Highlights of the Concall by Capital Mkt;
Zinc - India Business
FY'14 EBITDA was up 7% to Rs 6804 tonne due to higher integrated metal volumes and INR depreciation, partially offset by lower metal prices. Q4FY'14 EBITDA was 18% lower at Rs 1711 crore mainly due to lower volumes and lower metal prices
Mined metal production for the year was 880,000 tonne, marginally higher than the previous year of 870,000 tonne. Production in H2 was lower than what the company had planned initially due to slower than expected ramp up of underground mining projects and changes in the mining sequence, wherein preference was given to the primary mine development.
Integrated production of refined metal during the year was highest ever due to operational efficiencies and higher availability of smelters. Full year integrated production of refined zinc, lead and silver were higher by 13% (743000 tonne), 10% (118000 tonne) and 4% (301000 tonne) respectively.
The zinc metal cost of production before royalty in FY'14 was 12% higher in rupee terms to Rs 51100 per tonne and 1% higher in USD terms to USD 844 per tonne as compared with the previous year. The increase in rupee terms was driven by currency depreciation of 11%, significantly lower acid credits and higher mine development and diesel costs.
The cost of production for Q4FY'14 was 24% higher in rupee terms to Rs 55500 per tonne and 8% higher in USD terms to USD 899 per tonne as compared with the corresponding prior periods. The increase in rupee terms was due to 14% currency depreciation, lower mined metal production and higher mine development cost.
The Kayad and Rampura Agucha (RA) underground mine projects commenced commercial production during the year and after initial difficulties, are now ramping up well. The company is also evaluating optimizing the RA open pit, to ensure consistent output from the mine. The Sindesar Khurd expansion project is as per schedule.
During the year, total mine development increased by over 75%, marking the beginning of transition from open-cast to underground mining.
Capital expenditure for the year was US$243 million and is expected to be around US$250 million in FY'15.
In FY'14, there was a gross addition of 26.1 million tonne to reserves and resources, prior to a depletion of 9.3 million tonne. The contained zinc-lead metal increased by 1.1 million tonne, prior to depletion of 0.9 million tonne. Total reserves and resources at March 31, 2014 were 365.1 million tonne containing 35.2 million tonne of zinc-lead metal and 28,804 tonne of silver. Overall mine life continues to be 25+ years
The company expects mined metal and integrated refined metal production including silver in FY'15 to be marginally higher from FY'14. The cost of production is expected to remain stable.
Zinc - International Business
EBITDA for Q4FY'14 was 2% higher at Rs 441 crore despite lower production due to higher inventory sales. Full year EBITDA was 20% lower at Rs 1282 crore due to lower volumes, higher COP and marginally lower LME prices.
During Q4 FY'14, refined zinc production at Skorpion was higher than Q3FY'14 by 10,000 tonne to 33000 tonne consequent to ramp up after an unplanned shutdown in Q3FY'14. However, this was offset by lower mined metal production at BMM and Lisheen due to lower ore grades. Total production in Q4 remained in line with Q3, though the full year production was 15% lower on account of disruptions in production caused by accidents at Lisheen and BMM in Q1FY'14 and the unplanned shutdown at Skorpion in Q3FY'14. COP for the year was higher due to the lower volumes.
The company expects FY'15 volumes at Zinc International to remain in line with FY'14, with a drop in Lisheen production expected to be compensated by Skorpion and BMM.
Oil & Gas Business
Cairn achieved average gross production of 218,651 barrels of oil equivalent per day (boepd) for FY'14, 6% higher than the previous year.
In Rajasthan, the Company successfully achieved its target FY'14 exit rate of production of 200,000 boepd.
A total of 129 new wells were brought on production during the year, with 45 wells added in Q4FY'14. This has led to the Rajasthan Block achieving gross average production of 181,530 boepd for FY'14, up 7% YoY
The company continues to focus on key development projects to enhance recovery with overall planned net capex of US$3 billion by FY'17. It target to achieve reserve replacement ratio of 150% in next 3 years, subject to PSC extension till 2030, and a 3 year production CAGR of 7-10% from known discoveries with flat production in FY 2015 at Rajasthan
Iron Ore Business
The Supreme Court has lifted the ban on mining in the State of Goa subject to certain conditions; vide its order dated 21 April, 2014. The Honorable Supreme Court has imposed an interim state-wide cap of 20 mtpa, subject to determination of final capacity by an Expert Committee.
Further, in its order, the Supreme Court has held that all mining leases in the State of Goa, including those of Sesa Sterlite, have expired in 2007. Consequently, no mining operations can be carried out until renewal/execution of mining lease deeds by the State government. The company is working towards securing the necessary permissions for commencement of operations at the earliest.
The Supreme Court has also directed that the entire sale value arising out of e-auction of inventories be appropriated to various purposes specified in the order with only the average cost of excavation of iron ores paid to the mining lessees.
Further, for all fresh production of iron ore, a payment of 10% of sale price shall be made by all lessees towards the Goa Iron Ore Permanent Fund.
At Goa, the company participated in e-auctions of inventory and sold 0.3 million tonne during the quarter but these were not accounted for as sales since the dispatches did not take place during the quarter.
The company resumed mining on December 28, 2013 and optimized its approved annual capacity of 2.29 mtpa, which resulted in a production of 1.5 mt this year. However, only 27 kt was sold during the year.
Copper â India / Australia Business
The Tuticorin copper smelter has been performing well at significantly higher utilisation levels for the last two quarters. It operated at 98% utilisation in Q4. However, the full year production was 17% lower due to the temporary closure of the smelter in Q1FY'14.
In Q4, net unit cost of conversion at Copper- India was 6.0 US cents/lb compared with 10.7 US cents/lb in the prior period. Cost of production was lower due to improved operational efficiency resulting from higher volumes, lower power cost, partially offset by lower by-product (sulphuric acid) credits. Full year net unit cost of conversion was 12% higher at 9.7 US cents/lb due to temporary shutdown in Q1 and lower by product credits
Tc/Rc in the current quarter increased to 18.5 US cents/lb, which was 25% higher as compared to the corresponding prior period. Tc/Rc is expected to remain robust on the back of rising global mine supply from brownfield and greenfield expansions.
Production at Australian mine remained suspended due to a mud rush at one of the stopes in January 2014
The Tuticorin smelter is currently undergoing a planned maintenance shutdown which started on 26 April 2014 and will last for 22 days. This shutdown will improve plant availability and reliability
The Lanjigarh alumina refinery operated at 91% of its rated capacity and produced 227,000 tonne in Q4FY'14, 25% higher than Q3. Full year production was 524,000 tonne, after restarting the refinery in July 2013. This resulted in a steady increase of alumina feed from Lanjigarh to smelters, contributing to 28% of the smelters' alumina requirements in FY'14 and 49% in Q4FY'14
EBITDA was higher in Q4FY'14 and FY'14, mainly on account of lower average COP, improved premiums, higher volumes and INR depreciation, partially offset by lower LME
During FY'14, COP in rupee terms, at Jharsuguda, was 5% lower, primarily due to improved efficiencies, reduced power cost, better coal quality and higher proportion of linkage coal. COP in rupee terms, at BALCO, was 4% higher, on account of higher coal cost due to tapering of coal linkage, partially offset by operational efficiencies.
The company commenced the Korba-III 325kt smelter, achieving first metal tapping in Q4. It produced around 900 tonne of aluminium with power sourced from the BALCO 810MW power plants. Out of the first 84 pots, 36 pots had been started as of 31 March 2014. The company can facilitate upto 84 pots with the existing power plants at BALCO. It expects to commission the balance lines consequent to the commissioning of the 1,200MW power plant, for which it expect to receive regulatory approvals in Q1FY'15.
The company is working on feed stock security in terms of bauxite sourcing, alumina sourcing and the coal block start up at BALCO.
Power sales were 21% lower in Q4 and 7% lower in FY'14, as compared with the corresponding prior periods, primarily due to lower sales at its Jharsuguda 2,400MW and BALCO 270MW power plants on account of weak market demand and evacuation constraints. The Jharsuguda 2,400MW operated at a plant load factor of 36% during the quarter.
The power generation cost at Jharsuguda during Q4FY'14 remained stable at Rs.1.76 per unit
The company commissioned the Vizag General Cargo Berth (VGCB) in Q4FY'13. There has been a continuous increase in the tonnage handled at VGCB. During FY'14, it handled 4.7 million tonne and generated an EBITDA of Rs.24 crore