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

Year Ended March 31,
2007 2008 2009
(in millions, except Production output and Cost of production)
Zinc:
Segment sales Rs. 85,963 Rs. 78,222 Rs. 55,724
Less:
Segment profit (65,129) (55,563) (27,777)
Segment cost 20,834 22,659 27,947
Less:
Cost of tolling including raw material cost (14) — (409)
Cost of intermediary product sold (2,487) (2,944) (1,301)
By-product net sales (1,223) (2,637) (4,848)
Cost of lead metal sold (1,463) (1,787) (2,079)
Others, net (2,050) (118) (1,312)-
Total expenses Rs. 13,598 Rs. 15,173 Rs. 17,998
Production output (in tons) 348,316 426,323 551,724
Cost of production (a) $ 862 $ 884 $ 710
Aluminum:
Segment sales Rs. 41,002 Rs. 41,695 Rs. 39,336
Less:
Segment profit (15,765) (14,244) (8,954)
Segment cost 25,237 27,451 30,382
Less:
Cost of intermediary product sold (177) (118) —
By-product net sales (312) (367) (328)
Cost for downstream products (1,323) (1,709) (1,966)
Others, net (322) (181) (314)
Total expenses Rs. 23,103 Rs. 25,076 Rs. 27,774
Production output (hot metal) (in tons) 313,817 362,296 104,553
Cost of production (a) $ 1,626 $ 1,720 $ 1,700
(a) Exchange rates used in calculating cost of production were based on the daily RBI reference rates for the years ended March 31,
2007, 2008 and 2009 of Rs. 45.29 per $1.00, Rs. 40.24 per $1.00, and Rs. 45.91 per $1.00, respectively.
(3) Cost of production relates only to our custom smelting and refining operations and consists of the cost of converting copper concentrate
into copper cathodes, including the cost of freight of copper anodes from Tuticorin to Silvassa and excluding the benefit of the
phosphoric acid plant. Revenues earned from the sale of sulphuric acid and copper metal recovered in excess of paid copper metal are
deducted from the cash costs. The total cash costs are divided by the total number of pounds of copper metal produced to calculate the
cost of production per pound of copper metal produced.
(4) Our zinc operations are fully integrated. As a result, cost of production of zinc consists of the total direct cost of producing zinc from the
mines and smelters, including extracting ore from the mines, converting the ore into zinc concentrate and smelting to produce zinc ingots.
Our zinc segment includes lead and silver. Silver is a by-product of lead and accordingly, there are no additional processing costs for
silver. Revenue earned from the sale of silver is reported as profit in this segment. Revenue earned from the sale of sulphuric acid is
deducted from the total costs to calculate the total cash costs to HZL of producing zinc metal. Royalties paid are included in the cost of
production of zinc. The total cash cost is divided by the total number of tons of zinc metal produced to calculate the cost of production
per ton of zinc metal produced. HZL's cost of production in the last month of fiscal 2009, or its exit cost of production for fiscal 2009,
was $594 per ton.
(5) Cost of production of aluminum for BALCO’s smelters includes the cost of producing bauxite and conversion of bauxite into aluminum
metal, for the portion of BALCO’s operations that are integrated from production of bauxite to aluminum metal, and the cost of
conversion of alumina into aluminum metal, for the portion of BALCO’s operations where alumina is sourced from third parties. Cost of
production of aluminum consists of total direct cash costs. Revenue earned from the sale of by-products, such as vanadium, reduces the
total cash costs. The total cost is divided by the total quantity of hot metal produced to calculate the cost of production per ton of
aluminum hot metal produced. Hot metal production output is used instead of the cast metal production output disclosed elsewhere in this
annual report in calculating cost of production as the hot metal production, which excludes the value-added cost of casting, is the measure
generally used in the aluminum metal industry for calculating cost of production. In response to recent global economic conditions and a
decline in commodity prices, starting in February 2009, BALCO suspended part of its operations at its 100,000 tpa aluminum smelter and
ceased operations at this smelter on June 5, 2009. As the 100,000 tpa aluminum smelter had a higher cost of production than the newer
(and remaining) 245,000 tpa smelter, and partly as a result of efforts by BALCO to decrease its operating costs in response to the recent
global economic conditions, BALCO’s exit cost of production for fiscal 2009 was $1,146 per ton.
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