Adhunik Metaliks

At Adhunik Metaliks Limited, we had enunciated our commitment to the
 enhancement of shareholder value when we had gone public in March 5,
 2006.
 
 I am pleased to state that we reported an increase in profits in
 2007-08 as evidence of our commitment; more importantly, we acquired
 Orissa Manganese and Minerals Limited, enriching the intrinsic value of
 their holdings on the one hand, and adding an entirely new business to
 their ownership on the other.
 
 At Adhunik Metaliks, this acquisition will have a sustainably
 beneficial impact on our performance and shareholder value for a number
 of reasons:
 
 * The acquisition has resulted in the Companys access to more than 250
 million tons of iron ore, manganese ore, graphite ore, limestone and
 coal (thermal and coking).
 
 * The Companys reserves of manganese ore are estimated to last an
 adequate number of years based on its extraction rate; the iron ore
 mines are expected to last a number of years based on the Companys
 existing consumption.
 
 * These mines represent text book deposits, ideal balance of
 unmistakable ore evidence, ore richness and easy accessibility (low
 mine-strip ratio).
 
 * These mines enjoy low gestation; manganese ore mining had already
 been commissioned within the financial year of acquisition, while iron
 ore mining will start within five months.
 
 * These mines have been valued at around Rs. 1,500-2,000 cr. by an
 independent external agency, distinct from the value of our steel
 business.
 
 * The big question that a number of shareholders and analysts have
 asked me is: what will the mines do for the Companys business model?
 
 My answer The mines will completely evolve the image, brand and
 positioning of Adhunik Metaliks from a steel company with a reasonable
 backward integration into a mining company with strategic forward
 integration.
 
 The implications of this repositioning are significant.
 
 One, we are now a mining company more than a steel company with
 corresponding implications for our profitability, growth and valuation.
 
 Two, the complement of manganese ore and iron ore deposits - a rare
 combination - positions us among the few global mining companies with
 such dual deposits.
 
 Three, the flexibility of merchant and captive sale will enable us to
 ramp up our mining business; as a result, while our topline will be
 derived from the steel business, we expect to generate aggressive
 bottomline growth from our mining operations.
 
 Four, the low cost of mining relative to the realisations is expected
 to provide the Company with attractive annual resources available for
 reinvestment.
 
 Five, the hign profits from the mining operations will fund the ongoing
 capex requirements of the steel business and reduce our overall
 gearing.
 
 Six, the beneficiation of very low- grade ore (unsaleable) into
 high-grade material is being increasingly used by downstream ferroalloy
 users.
 
 Seven, we intend to take OMML public to realise its true value as a
 standalone business, which will have a positive impact on the market
 capitalisation of Adhunik Metaliks.
 
 Going ahead, we expect to unleash shareholder value through a
 progressive leverage of our existing mining business, enhanced
 utilisation of our steel business and the progressive acquisition of
 other mining assets, whenever opportunities arise.
 
 Manoj Agarwal
 Managing Director