Vedanta Resources plc

Vedanta Resources — Barclays Credit Conference December 2017

43 slides from Vedanta Resources's conference presentation, Dec 7, 2017

  1. Slide 1: Vedanta Resources Plc Barclays Credit Conference

    Vedanta Resources Plc Barclays Credit Conference December 2017 Awarded “Best High-Yield Bond" by FinanceAsia & The Asset for January 2017 issuance VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – BARCLAYS CREDIT CONFERENCE

  2. Slide 2: Cautionary Statement and Disclaimer

    Cautionary Statement and Disclaimer The views expressed here may contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness, reasonableness or reliability of this information. Any forwa

  3. Slide 3: Vedanta Group - A world-class natural resources powerhouse

    Vedanta Group - A world-class natural resources powerhouse Overview Group structure • Portfolio of large, diversified, structurally low-cost assets Vedanta geared towards base metals and oil Resources Plc • Access to diversified sources of funding, raised over 50.1% 79.4% $10bn of US$ bonds since li

  4. Slide 4: Focused on Sustainability

    Focused on Sustainability Drinking water initiative at Barmer, Cairn Biodiversity Management Plan at Gamsberg, S. Africa 331 RO plants established to benefit 1 million people Focus to minimise environmental footprint Lost Time Injury Frequency Rate Ranking by the Dow Jones Sustainability Index Numbe

  5. Slide 5: Consistently enhancing credit

    Consistently enhancing credit Strong 2017 results, 37% 1 Revised Cairn merger terms 6 HZL $2.1bn special dividend 11 EBITDA growth to $3.2bn and high FCF generation of $1.5bn $840mn new bank debt from 2 Cairn merger approval 7 Cairn merger completion 12 globally diverse group Moody’s upgrade to B1 S

  6. Slide 6: Vedanta Investment Case

    Vedanta Investment Case 1 2 Large, low cost and Attractive commodity mix diversified asset base 6 3 Ideally positioned to Proven track record capitalise on India’s growth potential 5 4 Well-invested assets driving Strong financial profile industry leading cash flow growth VEDANTA RESOURCES PLC – BAR

  7. Slide 7: Large, low cost and diversified asset base

    1 Large, low cost and diversified asset base  Second largest integrated zinc-lead  India’s largest private-sector crude oil producer globally; major silver producer producer Zinc Oil & Gas  Assets in India, Namibia and South Africa  Produces about 30% of India’s domestic Lead crude Silver  Ramp

  8. Slide 8: Attractive Commodity Mix

    2 Attractive Commodity Mix Global demand CAGR 2017-30E 89% of Vedanta Group’s H1 FY2018 EBITDA Vedanta Resources commodity presence 2.8% 2.2% 2.2% 2.0% 1.6% 1.5% 0.9% 0.6% 0.4% 0.3% Aluminium O&G India Lead Zinc Nickel Copper Met Coal Thermal Coal O&G Iron ore Vedanta commodity basket 130 120 Commod

  9. Slide 9: Ideally Positioned to Capitalize on India's Growth

    3 Ideally Positioned to Capitalize on India’s Growth Current per capita metals consumption 30 2017 2030 Germany 25 China consumption South Korea (kg/capita) Aluminium 20 US 15 Japan 10 GDP 2.6 6.0 5 130% India (real terms) trillion trillion 0 0 10 20 30 40 50 60 GDP (k$ per capita) 14 Zinc consumpti

  10. Slide 10: Well-invested assets driving industry leading cash flow growth

    4 Well-invested assets driving industry leading cash flow growth Remaining Total expanded Change vs FY17 Near-term expansions capex, $mn1 capacity production, %  Expansion to 1.2mt mined Zn-Pb Zinc 1.2mt Zn-Pb 30% Zn-Pb metal 603 India 24mn oz Ag 65% Ag  Silver to 24mn oz Zinc  Gamsberg project (

  11. Slide 11: Strong Financial Profile

    5a Strong Financial Profile Net Debt/EBITDA1 EBITDA/Gross Interest1 3.2 3.1 3.0 2.5 3.0 2.5 2.2 2.8 2.0 2.7 1.7 2.6 1.5 2.5 2.4 1.0 2.2 0.5 2.0 - FY2016 FY2017 LTM H1FY2018 FY2016 FY2017 LTM H1FY2018 Maturity Profile of Vedanta Plc Debt ($6.1bn) – No single large maturity over next 12-15 months 1.8

  12. Slide 12: Strong Financial Profile: Gearing

    5b Strong Financial Profile Vedanta plc 70% Moody’s Rating Ba3 60% 50% 40% Gearing2 Vedanta Ltd CRISIL rating AA 30% 20% 10% Peers1 International Domestic 0% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Net Debt/EBITDA3 1. Peers include BHP Billiton, Rio Tinto, Anglo American, Glencore, Teck Resources, Freep

  13. Slide 13: Proven track record

    6 Proven track record 16% CAGR production growth since listing Total Production (copper equivalent kt) 1,800 1,600 Copper Equivalent Production (kt) 1,400 1,200 1,000 800 600 400 200 0 FY2009 FY2013 FY2004 FY2005 FY2006 FY2007 FY2008 FY2010 FY2011 FY2012 FY2014 FY2015 FY2016 FY2017 Zinc-Lead Silver

  14. Slide 14: Capital Allocation Framework

    Capital Allocation Framework World class assets and operational excellence to deliver strong and sustainable cash flows Production growth and asset optimization Strong Shareholder Returns Maintain Strong Balance Sheet Grow Existing Businesses  Dividend policies at:  Continued reduction of gross de

  15. Slide 15: Strategic Priorities

    Strategic Priorities Production Growth and Asset optimisation Optimise Capital Allocation and Maintain Strong Balance Sheet Protect and preserve our License to Operate Identify next generation of Resources VEDANTA RESOURCES PLC – BARCLAYS CREDIT CONFERENCE 15

  16. Slide 16: Appendix

    Appendix VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – BARCLAYS CREDIT CONFERENCE

  17. Slide 17: Strategic Framework

    Strategic Framework Near Term Priority Medium Term Priority (FY18-20) (FY20+) Deliver Selectively pursue growth Ramp up to Design Capacity superior options shareholders  Well-invested assets ramping  High quality portfolio with up by FY2020 to deliver attractive brownfield growth returns with indu

  18. Slide 18: Strategic Framework: Selectively Pursue Growth Options

    Strategic Framework: Selectively Pursue Growth Options Future growth options Zinc  Expansion to Zn-Pb to 1.5mtpa India  Silver production of 32mn oz.+ Zinc  Gamsberg Phase 2 & 3 (350kt incremental) Intl.  Swartberg (75kt)  300-500 kboepd Oil & Gas  Accompanied by continued exploration Aluminiu

  19. Slide 19: Safety: Focussed on Building a Zero Harm Culture

    Safety : Focussed on Building a Zero Harm Culture LTIFR - Lost Time Injury Frequency Rate  Regrettably, 4 fatalities during H1 FY18; detailed (Number of lost time injuries per million man-hours worked)1 investigations completed and interventions are in progress under direction of Executive Committe

  20. Slide 20: Optimising Capex to Drive Cash Flow Generation

    Optimising Capex to Drive Cash Flow Generation  Prioritised capital to high-return, low-risk projects to Growth Capex Profile and Free Cash Flow pre capex $bn maximise cash flows Oil & Gas Zinc Al & Power Copper Optionality Capex Free Cash Flow (pre-capex)  H1 Capex spent $0.3bn, H2 FY2018 expecte

  21. Slide 21: Zinc Market Overview

    Zinc Market Overview Supply Shortage Leading to Multi-year low spot TCs Declining stocks at LME & SHFE warehouses $/tonne mn tonne $/tonne 1.40 4,000 400 1.20 3,500 350 300 3,000 Spot TCs dipped 1.00 250 to $25/mt in 2,500 0.80 Oct’17 200 2,000 0.60 150 1,500 100 0.40 1,000 50 0.20 500 0 0.00 0 Oct

  22. Slide 22: Zinc India Update

    Zinc India Update H1 FY2018 Results  MIC at 452kt; refined zinc-lead production at 459kt  Refined silver production at 8.2mn ounces  CoP at $979/t; impacted by higher input commodity prices Projects – key highlights  Capacity expansion to 1.2mtpa MIC by FY2020 on track  RAM U/G mine main shaft

  23. Slide 23: Zinc India Expansion

    Zinc India Expansion 1.5mtpa Shaft and decline integration capacity Multi-level mining under Digital transformation to boost productivity planning New prospects & tenements 25+ years of mining R&R with potential of 1.2mtpa 1.2mtpa capacity Transition to underground mining progressing smoothly by FY2

  24. Slide 24: Zinc International Update

    Zinc International Update H1 FY2018 Results Significant progress at 250kt Gamsberg project  Total production at 74kt  On target for first production by mid CY2018, with  Skorpion at 36kt, lower y-o-y mainly due to planned Production ramp-up to its full capacity in the next 9-12 acid plant shutdow

  25. Slide 25: Gamsberg – Anchor for Zinc International Growth

    Gamsberg – Anchor for Zinc International Growth Total Potential for Gamsberg 250 KTPA to 450 KTPA to 600 KTPA Phase 1 Project In Execution Gamsberg Project (Phase 1) Gamsberg North Gamsberg East U/G Gamsberg U/G (Phase 3) Resource Resource • Current project (open-pit mine, 183 MT of Ore @ 32.27 MT o

  26. Slide 26: ZI Outlook

    ZI Outlook FY18 FY19 FY20 Indicative Prod (kt) 150-160 240-260 410-430 Consolidated Outlook COP ($/t) <1,500 <1,200 <1,100 Project on track and progressing as per plan Gamsberg  First production by mid CY2018 and on budget for capex target of $400mn 250kt Production@  FY19 production expected to b

  27. Slide 27: Cairn: Oil & Gas Update

    Cairn: Oil & Gas Update MPT: Facility modifications H1 FY2018 Results  H1 FY2018 gross average production at 184,062 boepd  Rajasthan production at 156,278 boepd  Commenced 15 wells infill drilling campaign at Mangala with first well brought online in Sept 2017; 4 wells online currently  Aishwar

  28. Slide 28: Cairn Oil & Gas: $1bn Capex to Deliver 300 kboepd

    Cairn Oil & Gas: $1bn Capex Initiated to Deliver 300 kboepd at $5 per boe Enhanced Execution Strategy Gross production Net capex (kboepd) ($mn)  Fundamental shift to ‘Integrated Project Development’ with in-built risk and reward mechanism to drive 275-300 300 300 incremental value from project sche

  29. Slide 29: Copper – Zambia Update

    Copper – Zambia Update H1 FY2018 Results Production (kt)  Higher integrated mined metal in H1 FY2018 vs H2 FY2017 due to: 32 32  Improved fleet availability at Konkola UG & Nchanga 27 open pit 25  Positive impact of OEM’s supervision 21 20  Improved dewatering efficiency and development 16 15 ra

  30. Slide 30: Copper – Zambia Update (contd.)

    Copper – Zambia Update (contd.) Regulatory Update KCM: One of world’s highest grade copper mines Top 25 producing copper mines by contained copper (mt)  Power supply situation has stabilised 140 Contained Cu in R&R  Backlog VAT receivable: continued engagement with 120 Zambia Revenue Authority 100

  31. Slide 31: Aluminium Update

    Aluminium Update H1 FY2018 Results Aluminium Costs and Margins ($/t, for Q2 FY2018)  Record Aluminium production of 753kt and Alumina 572kt Q4 17 1,851 45 86 1,982 (645) (548) (298) (44) $447/t (150) (299) (2)  Aluminum CoP at $1,798/t, higher due to high power cost on account of coal shortages an

  32. Slide 32: Power Update

    Power Update Talwandi Sabo Power Limited (TSPL) Other IPPs  1,980 MW Thermal Power Plant (3 units of 660 MW  BALCO 600MW: H1 PLF of 47% on account of temporary each) coal shortage  Plant availability of 20% in Q1 and 87% in Q2; targeting  Jharsuguda 600MW: Low PLF of 26% due to shut down availab

  33. Slide 33: Iron Ore and Copper India Update

    Iron Ore and Copper India Update Iron Ore Volumes:  Sales of 3mt and production of 4.5mt (Goa and Karnataka)  Volumes at Goa impacted by low pricing environment  Karnataka to achieve full allocation production in Q3  FY2018 production allocation: 5.5mtpa at Goa & 2.3mtpa at Karnataka  Engaged w

  34. Slide 34: Copper India: 400kt Expansion

    Copper India: 400kt Expansion Business Case Project Details  Robust future for copper in India:  Incremental project cost of c.$576mn, excluding cost of  Per capita copper consumption of 0.5kg in India vs c.$141mn already invested 1.9kg globally  Project on hold since 2010 pending statutory  Gr

  35. Slide 35: FY2018 Guidance

    FY2018 Guidance Segment FY18e Comments Earlier guidance on CoP for FY2018 was marginally Zinc-Lead Integrated: 950kt; Silver volume: +500 tonnes Zinc India higher than FY17 CoP. Revised guidance due to CoP ($/t): $900-950/t input commodity inflation Zinc-Lead volume: c.160kt Zinc International Gamsb

  36. Slide 36: Entity Wise Cash and Debt

    Entity Wise Cash and Debt Net Debt Summary ($mn) 30 Sep 2017 31 Mar 2017 30 Sep 2016 Company Debt Cash & LI Net Debt Debt Cash & LI Net Debt Debt Cash & LI Net Debt Vedanta plc1 6,116 15 6,101 6,173 17 6,156 6,145 19 6,126 KCM 467 9 458 554 1 553 642 1 641 Vedanta Ltd. Standalone 5,850 1,891 3,959 7

  37. Slide 37: Group Maturity Profile

    Group Maturity Profile Maturity Profile of Term Debt ($12.2bn) (as of 30th Sep 2017) Debt at VED plc Term Debt at Subsidiaries 4.0 1.0 2.1 2.1 1.5 1.4 0.7 1.1 1.2 3.0 1.1 1.4 0.8 1.3 0.9 0.3 0.4 0.1 FY18 FY19 FY20 FY21 FY22 FY23 and later Debt numbers at face value; As of date, term debt of $12.2bn

  38. Slide 38: Debt Profile

    Debt Profile Diversified Funding Sources for Term Debt ($12.2bn) Debt Breakdown (as of 30 Sep 2017) (as of 30 Sep 2017) 1% Debt breakdown as of 30 Sep 2017 ($bn) Term debt 12.2 Bonds - USD Working capital 0.2 28% Bonds - INR Short term borrowing 2.1 31% Term Loan - INR Temporary short term borrowing

  39. Slide 39: Segment-wise Summary

    Segment-wise Summary Oil & Gas H1 FY18 H1 FY17 Zinc-India H1 FY18 H1 FY17 Average Daily Gross Operated Mined Metal (kt) 452 318 Production (boepd) 184,062 196,629 Refined Zinc – Integrated (kt) 386 250 Rajasthan 156,278 167,323 Refined Lead – Integrated (kt)1 73 55 Ravva 17,810 19,228 Saleable Silve

  40. Slide 40: Segment-wise Summary (contd.)

    Segment-wise Summary (contd.) Copper-Zambia H1 FY18 H1 FY17 Aluminium H1 FY18 H1 FY17 Mined Metal (kt) 45 58 Aluminium Production (kt) 753 541 Finished Metal – Total (kt) 101 92 Jharsuguda I - 500kt 191 261 Integrated (kt) 43 55 Jharsuguda II - 1,250kt1 277 77 Custom Smelting (kt) 58 36 Korba-I 245k

  41. Slide 41: Segment-wise Summary (contd.)

    Segment-wise Summary (contd.) Power Iron Ore and Pig Iron H1 H1 H1 H1 FY2018 FY2017 FY2018 FY2017 Power Sales (million units) 4,787 6,039 Sales (mt) 3.0 3.4 Jharsuguda 600MW 657 1,497 Goa 2.0 2.4 BALCO 600MW 682 1,156 Karnataka 1.0 1.0 MALCO 100MW3 4 115 Production (mt) 4.5 4.7 Talwandi Sabo 1980MW

  42. Slide 42: Credit Metrics

    Credit Metrics Covenant FY2017 H1 FY18 (Up to Sep 2017) Net Debt/EBITDA 2.7x 2.5x <3.75x EBITDA/Net Interest Expense1 4.0x 3.6x >3.00x Net Assets/Debt 1.42x 1.48x >1.40x Several of our facilities initially had the covenants of Net Debt/EBITDA of <2.75x and EBITDA/Net Interest of >4.0x, as disclosed

  43. Slide 43: Group Structure

    Group Structure Vedanta Resources Plc Divisions of Vedanta Limited 79.4% 50.1%  Sesa Iron Ore  Sterlite Copper (Tuticorin) Konkola Copper Vedanta Ltd  Power (600MW Jharsuguda) Mines (KCM)  Aluminium (Odisha aluminium and power assets)  Cairn India (O&G)1 Subsidiaries of Vedanta Ltd 64.9% 51% 10

Vedanta Resources — Barclays Credit Conference December 2017 on 6ix