharsuguda-II smelter produced 19,000 tonnes in Q2 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 FY2016. Due to non-availability of captive bauxite and cost optimization 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 c. 800 kt. The alumina COP for the month of September dropped by 20% to c. $299 per tonne against $340 per tonne in Q1 as a result of this optimisation.
Hot metal cost at Jharsuguda-I was at US$1,599 per tonne compared to US$1,740 per tonne in Q2 FY2015. Hot metal cost at Korba- I was at US$1,674 per tonne compared to US$2,089 per tonne in Q2 FY2015. Costs were lower mainly on account of depreciation of the Indian rupee, lower alumina and other costs. The COP at Jharsuguda was impacted by higher coal costs. The two CPP units (300MW each) of the 1,200MW power plant at BALCO are expected to commence production in H2 FY2016.
PowerThe Jharsuguda 2,400MW power plant operated at a PLF of 32% in Q2, lower than Q2 FY2015 and Q1 FY2016 primarily due to lower demand and softer power rates. The first 660MW unit of TSPL operated at 86% availability during the quarter. 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 H2 FY2016.
MALCO power plant operated at lower PLF due to lower demand. Of the two 300MW IPP units of the 1,200 MW Korba Power Plant, the first 300 MW unit has been commissioned. It was capitalized in August 2015 and sold 158 million units. The second commercial unit is expected to be commissioned in Q3 FY2016.
