London: Indian-focused mining group Vedanta posted higher fourth-quarter output on Thursday of its two most profitable products, zinc and iron ore, but shut down some aluminium and copper operations to cut costs.
Analysts were mostly upbeat, saying the output figures were largely in line with expectations, and the shares in the London-listed group rose.
Vedanta shares, which have gained 31% so far this year, climbed 4.8% to 810.0 pence by 0833 GMT, the biggest gainer among the FTSE 100.
They outperformed a 2.4% increase in the UK mining index, which was lifted by copper hitting a five-month peak.
“This is very impressive that Vedanta is able to maintain volume ramp up targets in most divisions, while most peers are suffering from volume fallout,” said analyst Tim Huff at Royal Bank of Scotland.
“We would find ourselves upgrading EPS for FY09 by 7% as a result of these data, but this has to be considered provisional in the absence of any cost data,” Cazenove said in a note.
Vedanta reports annual results on 7 May.
Weak metals prices have forced many mining groups to close down unprofitable operations and Vedanta said it had taken action recently.
“As part of our focus on improving profitability and cash flow, we completely ramped down the MALCO smelter in mid December 2008 and shut down a part of the BALCO Plant I smelter in Q4 2009 due to higher operational costs,” a statement said.
“Consequently, we are selling surplus power to maximise returns.”
Record aluminium output
Despite the shutdowns, London-listed Vedanta said fourth quarter aluminium production increased 31.4% to a record 134,000 tonnes, mainly due to the ramp-up of its new Jharsuguda smelter in India.
Vedanta said expansions such as Jharsuguda were on schedule and budget. The first phase of Jharsuguda, which has lower operational costs, is due to hit its 250,000 tonne annual run rate during the current quarter, the first in the 2010 fiscal year.
The second phase, which will add another 250,000 tonnes of annual capacity, is due to be fully operational by the end of the current fiscal year, Vedanta said.
Refined zinc output for the three months to end March rose 11.9% to a record 151,000 tonnes, while iron ore production gained 4.1% to 4.9 million tonnes.
Zinc and iron ore are Vedanta’s most important minerals, accounting for 39% and 32% of core profit for the first nine months of the fiscal year.
Copper cathode output in India fell 2.2% to 88,000 tonnes while copper cathode production in Zambia rose 2.9% to 35,000 tonnes.
Vedanta announced on 19 February that its Zambian unit Konkola Copper Mines had shut down its Nkana copper smelter to cut costs.
On Thursday, Vedanta said a furnace leak at its new Nchanga smelter in Zambia had caused a disruption earlier this month.
“Based on our initial assessment, production is expected to be resumed in a three-four week timeframe,” it said.
The global downturn has hammered metals prices, sending copper down 50% and aluminium 55% from their peaks last year.
On 28 January, Vedanta Resources posted a 98.5% fall in third-quarter core profit due to weak metals prices, inventory writedowns and currency losses.