Sesa to cut spending after fall in commodity prices

By Aman Shah

MUMBAI (Reuters) - Sesa Sterlite Ltd said on Thursday it was taking steps to reduce operating and capital costs, the latest miner to address the impact of sharp falls in the prices of iron ore, crude oil and other commodities.

The company, which posted a 15 percent drop in third quarter profit, also said it expected the Indian government to remove an iron ore export tax as soon as next month, a move which could help it boost output after two years of mining bans.

"There has been a sharp pullback in commodity prices in the last few quarters and we are reviewing our...plans to continue to generate positive free cash flow in these challenging commodity market conditions," Group Chief Executive Tom Albanese said on a conference call.

Sesa Sterlite, part of the London-listed miner Vedanta Resources Plc, has interests in oil and gas, iron ore, zinc, copper, power and aluminium.

IRON ORE DUTY

The company, which has been hit by mining bans in key producing states over the last two years, posted a net profit of 15.88 billion rupees ($257.46 million) for the quarter ended Dec. 31, its fiscal third.

A 30 percent tax on exports has made it even more difficult for it to sell iron ore to a world market where prices have almost halved in the past year.

Sesa Sterlite is in discussions with the government and the duty could be removed before the budget next month, Aniruddha Joshi, a vice president at Sesa Sterlite, said on the call, adding that the company could resume mining in southern Karnataka state in the first week of February.

"We're very mindful of lower iron ore prices," Albanese said, adding that the company's effective cost after royalties and the export duty is about $25 per tonne which was its unit price before the mining shutdown.

"Obviously, we're not incentivised to operate at a break-even number and to resume operations making no margins."

(Reporting by Aman Shah in Mumbai; Editing by Subhranshu Sahu and Michael Urquhart)