Vedanta Resources on Thursday revealed that it had cut production of zinc by almost 40 per cent in the first half of its financial year, which meant that the Indian mining company missed out on the full benefit of a sharp rise in the price of the metal.
London-listed Vedanta reported earnings before interest, tax, depreciation and amortisation of $1.2bn in the six months to September 30, down 4 per cent from the same time last year.
This reflected how its production of zinc fell by 37 per cent in the April to September period.
The price of zinc, which is used to galvanise steel, rose 27 per cent in the same period because of supply shortages partly linked to moves by Glencore, another mining company, to limit production.
Vedanta’s output of refined zinc in India, its main source of the metal, fell to 252,000 tonnes in the April to September period as the company focused on work to expand its mines in the country.
This work has involved reconfiguring some of the mines from opencast operations to underground projects.
Shares in Vedanta rose 12 per cent on Thursday to 875.5p, amid a broad rally in mining companies’ shares because of rising commodity prices, including copper.
Vedanta said that its zinc production would be “significantly higher” in the second half of its financial year.
The company added that lower zinc production in the first half was partly offset by increased iron ore output. Its aluminium division also recorded its highest ever half-yearly production.
Vedanta proposed an interim dividend of 20 cents per share.
The company is positive on future zinc demand in India, because regulators are requiring that the metal be used to prevent corrosion in cars, said Anil Agarwal, chairman.
There were “promising signs” for the mining sector, he added, saying that India’s demand for new infrastructure could make up for China’s slowing economic growth.
“India has huge demand, I have not seen something like this in the past,” Mr Agarwal said.
Vedanta has been investing in its Gamsberg zinc project in South Africa, which it expects to start producing the metal in 2018.
Vedanta is seeking to become a diversified natural resources group to compete with the likes of BHP Billiton and Vale.
Two of Vedanta’s core operating units in India, Vedanta Limited and Cairn India, are planning to complete a merger in March.
The restructuring would enable Vedanta Resources to retain control of Cairn India, an oil and gas business, and secure better access to the unit’s cash.
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