Message Mer 4 Nov 2015 10:33

KCM result

Copper Zambia progressed well in Q2 FY2016. We have
worked towards increasing production, while simultaneously bringing down costs. We
achieved a monthly production of 11.2kt, with C1 cash cost of USc161/lb in September 2015.
Various cost saving initiatives have led to a 5% reduction in power consumption. We will
continue to build on this momentum, and are aiming towards being cash flow positive in H2 at
Copper Zambia.

(2) EBITDA of US$26 million and margin of 59%, excluding the impact of Kwacha depreciation on the VAT receivable net of local spends

Production performance
Six months to
Six months to
30.09.14 % Change

During H1 FY2016, mined metal production was 5% higher at 62kt. Production at the Konkola
mine increased by 19% compared to H1 FY2015. This was primarily on account of improvement
in Cu grade (3.24% in H1 FY2016 : 3.16% in H1 FY2015), improvement in mobile equipment
availability through the implementation of improved planned maintenance practices, and the
roll-out of a rebuild programme.
At Nchanga, mined production reduced 18% over the corresponding period due to constraints
at the mill and reduced availability of dump trucks. TLP primary copper production was at
28,000 tonnes, an increase of 5% over corresponding period, on account of higher equipment
Production from the Upper Ore Body at the Nchanga underground was suspended in
November 2014 and remains under care and maintenance.
Custom production increased by 51% compared with the corresponding period, although this
was lower than the available capacity due to constraints of availability of concentrates in the
local market.
From 1 July 2015, the Government of the Republic of Zambia has approved the revision of the
mineral royalty rates from 20% to 9% for open pit operations, and from 8% to 6% for
underground operations, together with the reintroduction of corporate income tax at 30% on
mining activities and 35% on mineral processing activities.
Following the receipt of the 30% force majeure notice from Copperbelt Energy Corporation in
July 2015, KCM embarked upon a major energy savings programme, including the reduction of
refinery operations. It has produced approximately 80% of copper in the form of cathodes, with
the balance being sold as anodes in H1 FY2016. We achieved an improvement of 4.6% in power
consumption after the initiative. The price of imported power to replace the reduced supply is
unsustainable in the long run and discussions with interested parties, including the
Government of the Republic of Zambia, are underway.
Year ended
Production (kt)
Mined metal 62 59 5% 116
Cathode 90 76 19% 169
Integrated 60 56 9% 117
Custom 30 20 51% 52

Unit costs (integrated production)
Six months to
Six months to
30.09.14 % Change
Year ended
Unit costs (US cents per lb) excluding Royalty 210.2 272.9 (23)% 257.7
Unit costs (US cents per lb) including Royalty 239.6 291.3 (18)% 280.9
The unit cost of production without royalty reduced by 23% to 210 US cents/lb during H1
FY2016 compared to 273 US cents/lb in the corresponding period. The reduction was mainly
due to higher cobalt credit, better management of maximum power demand and the reversal of
certain provisions, which was partly offset by local currency depreciation on VAT receivable.
Financial performance
(in US$ million, except as stated)
Six months to
Six months to
30.09.14 % Change
Year ended
Revenue 525.0 524.7 0% 1,077.1
EBITDA (24.3) 16.2 -250% (3.8)
EBITDA margin (%) -4.6% 3.1% -0.4%
Depreciation and amortisation 94.7 93.5 1% 187.2
Operating Profit (119.0) (77.3) 54% (191.0)
Share of Group Operating Profit (%) -20.6% -7.5% -11.0%
Capital expenditure 11.0 37.7 -71% 57.9
Sustaining 11.0 37.7 -71% 57.9
Growth - - -Vedanta Resources plc Page 29 of 62
Interim Results For The Six Months Ended 30 September 2015
EBITDA in H1 FY2016 was a loss of US$24 million compared with a US$16 million profit in the
previous period. The EBITDA was hit by US$68 million due to Kwacha depreciation impact on
VAT receivable, which was partly offset by improved volumes and lower costs. Operating
losses increased to US$119 million.
Konkola mine
KCM is focusing on running the Konkola mining operations efficiently through its prioritisation
strategy, which focuses on three key production areas, thereby resulting in improved
equipment availability and productivity.
Smelter and refinery
Continuous efforts are being made to increase the production with increase in third-party
purchase concentrates and higher concentrate from Konkola mine.
Nchanga operations
At Nchanga, we are focusing on sustaining and improving the operations at the Tailings Leach
Plant by treating CRO stockpiles and old tailings.
Production is expected to ramp up further during H2 FY2016. We maintain our target
production of 190kt - 210kt, with integrated production of 120kt - 130kt during FY2016.