The Jharsuguda-based VAL said recent financial the losses were only short-term and linked to the fluctuation in metal prices.

"The losses that we incurred in the past few months were in tandem with international market trends, as world-wide metal prices collapsed due to uncertainty in the European economy. But I think prices will revive in a couple of months,” Mukesh Kumar, VAL chief operating officer said.

Vedanta Resources plans to combine its iron ore and non-ferrous metals assets into a single company to cut costs and control its debt.

To help achieve this, Vedanta is selling its holding in Sterlite Industries, India’s biggest copper producer, to its subsidiary Sesa Goa, India’s biggest iron ore exporter, in an all-share offer. The iron ore miner will also absorb Vedanta’s holdings in Vedanta Aluminium and Madras Aluminium, making the expanded company worth about $20bn.

However, since the announcement Sesa Goa shares shed 10% and Sterlite prices tumbled 4% during intra-day trade on the Bombay Stock Exchange. Analysts said Sesa Goa suffered the most as investors felt the merger was negative for the minor shareholders of the iron ore miner.

However, Sesa Sterlite will have to carry a $4bn debt burden of the aluminum maker, post merger.

VAL produces ingots, billets & wire rods from its 500kt/y site in Lanjigarh, Kalahandi district. It sources bauxite from Gujarat and other states.

The company is yet to get bauxite from Orissa Mining Corporation, as the state has entered into a legal battle with the Union forest and environment ministry over mining in Niyamgiri Hills.