Annual report and accounts
FY 2015

Our aluminium business is currently operating in the second quartile of the global cost curve and is well positioned to significantly improve their costs and contribution to EBITDA as we ramp up new capacities and build the captive raw material linkages.

S.K. Roongta, CEO, Aluminium & Power

Key metrics

Employees reviewing plan at BALCO.

Employee at BALCO cast house.

Results:

During the year we achieved:
  • Copper cathode production at Tuticorin record 362,000 tonnes.
  • Cost of production at Tuticorin reduced due to higher volumes, lower input costs and higher by-product credits.
  • Mined metal in Zambia reduced due to maintainence shutdowns.
  • Mined metal in Zambia reduced due to maintainence shutdowns.

We initiated a number of innovative and cost saving projects to increase operational efficiencies. Pot-lines and other facilities including billet and wire rods are now working at much higher than designed capacities, with improved recovery and quality.

Employee with ingots at cast house, Jharsuguda.

At the Lanjigarh Alumina refinery, FY2015 production reached record levels, allowing us to achieve 98% of the permitted capacity of 1mt. Production numbers for FY2015 are not comparable to the previous year, due to the temporary suspension of production which was lifted in July 2013.

In FY2015, production was stable at the 500kt Jharsuguda I and 245kt Korba I smelters.

We initiated a number of innovative and cost saving projects to increase operational efficiencies. Pot-lines and other facilities including billet and wire rods are now working at much higher than designed capacities, with improved recovery and quality.

Production (kt) FY2015 FY2014 % Change
Alumina – Lanjigarh 977 524 86.4%
Aluminium – Jharsuguda I 534 542 (1.4%)
Aluminium – Jharsuguda II1 19
Aluminium – Korba I 253 252 0.7%
Aluminium – Korba II2 71 1
Total Aluminium 877 794 10.4%
  1. Including trial run production of 19kt in FY2015.
  2. Including trial run production of 24kt in FY2015.

In FY2015, alumina cost of production was US$356 per tonne, almost flat compared with FY2014.

The cost of production of hot metal at Jharsuguda I was US$1,630 per tonne and increased by 2.0%, compared to US$1,602 per tonne in FY2014. The increase was due to higher purchased alumina prices and higher e-auction coal prices, partially offset by improved captive coal availability and lower power consumption.

The cost of production at the 245kt Korba I increased to US$1,904 per tonne from US$1,781 per tonne in FY2014. This increase was due to higher alumina and coal costs, as captive coal availability reduced by a further 25% this year. However, this was partially offset by the improved operational efficiencies.

Average LME prices for aluminium for the year were US$1,890, an increase of 7% on the previous year’s average price level of US$1,773.

(US$ per tonne)

FY2015 FY2014 % Change
Alumina cost 356 358 (0.6)%
Aluminium hot metal production cost 1,755 1,658 3.6%
  Jharsuguda I CoP 1,630 1,602 1.8%
  Jharsuguda I smelting cost 907 889 2.0%
  BALCO COP 1,961 1,781 6.9%
  BALCO smelting cost 1,270 1,082 12.2%

FY2015 EBITDA was up 44.6% at US$416 million, compared with US$287 million in the previous year. This was primarily due to higher LME prices and premia on metals, as well as additional volume from the new Korba II smelter.

(in US$ million, except as stated)

FY2015 FY2014 % Change
Revenue 2,081.9 1,785.4 16.6%
EBITDA 415.5 287.3 44.6%
EBITDA margin (%) 20.0% 16.1%
Depreciation and amortisation 139.6 174.7 (20.1)%
Operating profit before special items 275.9 112.5 145.1%
Share in Group operating profit (%) 15.9% 4.9%
Capital expenditure 142.0 165.3 ((14.1)%
Sustaining 9.5 18.3 (47.9)%
Growth 132.5 147.1 (9.9)%

During the year, progress was made in securing raw material for our alumina refinery, with the Government of Odisha granting Prospecting Licenses (PLs) for three laterite deposits. The exploration work is ongoing and we expect to start production in FY2016 after receipt of the Mining Leases (ML). The approval for expansion of the Lanjigarh Alumina refinery has reached the final stages and environmental clearance is expected soon.

At the new 325kt Korba II smelter, 84 pots were commissioned during the year and produced 71,000 tonnes, which includes 19,000 under trial run. Ramp-up to full capacity will take place during H1 FY2016, along with the ramp-up of the 1,200MW power plant. Out of the two captive power units of 300MW each, the first unit is expected to be commissioned in Q1 FY2016. The BALCO 270MW power plant will be available for captive consumption as a back-up for pot ramp-up support.

We have also commenced the start-up of the first pot line of 312.5kt of the 1.25mtpa Jharsuguda II smelter, using surplus power from the 1,215MW power plant. 82 pots have been started during the last quarter of FY2015 and are under trial run. Ramp-up of the remaining pots of the first pot-line is expected to commence in end of Q1 FY2016, using power from one 600MW unit of the 2,400MW power plant.

In the recent coal block auctions conducted by the Government, BALCO was successful in securing two coal mines which are ready for production; Chotia Block with reserves of 15.5mt and annual production capacity of 1mtpa; and Gare Palma IV/1 Block with reserves of 44mt and capacity of 6mtpa.

We will commence production at the Chotia mine over the next few months after transfer of the mining lease and other statutory approvals. BALCO has appealed regarding Government’s rejection of its winning bid for the Gare Palma IV/1 block and the matter is sub judice.

During FY2016, the Company will focus on ramping up production from the Korba II and Jharsuguda II smelters as well as increasing the alumina production at Lanjigarh Refinery beyond 1mtpa post receipt of approvals.

The Company has Prospecting Licences for three laterite mines in Odisha and exploration is in progress. We expect to commence mining in the second half of FY2016.

  • Secure captive refinery feed to realise the full potential of cost efficiencies and increase capacity utilisation.
  • Ramp-up Aluminium capacity.
  • Laterite mining.
  • Commencement of coal block operations at BALCO.
  • Lanjigarh refinery expansion to 4mpta.