Capex optimised across the business.
Delivered strong free cash flow.
During the period of weak commodity prices, Vedanta maintained a disciplined approach to capital allocation, prioritising high-return low-risk projects to maximise cash flows. Our well-invested assets are on track to deliver near-term growth with marginal incremental capital expenditure. We retain the option to fund further growth projects, such as Enhanced Oil Recovery (EOR) and gas projects at Oil & Gas business, Lanjigarh alumina refinery expansion and the additional 400kt copper smelter at Copper India.
In FY 2015-16, capex was optimised to reduced levels of US$ 0.6 bn. Most of this was invested in high-return projects, such as the expansion at Zinc India, the Mangala EOR programme at Oil & Gas and smaller amounts to complete the Aluminium and Power projects.
Capital investment in Gamsberg, one of the world’s largest zinc deposits was rephased and only US$ 16 mn was deployed in FY 2015-16. We have also made significant progress in reducing Gamsberg capex over the life of the project, reducing capex by US$ 200 mn primarily through reengineering and re-negotiation of contracts leveraging the current commodity environment. The project comprises a 250 ktpa mine, propelling Southern Africa into a leading supplier of zinc globally. First ground was broken in July 2015, with initial production expected in early 2018.
Free cash flow pre-capex
A relentless focus on operational efficiency has resulted in reduced cost of production across our businesses, mitigating the impact of falling commodity prices throughout the year.
The ramping up of the Jharsuguda-II and Korba-II smelters reflected well in the record full year aluminium production of 923 kt. It also led to the reduction in cost of production (CoP) by 10%. Robust production at the Lanjigarh alumina refinery achieved a record operating level at 97% of permitted capacity of 1 mt.
Good progress on the mine expansion in Rampura Agucha and the Sindesar Khurd mine and continued higher volumes from Rampura Agucha open pit resulted in, record zinc production. Integrated lead and silver also saw higher volumes at the Sindesar Khurd mine. We are now one of the top 20 silver producers in the world at our current volumes.
Our focus on efficiency has resulted in our positioning on the 1st or 2nd quartile of the global cost curve.
Competitive position on global cost curve
In line with the Group's long-term strategic
priority to de-lever and increase cash
flow, Vedanta continued to make good
progress against these objectives. The
focus on optimising operating and capital
expenditure together with robust working
capital management contributed to record
free cash flow of
₹ 11,572 Crore after growth capex during FY 2015-16. This enabled reduction of ₹ 6,254 Crore in net debt, when compared to March 2015.
An ambitious target to deliver cost and
marketing savings of US$ 1.3 bn was set.
In FY 2015-16 alone, we took over 900
specific initiatives including consolidation of
spend and reduction of vendors, contract
renegotiation and efficient logistic solutions
across our business.
These delivered savings US$ 250 mn.
Several operations have been restructured to protect free cash flow. These include the temporary shutdown of the BALCO rolled product facility, and one line at the Lanjigarh alumina refinery to drive down aluminium costs.
Cost savings of
We continue to focus on embedding a culture of sustainability across the Group. This is an essential feature of our licence to operate. We believe that sustainability and long-term value creation go hand-in-hand. We deploy resources, impart skills and extend financial contributions to support our people; and the communities where we operate.
We are also steadily enhancing our investments to minimise our environmental footprint. Together with this, we deploy an unwavering focus on occupational health and safety.
In FY 2015-16, 485,900 hours of safety training were delivered to employees and contractors across various parameters. We also focused on building a strong understanding of Vedanta Safety Performance Standards and Incident Investigation among our people. We are seeing tangible outcomes of this safety drive, with fewer fatalities and lost time injuries.
Our community investments focus on health, education, livelihoods and environment. In FY 2015-16, we invested ₹ 160 Crore benefiting over 1.75 mn people globally through multiple initiatives. Our employees also contribute to community initiatives through volunteering efforts, which has fostered a greater sense of responsibility; and helped create a more motivated team and united culture.
By adopting world-leading practices, we aim to reduce and minimise the environmental impact of our operations. Our goal is to obtain ISO 14001 certification at all sites by this year (as on date 43 out of 47 operations are certified). Systems to reduce water and energy consumption, minimise land disturbance, and waste production, contain pollution and conduct successful mine closures are in place. We are implementing Biodiversity Action Plans at all our sites and are also finding new and innovative ways to recycle waste from our operations including fly ash, red mud, phosphor and gypsum, among others.
In line with our site closure plan strategy, we are starting the rehabilitation programme for the Lisheen mine that ceased production this year, in consultation with employees, local authorities and local environment groups.read more
LTIFR incidents (per mn person-hour worked)
* as per revised ICMM definition LTIFR stands at 0.49