Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

Separately, we have agreed with the representatives appointed pursuant to Asarco’s reorganization proceedings under Chapter 11 of the US
Bankruptcy Code to represent all persons with asbestos claims and demands against Asarco and/or its subsidiary debtors, or the Asbestos
Claimants, and Asarco to grant a put option to the asbestos settlement trust to be established, or the Asbestos Trust, pursuant to which the
Asbestos Trust shall be entitled to sell to us its interest (expected to be approximately 27%), or the Asbestos Litigation Interest, in the
Brownsville judgment against the Americas Mining Corporation, a subsidiary of Grupo México, or the Brownsville Judgment, which was
awarded by the US District Court for Southern District of Texas, Brownsville Division, against Americas Mining Corporation requiring it to
return to Asarco 260.09 million common stock of Southern Copper Corporation, together with past dividends received with interest, worth over
$6.0 billion in aggregate. The Asbestos Litigation Interest in the Brownsville Judgment is to be distributed for the benefit of all Asbestos
Claimants. The grant of put option would be subject to the approval and consummation of the reorganization plan proposed by Asarco and
sponsored by Sterlite USA. The put option is exercisable by the Asbestos Trust at any time after the end of the second year from the effective
date of the approved reorganization plan, or the Effective Date, through the end of the fourth year from the Effective Date at the price of $160
million less the amount of any receipt or other recovery on account of the Asbestos Litigation Interest prior to the exercise of the put option.
We do not expect any obligation on account of this agreement.
Raising of Additional Capital
On June 15, 2009, our board of directors approved resolutions authorizing us to seek the approval of our shareholders for the raising of
additional capital through the domestic Indian or international markets. According to the resolutions, we have convened an extraordinary
general meeting to be held on July 11, 2009 to seek shareholder approval authorizing us to issue securities representing up to 25% of our
currently outstanding and paid-up share capital.
Factors Affecting Results of Operations
Our results of operations are primarily affected by commodity prices, our cost of production, our production output, government policy in
India and exchange rates.
Metal Prices and Copper TcRc
Overview
Our results of operations are significantly affected by the TcRc of copper in our copper business and the commodity prices of the metals that
we produce, which are based on LME prices, in our zinc and aluminum businesses. Both the TcRc of copper and the commodity prices of the
metals we produce can vary significantly when supply of and demand for copper smelting and refining capacity and the metals we produce
fluctuate. While copper smelters and metal producers are unable to influence the market rate of the TcRc or commodity prices directly, events
such as changes in copper smelting or commodity production capacities, temporary price reductions or other attempts to capture market share
by individual smelters and metal producers, including by our consolidated group of companies, may have an effect on market prices. Moreover,
the prices realized by us can, to some extent, be affected by the particular terms we are able to negotiate for the contractual arrangements we
enter into with buyers. Price variations and market cycles, including recent volatility for both LME prices and the copper TcRc, have
historically influenced, and are expected to continue to influence, our financial performance.
Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recession in
most major economies continuing into 2009. These conditions, combined with volatile oil prices, declining business and consumer confidence
and increased unemployment, have contributed to volatility of unprecedented levels. As a result of these market conditions, the cost and
availability of credit has been and may continue to be adversely affected, leading to decreased spending by businesses and consumers and, in
turn, corresponding decreases in global infrastructure spending and commodity prices. Between fiscal 2008 and 2009, we experienced
significant declines in TcRc and commodity prices as follows:
• A 25.1% decrease in the average realized TcRc in our copper business and a 22.4% decrease in the daily average LME price of copper,
which decreases were due to copper’s use in a broad range of industries adversely affected by the economic downturn, including
construction, electronic products, industrial machinery, transportation equipment and consumer products, with construction and
electronic products, being the most significant drivers of copper consumption and the construction industry being one of the most
adversely affected industries.
• A 47.8% decrease in the daily average zinc LME price, which decrease was particularly significant as the primary driver of zinc
demand is the steel galvanizing market, which has principal applications in the construction and automotive industries, two of the
industries most adversely affected by the recent global economic downturn.
• A 14.8% decrease in the daily average aluminum LME price, which decrease was, as with copper and zinc, due to aluminum’s use
being concentrated in industries adversely affected by the global economic downturn, specifically construction, electricals, transport
and packaging. The daily average aluminum LME price would have likely decreased considerably more than it did if it were not for
continued strong demand from China.
These decreases were, in the case of copper TcRc and the daily average zinc LME price, following significant declines between fiscal 2007 and
2008.
The outlook for the copper TcRc and copper, zinc and aluminum commodity prices remains uncertain in the short to medium term, and
further decreases, including as a consequence of continued challenging, or a further deterioration in, global market and economic conditions,
would have a further adverse impact upon our financial performance. For a further discussion of global market and economic conditions and
the risks to our business, see “Item 3. Key Information — D. Risk Factors — Risks Relating to Investments in Indian Companies, Global
Economic Conditions and International Operations — Recent global economic conditions have been unprecedented and challenging and have
had, and continue to have, an adverse effect on the Indian financial markets and the Indian economy in general, which has had, and may
continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs.”
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