Vedanta sees higher H2 output, shares rise

Vedanta sees higher H2 output, shares rise

London: Indian-focused mining group Vedanta Resources Plc forecast higher production in the second half after it posted strong output gains for most metals in the latest three months, boosting its shares.

Stock in the London-listed firm was the top gainer among the FTSE-100 index, gaining 3.9% to 2,187 pence by 1013 GMT as commodity prices continued to recover.

“We expect improved volumes in all of our operations in the second half," chief executive M.S. Mehta told a conference call.

The higher output is expected mostly due to the group’s expansion programme as it builds new smelters and mines.

Vedanta released production data showing output of its most profitable metal, zinc, rose 15.6% to 141,000 tonnes due to improved smelter performance in the quarter to end September.

Output of saleable iron ore gained 27% to 3.26 million tonnes due to improved efficiences in mining operations.

“Vedanta have come out with another impressive production report today," Liberum Capital said in a note.

In the first quarter, zinc accounted for 44% of core earnings and iron ore for 24%.

No other major London-listed diversified miners have issued quarterly output data yet, but investors took heart after U.S. aluminium giant Alcoa posted a surprise profit on Wednesday from cost cutting and higher prices.

Global miner Rio Tinto is due to issue a production report next Wednesday.


In July, Vedanta said first-quarter core earnings more than halved despite higher production after a sharp decline in metals prices.

A rebound in metals prices this year, however, has improved the picture for the most recent quarter and many analysts expect further price gains next year as economic recovery takes hold, especially in resource-hungry China.

Investment bank Investec upgraded commodity price forecasts this week, but said it was cautious about the fourth quarter. It increased its copper price forecast for 2010 by 42%, zinc by 13% and iron ore by 8%.

In the September quarter, the average price of cash LME zinc was $1758 per tonne, little changed from the average for the same period a year ago of $1,779, according to Reuters data. This is still well below the 2008 peak of $2,799.

Iron ore has also recovered, but was still below last year’s levels. An analyst said spot prices during the quarter ranged from around $80-$105 per tonne, compared to $110-$180 in the same period last year. Iron ore was trading in India at around $93 per tonne C&F early this month, up slightly from a week earlier.


Output of copper cathodes in India rose 12.4% to 91,000 tonnes while in Zambia it fell 5.4% to 35,000 tonnes following a maintenance shutdown of the Nchanga smelter.

Aluminium production rose 13% to 120,000 tonnes due to the ramping up of the new Jharsuguda smelter, which more than offset the shutdowns of two other smelters.

The company sold surplus energy not used at the two shut smelters, boosting power sales during the quarter by 663% to 511 million units.

Construction of a new smelter project at unit BALCO was progressing well and on schedule for first metal tapping in October 2010.

Work on BALCO’s 1,200-megawatt captive power plant was disrupted when a chimney under construction collapsed last month and killed at least 20 workers.

“At this stage we do not anticipate a material delay in the progressive commissioning of the power plant," Vedanta said.