Managing Director’s Statement

P.K. Mukherjee

Managing Director

It gives me great pleasure to present our Sustainability Report for 2010-11. Sesa Goa story has been of steady growth over the years and it reflects not just economic progress, but also our holistic approach towards sustainability, despite numerous challenges being faced. We are well aware that for sustainable mining, any Company in the mining industry must reclaim and rejuvenate mining areas by afforestation, water conservation, raising economic standards and improving the standard of living in the surrounding communities. As you read through this report, you would realize how we have practiced this belief and woven it as a part of our business strategy as well.

At Sesa Goa, our way has been to nurture safe work practices and look after the well-being of the people we work with. Since mining per se is not an environment friendly industry, our continuous focus had been to scientifically do the mining to minimise the environmental footprint while restoring back the environment more than what it was originally after the mine closure.

Although the economic environment has become positive since the global economic slowdown in 2008-09, the operating environment was not so favourable for the major part of the year 2010-11. However, I’m happy to say that through the persistent efforts of our employees, we have managed to sustain our performance levels across various spheres of operations.

Protecting and caring for the world we live in

The people we work with and the communities we live in are all part of the warp and weft of our lives. Any roughness in the weave, any weakness in the fabric of our daily lives – whether at work or in society – is detrimental to the community at large. We strongly believe that , as an economic and industrial force, we have a duty to ensure that the work we do, the products we manufacture should coexist in harmonious balance with the environment that surrounds us and that is possible only if we take care of the ‘how’ part of it.

Sesa Goa remains committed to sustainable development and with this we strive to replicate the values associated with sustainability practices in all spheres of our operations. We maintain the highest standards to provide healthy and safe working conditions for our workforce. I’m happy to report that our Met Coke Division (MCD) and Pig Iron Division (PID) achieved zero accidents status which means we achieved our target of Zero LTIFR at our MCD and PID through ZERO Accident MINDSET.

The Lost Time Injury Frequency Rate (LTIFR) reduced from 1.13 in 2009-10 to 0.86 hours lost per million man hours worked in 2010-11. Our Met Coke Division (MCD) has maintained its zero accident status for the last two consecutive years. Nevertheless, I must inform with deep regret of a fatality, which occurred at a jetty in Goa where a barge sailor lost his life in an accident. We have thoroughly investigated the case, and institutionalised the learning.

Sesa Goa continues to take a proactive role in providing employees and contractors with a safe working environment through continuous training, monitoring and implementing best safety practices all across the group. The community development work through the Sesa Community Development Foundation, Mineral Foundation of Goa and specific need based initiatives continue to focus on social projects in line with our over-all sustainability objectives. More details on the best people practices and corporate responsibility initiatives are dealt with in the Protect section.

Preserving and restoring the ecological balance

At Sesa Goa, we minimise the damage to ecology caused by mining by balancing its effects with focused initiatives that enhance and restore the ecological balance around us. We have placed the highest environment management standards in all our operations. We have ensured that all our locations are certified for ISO 9001, ISO 14001 and OHSAS 18001. Sesa Resources Limited (SRL) is in the process of getting certification for OHSAS 18001.

During this reporting period, amidst the lush green plantations at the Sanquelim reclaimed site, we have created a marvel made out of Bamboo known as the ‘Bamboo Pavilion’. The Pavilion will fulfil the need for a convention centre in the area for visits by school children, delegates, government officials, etc. at the Sanquelim reclaimed mine in Goa. More details on the best practices and environment initiatives are dealt with in the Preserve section.

Progressing with sustainability in tow

In last year’s Sustainability Report, I had shared our goal to be the fourth largest iron ore producer in the world by 2012-13 with an annual production of 50 million tonnes (MTPA) production. However there has been a revision to this owing to non renewal of our agreement with third party operations (Thakurani mines) in Barbil, Orissa, due to unfavourable commercial terms and consequent termination of our operations in Orissa. We continue to maintain our target for increasing ore production in Goa and Karnataka together to 40 MTPA.

Exploration activities too will continue as planned. With 53 MT having been added to the gross reserves and resources during the year ending as on 31^st March, 2011, the Company’s total reserves and resources were 306 MT as certified under international standard (JORC). As planned in the last year, we made satisfactory progress in logistics as well as mining and processing capacities, whilst awaiting certain statutory clearances. Expansion of the pig iron capacity is progressing well, for completion by Q3, 2011-12.

In the second half of calendar year 2010, there were fears of a slowdown in iron ore imports due to reduction in Steel output in China. But it turned out to be a temporary aberration. From the beginning of calendar year 2011, China has once again launched another round of economic growth initiatives, with the focus on social housing and infrastructure, especially railways. This has led to major growth in steel output in China in Q1, calendar year 2011, which has increased both iron ore imports and prices. The phase of GDP growth in China is expected to continue in the near future, with high demand from the construction industry.

We are optimistic that the strategic positioning of Sesa Goa with its low cost capabilities, easy accessibility to ports and strong customer relations will hold us in good stead to mitigate any downside risks and exploit upside opportunities.

Over the last few years Sesa Goa has developed a growth strategy with a focus on serving the increasing demand for iron ore, especially in emerging economies, but in most responsible manner – the details of which are available in the Progress section of this Sustainability Report.

Sesa Goa’s revenue went up by 55% this year to Rs.9,745 Crores, up from Rs. 6,284 Crores. We have been delivering consistent growth in financial terms despite challenges inherent in the mining industries export ban in Karnataka, extended monsoons in Goa, new restrictions on transportation timings in Goa, substantial increase in Iron Ore export duty, to name a few.

Our production and sales of iron ore were 18.8 million tonnes and 18.1 million tonnes respectively in 2010-11 as against corresponding figures of 19.2 million tonnes and 18.4 million tonnes in the previous year.

The Government of Karnataka imposed a ban on the export of iron ore in their efforts to curb illegal mining. Although, the Apex Court issued a ruling that the Karnataka export ban is to be lifted from 20^th April 2011, the effective export is yet to start till the time of writing this statement, as passes/permits are not getting issued. This affects the performance, since there is not enough demand for our grade of iron ore in the domestic market. Moreover, there are a lot of procedural hurdles in the movement of iron ore.

Amalgamation of Sesa Industries Limited with Sesa Goa Limited

In February 2011, Sesa Industries Limited and Sesa Goa Limited amalgamated following the final nod of approval from the Supreme Court of India.

Investing in a promising future

In our effort to value add for our shareholders, we wanted to capitalise on the healthy balance sheet that reflects our strong cash reserve. Hence in 2010, we made a move to acquire 20% stake in Cairn India Limited, as part of the Vedanta group’s move to acquire a controlling stake. We believe that this strategic investment will deliver significant value to the Company with its low operating cost, substantial long life assets the ability to increase its production volume in the time to come.

In a move to diversify up the ferrous metal value chain, we acquired the assets of the upcoming unit of Bellary Steel and Alloys Limited (BSAL) for an all cash consideration of Rs. 220 Crores in March 2011. The Assets have been transferred on an “as is where is” basis to SGL as of 22nd March 2011. The expected multiplier effect of this acquisition on the Karnataka Iron ore business makes this a strategic acquisition for Sesa Goa.

We have successfully integrated the operations of Sesa Resources Limited and Sesa Mining Corporation Limited (erstwhile V S Dempo & Co Limited and Dempo Mining Corporation Limited). Our assets continue to perform to expected levels.

As I stated earlier, these investments provide us with the opportunity to earn superior returns on an investment by unleashing the value inherent.

The way ahead

Our expansion plans include strategic acquisitions and exploration activities in Goa and Karnataka. During the reporting period, six drilling rigs were deployed across leases in Goa and Karnataka. By 31st March 2011, over 68,900 metres were drilled which resulted in a gross addition of 53 million tonnes to our reserves and resources base prior to a depletion of 21 million tonnes during FY 2010-11. The Company closed its third party operations at the Thakurani Mines in Barbil, Orissa, in November 2010 as the contract renewal could not be negotiated on favourable commercial terms.

As we follow our dream to be amongst the top four iron ore companies in the world, we endeavour to continue our sustainability initiatives as well to set higher benchmarks for ourselves in social development and further minimise the negative effect on ecology. We strive to be more responsible in our impact on environment and society.

Please share with us your feedback on this sixth Sustainability Report prepared as per the principles and methodology of the GRI-G3.1 Guidelines and in accordance with the UN Global Compact Principles. The report fulfils the A+ application level criteria of GRI. An assurance statement has been provided by DNV after assessing the report.

I thank you for all the support and encouragement you have shown towards our sustainability initiatives, and sincerely look forward to your suggestions in taking it to further heights.

P.K. Mukherjee

Managing Director