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

• Cost of production, which consists of cost of smelting and refining costs, was reduced significantly from 6.1¢/lb in fiscal 2007 to
1.8¢/lb in fiscal 2008, primarily due to improved copper recovery, improved by-product management and higher realization on the sale
of sulphuric acid by-product.
• Higher copper LME prices contributed to increased profitability of our mining operations, which was partially offset by slightly
reduced production at our sole remaining copper mine, Mt. Lyell.
• We earned a profit of Rs. 986 million in fiscal 2007 from the sale of real estate in Mumbai, with no such profit in fiscal 2008.
Zinc
Net sales in the zinc segment decreased from Rs. 85,963 million in fiscal 2007 to Rs. 78,222 million in fiscal 2008, a decrease of Rs.
7,741 million, or 9.0%. This decrease was primarily due to a 16.4 % decrease in the daily average zinc LME price, a decrease in the sales of
zinc concentrates to third parties and a reduction in Indian customs duty from 7.5% to 5.0% in January 2007, partially offset by an increase in
sales volume enabled by increased production. Specifically:
• Zinc ingot production increased from 348,316 tons in fiscal 2007 to 426,323 tons in fiscal 2008, an increase of 22.4%, as a result of the
contribution of a full year’s production from our first hydrometallurgical zinc smelter at Chanderiya and the contribution from our
second hydrometallurgical zinc smelter at Chanderiya which was commissioned in December 2007, in addition to marginal increases
in production from other smelters. Zinc ingot sales increased from 349,615 tons in fiscal 2007 to 425,531 tons in fiscal 2008, an
increase of 21.7%, enabled by higher production.
• Zinc ingot sales in the domestic market increased from 204,286 tons in fiscal 2007 to 337,672 tons in fiscal 2008, an increase of
65.3%. We endeavor to sell as large a quantity of our products as possible domestically, where we receive an Indian market premium.
Our domestic sales as a percentage of total sales increased from 58.4% in fiscal 2007 to 79.4% in fiscal 2008 as the demand in the
domestic market increased more rapidly than our production volume growth.
• The daily average zinc cash settlement price on the LME decreased from $3,581 per ton in fiscal 2007 to $2,992 per ton in fiscal 2008,
a decrease of 16.4%.
• We also sold surplus zinc concentrate of 254,249 dmt in fiscal 2007 and 231,797 dmt in fiscal 2008 to third parties, a decrease of
8.8%. The decrease was due to increased internal consumption of zinc concentrate with the commissioning of our second
hydrometallurgical zinc smelter at Chanderiya in December 2007. We sold surplus lead concentrate of 59,050 dmt in fiscal 2007 and
65,418 dmt in fiscal 2008 to third parties, an increase of 10.8%, which was enabled by higher mining output in fiscal 2008.
• Lead ingot production increased from 44,552 tons in fiscal 2007 to 58,247 tons in fiscal 2008, an increase of 30.7%, as a result of
increased production from the Ausmelt TM plant. Lead ingot sales increased from 44,916 tons in fiscal 2007 to 58,298 tons in fiscal
2008, an increase of 29.8%.
• Silver ingot production increased from 51,296 kg in fiscal 2007 to 80,405 kg in fiscal 2008, an increase of 56.7%, with silver ingot
sales at similar levels to production. Combined with a 16.1% increase in the average silver LBMA price in fiscal 2008 as compared to
fiscal 2007, net sales from the sale of silver ingots increased from Rs. 920 million in fiscal 2007 to Rs. 1,583 million in fiscal 2008, an
increase of 72.1%.
• The daily average lead cash settlement price on the LME increased from $1,426 per ton in fiscal 2007 to $2,875 per ton in fiscal 2008,
an increase of 101.6%.
Operating income in the zinc segment decreased from Rs. 62,908 million in fiscal 2007 to Rs. 53,192 million in fiscal 2008, a decrease of
Rs. 9,716 million, or 15.4%. Operating margin decreased from 73.2% in fiscal 2007 to 68.0% in fiscal 2008. The decrease in operating income
was primarily due to the 16.4 % decrease in the daily average zinc LME price between fiscal 2007 and fiscal 2008 and lower sales of zinc
concentrate, partially offset by a 21.7% increase in sales volume from fiscal 2007 to fiscal 2008.
Aluminum
Net sales to external customers in the aluminum segment increased from Rs. 40,091 million in fiscal 2007 to Rs. 41,596 million in fiscal
2008, an increase of Rs. 1,505 million, or 3.8%. This increase was primarily due to an increase in sales volume enabled by increased
production, partially offset by a marginal decline in the daily average aluminum LME price and a reduction in Indian customs duty from 7.5%
to 5.0% in January 2007. Primary and contributing factors to the increase include the following:
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