Vedanta Resources' CEO Discusses F3Q14 Results - Earnings Call Transcript

Jan.31.14 | About: Vedanta Resources (VDNRF)

Vedanta Resources plc (OTCPK:VDNRF) F3Q14 Earnings Call January 31, 2014 4:00 AM ET

Executives

Ashwin Bajaj – Director, IR

M.S. Mehta – CEO

Kishore Kumar – CEO, Base Metals (Africa)

P.K. Mukherjee – Executive Director, Sesa Goa Limited (Iron Ore Business)

S.K. Roongta – Managing Director, VAL and Vice-Chairman, Bharat Aluminium Company Limited (‘BALCO’)

D.D Jalan – CFO

Sudhir Mathur – CEO, Cairn-Energy

Analysts

Menno Sanderse – Morgan Stanley

Jatinder Goel – Citi

Roger Bell – JP Morgan

Anna Mulholland – Deutsche Bank

Abhishek Shukla – Société Générale

Operator

Ladies and gentlemen, good day, and welcome to the Vedanta Q3 FY ‘14 Production Release Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to, Mr. Ashwin Bajaj. Thank you and over to you, sir.

Ashwin Bajaj

Thank you, Melissa. Ladies and gentlemen, good day this is Ashwin Bajaj, Director of Investor Relations for Vedanta. Thanks for joining us today to discuss our Production Results for the Third Quarter of FY 2014. Let me introduce our management team present with us today. We have Mr. M.S. Mehta, CEO of the Group; Mr. D.D. Jalan, Group CFO; Mr. S.K. Roongta, CEO of our Aluminium and Power businesses; Mr. P.K. Mukherjee, CEO of Iron Ore business; Mr. Sudhir Mathur, CFO of Cairn India and Mr. Kishore Kumar, CEO of our Africa Metals business. Mr. Mehta will talk about the production results and then we’ll be happy to take your questions.

So with that, I’ll hand it over to Mr. Mehta.

M.S. Mehta

Thank you, Ashwin and good morning everyone. I’m pleased to present the Q3 FY14 production results. First, the highlights. We delivered higher integrated refined zinc, lead and silver at Zinc India. We delivered a record production of 224,000 barrels a day at Cairn India which represents a growth of 10% year-on-year. We resumed iron ore operations in Karnataka during the quarter. Overall, the EBITDA for the quarter was 3% higher at $1.1 billion. Let me now take you through the performance of each segment. Zinc India – At Zinc India, we delivered operational efficiency and high utilization that has resulted in higher integrated refined zinc and lead production. Although mine metal production was lower during the quarter, it was a record for the nine month period driven by higher production at Rampura Agucha and Zawar mines. We now expect to deliver around 900,000 tonnes of mine metal in FY14 due to slower than expected ramp up of the underground mining project and some change in the mining sequence, wherein the preference has been given to primary development. Accordingly, the integrated saleable seller production is expected to be in the range of 290 tonnes to 300 tonnes for the year. Zinc cost of production excluding royalty and silver credit was stable at about $826 per tonne. The silver business delivered an EBITDA of 47 million. Overall EBITDA was 6% higher at 294 million due to higher integrated volumes

Moving forward to Zinc International; Zinc International production was 19% lower in Q3 due to an unplanned maintenance shutdown at Skorpion after a tank failure. The operations at Skorpion are now normalizing back and we expect a total production of 90,000 tonnes in the current quarter. Overall, the EBITDA impact by this volume production as well as a delay in dispatches at Skorpion and Black Mountain which impacted EBITDA to the extent of about 20 million, and this dispatches will now take place in Q4. Moving over to oil and gas – At oil and gas business we delivered a record production of 224,000 barrels, 10% higher year-on-year, primarily due to 42 new wells at Rajasthan which were brought online during the quarter. Development activities at the Rajasthan block are progressing well. Overall, we have eight drilled rigs in the block out of which four rigs are dedicated to rig development wells across various fields to support production. We expect to add new production from our satellite fields, Mangala and Aishwarya Barmer Hill in the coming quarters are subject to management committee approval. During this quarter, we crossed a milestone of securing all key approvals for the 600 billion Mangala polymer flood based EOR project which will enhance ultimate recovery from the Mangala field. Major project contacts have been awarded and we expect this project to commence polymer injection by Q4 of next year. We are working on plans to extend this program to other fields in the future.

Exploration and appraisal activity started leading tangible results. Since resuming exploration, our drilling program has achieved 50% success rate, opened up three new play types and added oil in place resource of 500 million to 600 million barrels. We announced two more discoveries during the quarter the 27th and 28th in the block. With four rigs now dedicated to exploration in Rajasthan and two high impact wells being drilled, we are back to drill about 50% of gross risked prospective resources in the block by fiscal year end. Exploration in the KG Onshore block has also been successful and we are now targeting first oil from the Nagayalanka discovery in FY17. At the mature end, producing Ravva block exploration for deep prospective is currently in progress. Overall, we expect the company to exit this fiscal year at the production rate of over 225,000 barrels a day. Exploration remains a key component of growth strategy and we target to book additional reserve resource by the end of the fiscal year. Moving on to iron ore. As Karnataka subsequent to receiving all approvals, we started mining at Karnataka from 28th December and we are now ramping up to a run rate of 0.5 million tonnes per month. Gross sale from this current production have been put up for e-auctions slated for the 31st January that is today. Coming to Goa, as per the direction of the Supreme Court, the e-auction of the mine is expected to start shortly. Government has recently announced the first set of lots that they intend to put up for e-auction in Goa, which also included around 500,000 tonnes of iron ore of our [inaudible]. However, the sale proceeds will be temporarily held by Goa in an escrow account and transferred to our accounts subsequently. Another committee appointed by the Supreme Court to suggest their feeling of iron ore excavation from Goa had to submit an interim report to the court by mid-February.

Moving on to Copper India – Our Copper India business had a record production during the quarter at the back of improved operational efficiency, as a result of continuous improvement in work culture. Mine metal production in Australia was impacted by an accident in December and Q4 production will further remain affected due to mud rush experienced in January. Costs are low due to improved operational efficiency, partially offset by lower byproduct credit from sulfuric acid at our Copper-India operations. However, the asset prices as we speak continue to remain low while Tc/Rc continue to be strong in the current calendar year and contract settlement has been around $0.25 a pound. EBITDA was 37% higher due to higher Tc/Rc, increased contribution from 80 MW power plant, partially offset by lower byproduct credit namely sulfuric acid. The final shutdown at Tuticorin was originally scheduled in the current year is now expected to be taken up in the Q1 of next fiscal and it will be for about previous period. Moving over to Copper Zambia – As we had communicated earlier in the interim, this business needs an operational turnaround. We are committed to delivering this by ramping up volume and increasing profitability. During Q3, the manual production was lower as the high cost open pits remained closed. We delivered 15% lower cost at about $2.40 per pound excluding royalties and delivered 9% higher EBITDA. For the nine months period, the cost was around $2.30 per pound. For the full year FY14, we expect to produce 130,000 tonnes to 135,000 tonnes of integrated production of cost of around $2.30.

At Konkola, the project phase has been completed and we are now focusing on mine planning and development. We augmented the team of underground mining experts with the recent talent and are transitioning to a high degree of mechanized mining which will help us to improve productivity, cost and profitability. This will translate into higher contribution to the exchequer in the form of royalties and taxes. At the Nchanga, we have increased custom smelting volumes since December using third party concentrates on nearby mines and have been able to improve smelter utilizations and cost. We also optimized the blend and throughput of the feed at our Tailings Leach Plant to obtain higher volume of these plants. As you might be aware, the repayment of VAT has been result for mining companies in Zambia. For us, this works out to approximately $60 million to $70 million of funds which are currently tied up when we complete the necessary processes and the Vedanta has supported KCM to this extent for its short-term working capital department. Overall, we engage with the government of Zambia as we always remain engaged and other stakeholders to work constructively to find solutions to any current situation and also to govern the Copper group prospects.

Aluminium both Jharsuguda and Korba smelter continued to operate above their rated capacities. Lanjigarh refineries reinstated in July ‘13 and has been ramping up and operating at a capacity of over 70% in Q3. We expect the refinery to ramp up to the full capacity in this quarter. Aluminium produced in Lanjigarh cost around $40 to $50 lower than imported alumina at current prices. We continue to improve our cost performance and maintain our aluminium COP at the second quarter of the global cost curve. Without integration of bauxite, the company has been able to deliver competitive cost that are in line with or better than most of our integrated peers in India and across the globe. Our overall aluminium COP has gone down by $300 per tonne as compared to last year on account of depreciation of iron ore and operational efficiency. While the tapering of coal linkage at BALCO has had significant cost implications, these were mitigated once we start production from 211 million tonnes of coal block at BALCO in due course. We are working towards securing regulatory clearance of this core block in order to start mining in the next fiscal. The improved COP and high utilization offers smelter resulted in 64% increase in EBITDA despite lower purchase prices. Aluminium premiums are stable and improving spot premiums are around 218 to 285 MJP is about 255. We continue to expect healthy premiums in the near term.

Moving on to Power. As you must be aware Indian Power Center continue to face issues of lower demand and evacuation concern. And we expect we will have to remain at the current level in the near term. The marginal decline in the realization during the quarter has been compensated by the marginal decline in COP on account of improvement in quality of coals and lower energy consumption. We expect COP to be in the range of 2.20 paise to 2.30 paise per unit. We delivered 12% REBITDA year-on-year which is primarily driven by 16% higher volume from Jharsuguda power plant.

With this, I would like to open the floor for the questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions]. We have the first question from the line of Menno Sanderse from Morgan Stanley. Please go ahead.

Menno Sanderse – Morgan Stanley

Yes good morning everybody. I have a couple, if I may, please. So let’s – the first one is with respect to KCM. It looks like you have started to stabilize the operations, but obviously, the original objective was to get us to 250,000 tonnes to 300,000 tonnes of integrated copper production versus the 135,000 tonnes you expect to do this year. Can you give us a bit more insight into, after you’ve looked at this in more detail now? How long you think it will take to get to that 250,000 tonnes to 300,000 tonnes, and at what cost level you think you can do that?

M.S. Mehta

Kishore would you like to take this?

Kishore Kumar

Yeah thank you. At this stage the entire focus has been on ramping up Konkola that you know it was completed. And as you said the mechanization process of bringing right challenges on the ground and we believe that this is not a job that will happen in just couple of quarters, it is a long journey. And we hope that this turnaround as we speak for Konkola in particular should be at least a year or two in terms of looking at stability of Konkola’s production going from the current levels of 4,000 tonnes to the higher levels. And on the side of Nchanga, obviously the low hanging fruit has been around the Tail Leach Plant and the customs smelting that has focused. And we believe that copper which has been stuck for almost now a more than a year, this year we’ll make an attempt to try and win that through operations. So overall, the journey from the current 130-140 levels of production, we see decline to be gradual and we expect to a rise of over 5% to 10% year on year in the short term.

Menno Sanderse – Morgan Stanley

Okay. Thank you. Secondly on the

Kishore Kumar

In terms of cost levels, sorry in terms of cost levels we firmly believe that we have been trying to hold at the level of $2.20 and the focus of the cost and cash flow continues to be less.

Menno Sanderse – Morgan Stanley

Okay, very clear. Thank you. Then secondly on financing. One of the convertibles, the 1.25 billion convertible with the 5.5% coupon, can be put to the company on July 14, 2014. What contingency plan has been put in place to refinance that if necessary? Obviously, you don’t know yet but it may be put to you.

M.S. Mehta

So basically I think as you know that we brought the diverse sources of financing and in recent past also we have raised financing. And we have also got a policy that we should try to complete the financing much ahead of the date. So as a contingency plan we have got time and we plan to close the contingency plans sometime during March or April. And there are diverse sources and it will be premature to talk about one or two source. But it could be bank financing it could be refinancing of the loans from various other sources also.

Menno Sanderse – Morgan Stanley

Okay and two small ones. On Sesa iron ore, how quickly can the 4 million tonnes of inventory in Goa be sold? And secondly, we’ve seen the main shareholder regularly buy shares in the last two months, now up to 67.99%. Has there been any communication from the main shareholder to the company about what level of shareholding that main shareholder wants to go to?

P.K. Mukherjee

Let me take the question Mr. Mehta?

M.S. Mehta

Yeah go ahead Mr. Mukherjee.

P.K. Mukherjee

Yeah so as you have seen that the first auction for Goa’s inventory is yet to announced, but it is very shortly announced as you see. So it has taken almost three months for the first auction to happen and as for the methodology developed by the government of Goa, the people have got time to evacuate this material initially 30 days plus they can ask for additional time of 30 days. So, I guess the 4 million tonnes it is very difficult to take a guess, but it will take considerable time and as you are expecting much before that Supreme Court orders will happen.

Menno Sanderse – Morgan Stanley

Thank you.

M.S. Mehta

Would you like to take the question on the shareholding?

Operator

This is the operator. Yes, the question is for which speaker sir?

M.S. Mehta

D.D?

Operator

Mr. Jalan, please go ahead.

M.S. Mehta

D.D. are you on mute? Okay, let me give you a respond to that question while we are waiting for D.D. Jalan to come online. But it is only his conviction statement or signature his conviction about the company’s long-term prospects at this point.

Menno Sanderse – Morgan Stanley

And there’s no maximum level to the shareholding?

M.S. Mehta

Hello? Yes D.D?

Operator

Mr. Jalan please go ahead. Your line is unmuted. Sir, you may continue.

M.S. Mehta

Yeah, yeah. So that’s their response so far there is no indication of what we can go up to.

Menno Sanderse – Morgan Stanley

Okay. Thank you.

M.S. Mehta

Thank you.

Operator

Thank you. The next question is from the line of Jatinder Goel from Citigroup. Please go ahead.

Jatinder Goel – Citi

I’ve got two questions, firstly, for Mr. Mukherjee. Since we have now resumed iron ore operations in Karnataka, do we know how to get back to 6 million tonne capacity or are we waiting for something from the government to tell us how we get to 6 million tonnes? And secondly, probably for Mr. Roongta, on 1.25 million tonne smelter – hello?

P.K. Mukherjee

You finish your questions…

Jatinder Goel – Citi

Yes. Secondly, just on aluminum smelter for – on 1.25 million tonne smelter, has anything changed from your strategic perspective after the Indonesian bans coming in place? Because the bauxite and alumina are likely to be more expensive for you now and you don’t have captive alumina or captive bauxite to feed that additional smelter? So, any thoughts on that will be appreciated. Thank you.

P.K. Mukherjee

Let me take the alumina question first so far our pre-ban pre-stoppage capacity of 6 million tonne. Right now it is a Supreme Court approved capacity of 2.29 million tonne and we support that any increase in this capacity has to go through the Supreme Court. So there are certain ways which has been in the Supreme Court has been approved plan in how it can be increased. So that is based on the reserve if it goes up, so based on the dumping capacity it will go up and based on the evacuation capacity which goes up. So 6 million tonne at the moment it is not the insight, but it’s a marginal increase already pushing forward, but difficult to give you the tally. But as you might have already noticed that because of the of iron ore in the domestic market, there are people consumer sites there are field people as well as Karnataka government, they have made a request to the Supreme Court to increase capacity from 30 million to 40 million tonne. Of course Supreme Court has not given positive hearing to that but various – there are pressures building up.

Jatinder Goel – Citi

Is there something still going on from the Supreme Court side or is there a timeline for Supreme Court about the next hearing, next thing they need to do before they get back to other people? I’m sure there must be other producers as well who have got constraint capacity at the moment like yours.

P.K. Mukherjee

Supreme Court for that matter get to on a couple of occasions, people have tried to that issue by governing applications. And so Supreme Court has said they are turning applications will not work the judgment stands final. However, if anybody wants to ask for review of the judgment they can apply for that.

Jatinder Goel – Citi

But at the moment, is it fair to assume that 6 million tonne is not on the horizon at all then?

P.K. Mukherjee

At the moment, no.

Jatinder Goel – Citi

Okay. Thank you.

S.K. Roongta

Roongta here coming to 1.25 million smelter at Jharsuguda now first Indonesian ban on bauxite there has been marginal increase in the global prices of alumina, but it is not sizeable. And as of now we feel that for the year 2014, global alumina supply and demand seem to be evenly matched and we have also done some contracting for the year 2014. So we are covered for the alumina. And it does not change the strategically the position significantly with regard to start up of the smelter. But we are to see how long this ban will last if it is not of a permanent ban and what will be the impact in the global bauxite supply expansion, whether it will significantly impact the alumina prices that is to be seen. But as for the current year, Chinese importers have stopped bauxite Indonesia for the next six to eight months and no significant effects we are feeling for the time being. So strategically, there is some impact in terms of alumina price and 2% to 3%, but it does not basically alter the situation.

Jatinder Goel – Citi

Okay. Can I just follow up quickly on the financials side then? Is this a decision that either you need to start the smelter by a certain timeline or you need to take some impairments maybe for Mr. Jalan?

Operator

Excuse me Mr. Jalan’s line disconnected we are trying to reconnect him.

D.D Jalan

Jatinder, the fact we always said that we want to maximize the shareholder return so – and plus starting smelter is sort of a technically irreversible process. So we are obviously doing this decision making very carefully and obviously what question you are asking are very valid questions whether the impairment or what happens to the demand scenario of alumina or bauxite per se. We looked at very broad terms, we don’t anticipate that Indonesian bauxite changes will reduce the bauxite supply in overall basis somewhere. So there are dynamics working on all types multi price aluminium demand is growing 6% to 7% per year despite all the odds, new capacities only China are coming up everywhere, people are talking of shutting down capacities again because of technical constraints technical difficulties the shutdowns are slower than what statements people made. So while the conditions are not very good for aluminium industry per se, but if you look at overall basis that despite not having or integrated alumina or bauxite supplies to the extent we require, we are able to deliver the cost of second quarter to global cost curve. I think this is a very good signature of efficiency and so small changes in supply demand of alumina or cost, I think we should be able to take an old as yet. Particularly if you increase volume the cost are going to go down in due course of time. Having said that, we’ll remain watchful, how and when to start the smelter, in what way we start because the force smelter should we start one, should we start two. A lot of decision has to be taken, but whatever we do, we’d like to ensure that it will be good for the company and for shareholders.

Jatinder Goel – Citi

Just a final comment. So if you don’t start the smelter, can you continue without the write-off for five years or three years? If it doesn’t start assuming the ban on the amendment case in Indonesia and you can’t get your captive bauxite

D.D. Jalan

I can only answer technically yes but proper care it’s possible to therefore they’ll start another good period of time.

Jatinder Goel – Citi

Okay. Thank you very much.

D.D. Jalan

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Roger Bell from JP Morgan. Please go ahead.

Roger Bell – JP Morgan

Yes good morning, gentlemen. Thanks very much for the call. I just wanted to touch on Copper-Zambia again. You mentioned that you’re moving towards more mechanized processes. Could you in light of that comment, give us a sense of where you expect total headcount to go over the next few years? And whether that has caused any further issues in negotiation with the local authorities etcetera? And then also, you mentioned briefly that you’ve been supporting KCM’s working capital requirements. Could you quantify how much cash Vedanta’s having to put into KCM as we stand today?

M.S. Mehta

Kishore would you take that question mechanization?

Kishore Kumar

Yeah. Sir we are taking mechanization at both the mines which is basically the Konkola mine as well as upper body of the Nchanga and mechanization involves capital equipment and larger phases in terms of mining. As we speak, the fees on any further equipment or any further manpower in addition to the company and all that we are saying with good mechanization scale of economies to come in and training and development, we need to look at the hard productivity over the existing manpower. In terms of our association with the government, we have maintained that there won’t be any layoffs which you have planned earlier and we are pleased to serve to any such at this point in time. And we continue to engage government in addressing the challenges on productivity. As regards the support that required in terms of the mechanization, we are at this point in time bringing technical experts both from Vedanta [ph] Group Companies which is based in Australia. And we are also looking at opportunities to bring in the right quality of asset and networking in mine in terms of mobility as well as managing to crack those operations. So that is as far as the mechanization of KCM goals. Now the second question that you requested was regarding the working capital challenge that we face, because of funds which were held back for reasons of documentation. We have received the support from Vedanta of funding of $65 million till date on the working capital.

Roger Bell – JP Morgan

Okay. Thank you very much. That’s very clear.

M.S. Mehta

Thank you, Roger.

Operator

Thank you. The next question is from the line of Anna Mulholland from Deutsche Bank. Please go ahead.

Anna Mulholland – Deutsche Bank

Sorry just back on KCM, I just wanted to see if you could give us a little bit of color about your cost control plans and successes there. Obviously, as we’ve gone through this calendar year, we’ve seen production guidance being downgraded from around 160 now to about 130. But you’re seeming comfortable that you can keep costs at around the 230 to the pound [ph] level. Can you just give us a little bit of color on how you’re managing to do that? And then just a very quick second question on financial number. You’re talking about a one-time charge on adoption of your fair value methodology of your stock option valuations in oil and gas. Can you just give us what that number was in terms of the impact on EBITDA, please? Thank you.

D.D. Jalan

On the KCM side the cash model was established as part of the organization turnaround effort and that included not only the management of cost, but also cash. So on the cost side, specifically to refer to the opportunity that exists on the ground number one, we have liberated the opportunities of buying and capital items on a synergy basis across Africa now with all our assets in Namibia, South Africa as well as KCM. There has been a significant support in terms of corporate capital whether it is looking at operation or buying sulfurous commodity for our sulfur both at Skorpion and at KCM. We see the opportunity of synergizing the buying has been of a significant support to the business. And as you’ll observe in addition to these supports and purchase, we also ended up shopping very expensive mining operations of [inaudible] where we incurred substantial costs in the previous prior period which has been stocked and we are looking at old mine operations and started to focus on the asset optimization within the open pits. So, overall it is the mix of commercial support from marketing in terms of the byproducts as well as the managing the asset optimization of the ground. So it has been a multi-pronged attack on managing the cost. The second question I guess was

M.S. Mehta

Sudhir would you like to respond to that question please?

Sudhir Mathur

Can you please repeat the question so that I can answer it more precisely?

Anna Mulholland – Deutsche Bank

Sorry. Thanks. The impact on EBITDA in your oil and gas division from the one-time charge that you took on your stock option valuation.

Sudhir Mathur

Yeah that’s the onetime accounting entry with respect to the stock options with the employees and we converted the valuation to the Blackstone’s model so it’s a one-time issue it’s not repeated in the future.

Anna Mulholland – Deutsche Bank

Can you give me the number please?

Sudhir Mathur

Yeah it’s in 156 Crores in Indian Rupees which translates to roughly US$25 million.

Anna Mulholland – Deutsche Bank

Thanks very much.

Sudhir Mathur

Thank you.

Operator

Thank you. The next question is from the line of Fawzi Hanano from Goldman Sachs. Please go ahead. I’m sorry she took off the question. The next question is from Abhishek Shukla from Société Générale. Please go ahead.

Abhishek Shukla – Société Générale

Hi good afternoon. I would like to ask four questions, if I may. First is regarding power supply at Jharsuguda. And it seems there’s some legal dispute with the Orissa electricity regulator that if you want to supply power from your own power plant here on smelter, you need to pay access charges, which will clearly increase the cost of power to a very high level. Could you just give me an update on where exactly things stand there and what’s the prognosis? Second question is on KCM. I know you are trying your best to sort out the operations. I was just wondering have you considered selling that operation to maybe somebody who will be more specialized in those kinds of mines. Any such thought ever crossed your mind? And also what would be your annual CapEx level at KCM over the next few years? And finally, could you please let us know your Hindustan Zinc mines production forecast over the next few years? Thank you.

M.S. Mehta

May be I’ll request Mr. Roongta to take the first question of power supply issues.

S.K. Roongta

On power supply issue, we don’t have legal dispute per se with Orissa about power supply to our smelter. Our basic dispute with them is relating to fixation of rates for our power supply which we are making to them. Of course, that is a separate issue which is under legal scrutiny right now whether under the Electricity Act ours is a unit and [inaudible] unit is a big distribution company. So, there we have represented that it should be declared a distribution company and that is separate issue which is under discussion, which is under you can say under legal scrutiny and final judgment on that is yet to come. But as such, we don’t have dispute with the on the current the power supply which we will be making in future from our power plant smelter.

M.S. Mehta

Abhishek on the second question on KCM I don’t think we thought like that having of those assets, because we invested in this, we developed this asset over the last few years only the bark of the conviction that it’s a very high quality asset and can reap very good returns to shareholders. Yes it is true that it is lower than what we anticipated, but it’s not something that we can’t crack it. And as we mentioned as Kishore mentioned earlier he’s augmented the team of underground mining engineers and complete a complement of people. So that’s going to be turning point for him to start getting higher volume from the underground mining operations. As far as CapEx is concerned, there is no large projects which has been approved and right now under implementation at KCM. So there is no number to be mentioned which is worth significance. However, having said that, KCM’s historical CapEx has been above 150 million, 160 million, but it would be more efficient management of operations this number is likely to go down. Kishore would you like to take a guess hit on the number next year or late for the next year few months?

Kishore Kumar

It’s better I think just to add what you said these assets have got well invested over the last may be six or seven years. So at this point in time, we are bringing technical expertise going to recognize the mine and move to the typical modern mine. So that is going to be a support on the CapEx short term of Q3 to five years in terms of ramping up the production and we are expecting the CapEx levels around 125 to 115 levels.

M.S. Mehta

On the last question on Hindustan Zinc, I think with this question we’d like to address in the due course of time. Having said that, we should not be too far from the 1 million tonne next year.

Abhishek Shukla – Société Générale

Okay thanks a lot.

M.S. Mehta

Thank you.

Operator

Thank you. [Operator Instructions]. I would like to hand the floor back to the management for closing comments. Please go ahead.

Ashwin Bajaj

Yes thanks ladies and gentlemen for joining us today. And if you have any further questions please feel free to contact us at IR. Thank you.

M.S. Mehta

Thank you, thank you all.

Operator

Thank you gentlemen of the management. Ladies and gentlemen on behalf of Vedanta that concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank you.

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