Introduction to Business Review

Providing industry leading growth

• For more on Aluminium
• For more on Copper
• For more on Zinc-Lead
• For more on Iron Ore
• For more on Other Business

• Record Production in Aluminium, Iron Ore, Zinc Businesses.
• Successful project commissioning. Achieved significant cost savings.
• Further improving low cost position.

Summary

Operating performance was strong, driven by record production in our Aluminium, Zinc and Iron Ore businesses and cost reduction measures. This helped us to mitigate the impact of a sharp fall in commodity prices in the second half (‘H2 FY 2009’) of the year ended 31 March 2009 (‘FY 2009’). We also took proactive steps to temporarily shut down high cost operations at our MALCO aluminium smelter, Nkana copper smelter at KCM and partially shut down the BALCO Plant I aluminium smelter. Surplus power has been sold in a power deficient state in order to maximise returns.

Despite a tough business environment and a drop in commodities prices of our products, we continue to remain confident about the future based on our low-cost position and track record of low capital cost project development.

This allows us to continue to deliver profits and growth even at depressed commodity prices. We have made excellent progress during the year with our expansion programme. We commissioned a zinc concentrator at the Rampura Agucha mine, de-bottlenecked operations at our Chanderiya and Debari zinc smelters, achieved full capacity at the first line of the 1.4 million tonne per annum (‘mtpa’) Lanjigarh alumina refinery and progressively commissioned the first 250,000 tonne per annum (‘tpa’) phase of the new 500,000 tpa aluminium smelter at Jharsuguda. These were achieved in line with our expected capex plan at just over US$3 billion in FY 2009. With very modest net debt, strong cash flow and significant non-recourse project finance secured, our project expansion programme is well funded. We expect to commission most of our projects within budget and at, or ahead of schedule.

Our ongoing and rigorous cost reduction measures, coupled with our fast response to the commodity cycle correction, has brought positive results in reducing operating costs in the third (‘Q3 FY 2009’) and fourth (‘Q4 FY 2009’) quarters of FY 2009, the benefits of which we expect will continue to be seen next year. Higher volumes and various improvements to enhance operational efficiencies have also reduced unit operating costs. For instance, at our Copper – Zambia operations we have achieved a sharp reduction in production costs from 292.8 US cents per lb in the first half (‘H1 FY 2009’) of FY 2009 to approximately 140 US cents per lb in the month of March 2009. Our approach to costs has always been to optimise productivity, increase efficiencies and achieve better recoveries, without sacrificing the longer-term growth potential of our operations. Our strong operational management teams are incentivised to implement the innovative initiatives to enhance efficiency and achieve savings.

Despite increased contribution from higher volumes and stable costs of production, EBITDA was US$1,612.2 million in FY 2009, including non-cash inventory write-downs of US$79 million.