The rapidly developing Asian market is expected to drive copper consumption growth. The countries from Asia that are contributing to this rapid growth are primarily China and India. Copper demand is expected to continue to be dominated by its use in electric wires and cables. Total consumption of copper is expected to increase from 16.9 million tons in 2005 to 17.7 million tons in 2006, an increase of 4.7%. Asia is expected to contribute 42.6% of this incremental growth. This will translate into a compound annual consumption growth rate from 2003 to 2006 of 6.3% for Asia, compared to 4.4% for the world and 2.7% for the world excluding Asia.

The key end segment for zinc consumption is the galvanizing segment. China’s zinc consumption is driving the global zinc demand growth. The total consumption of zinc is expected to increase to 11.3 million tons by 2006, with Asia contributing 52.9% of that consumption. That will translate to Asian consumption growth at an expected compound annual growth rate of 10.1% between 2003 and 2006, which compares to global consumption growth at an expected compound annual growth rate of 5.4% for the same period and to world excluding Asia consumption growth at an expected compound annual growth rate of 0.9% for the same period.

Despite the growth in aluminum production, the aluminum market in 2006 is expected to show a modest deficit for the third successive year. Global aluminum consumption is expected to increase by 6.0% from 2005 to 2006, led primarily by a 17.0% increase in demand in China.

In comparison to the expected 5.3% increase in aluminum production, alumina production is expected to increase by 10.3% from 2005 to 2006. Nearly 60% of the 6.9 million ton increase in alumina production is expected to occur in China, which is expected to drive the global alumina market from a deficit in 2005 to a surplus in 2006. With alumina becoming more available and a relative slow down in consumption in China, aluminum supply is expected to catch up with demand in 2007.

The Company’s copper cathodes are square shaped with purity levels of 99.99% copper. These cathodes meet international quality standards and are registered as LME “A” Grade. The Company produces sulphuric acid at its sulphuric acid plant through conversion of sulphur dioxide gas that is generated from the copper smelter. The Company produces phosphoric acid at its phosphoric acid plant by chemical reaction of sulphuric acid and rock phosphate.

The Company’s zinc business is owned and operated by HZL. HZL’s fully-integrated zinc operations include three lead-zinc mines, two zinc smelters, one lead smelter and one lead-zinc smelter in the State of Rajasthan in Northwest India and one zinc smelter in the State of Andhra Pradesh in Southeast India. HZL’s mines supply all of its concentrate requirements and allow HZL to also export surplus zinc and lead concentrates.

The Company produces and sells zinc ingots in all three international standard grades: Special High Grade (SHG), High Grade (HG) and Prime Western (PW). The Company produces and sells lead ingots of 99.99% purity primarily to battery manufacturers and to a small extent to chemical manufacturers. The Company sells sulphuric acid to fertilizer manufacturers and other industries. The Company produces and sells silver ingots primarily to industrial users of silver.

The Company’s aluminum business is owned and operated by BALCO. BALCO’s partially integrated aluminum operations are comprised of two bauxite mines and the Korba facility, which includes one alumina refinery, two aluminum smelters, two captive power plants and a fabrication facility, all of which are located in the State of Chhattisgarh in Central India.

Primary aluminum is produced from the smelting of metallurgical grade alumina. BALCO produces primary aluminum in the form of ingots and wire rods for sale. Rolled products, namely coils and sheets, are value-added products that BALCO produces from primary aluminum. Vanadium sludge is a by-product of the alumina refining process and primarily used in the manufacture of vanadium-based ferro alloys.

Operating income increased from Rs. 7,610 million in the six-month period ended September 30, 2005 to Rs. 42,790 million ($931.3 million) in the six-month period ended September 30, 2006, an increase of Rs. 35,180 million, or 462.3%.

Cost of sales increased from Rs. 34,115 million in the six-month period ended September 30, 2005 to Rs. 66,400 million ($1,445.0 million) in the six-month period ended September 30, 2006, an increase of Rs. 32,285 million, or 94.6%.

Selling and distribution expenses increased from Rs. 731 million in the six-month period ended September 30, 2005 to Rs. 1,572 million ($34.2 million) in the six-month period ended September 30, 2006, an increase of Rs. 841 million, or 115.0%.

Depreciation, depletion and amortization increased from Rs. 1,982 million in the six-month period ended September 30, 2005 to Rs. 2,815 million ($63.0 million) in the six-month period ended September 30, 2006, an increase of Rs. 833 million, or 42.0%.