Since its disinvestment in 2002, Hindustan Zinc
has invested over $3 billion (We have spent Rs 13,500 crore in project capex since FY2012, which is over $2 billion if you go by the exchange rate at the time of capex) towards four phases of the expansion programme to reach to the current metal production capacity of over 1.1 million tonnes (mt) per annum. Hindustan Zinc
has a mine life of more than 25 years, with reserves and resources of 403 mt. HZL's mines are expanding enormously and are expected to reach a capacity of 1.2 mtpa in FY2020. Hindustan Zinc’s production shaft at the Sindesar Khurd mine was commissioned in FY2019 and another one at Rampura Agucha is set to be commissioned in FY 2020. Work is in the planning stage for mining capacity expansion to 1.35 mt, which will take two to three years. For this, we have ramped up our exploration to leverage the potential of existing deposits and new ore bodies to secure our future. We are looking to appoint a consultant for end-to-end delivery. This kind of engagement is almost unheard of in the industry. The consultant will look at HZL’s entire portfolio and resources to grow volumes, advise it on newer ore bodies in its leases, and suggest the best technology for tailing and treatment of waste and slag. The company recently set up two new mills at the Zawar and Sindesar Khurd Mines, with a joint capacity of 3.5 mt of ore-treatment, increasing ore treatment capacity to 17.7 mtpa. To increase metal production through the recovery process, HZL is also putting up fumer plants, the first of which will be commissioned in FY2020. This will help in recovery of metals -- particularly lead and silver -- from smelter waste.
As per World Silver Survey 2019 by The Silver Institute, Hindustan Zinc is now the ninth-largest producer of the metal in the world, placing India among the top 10 silver producing countries. The company has increased production of silver manifold in the last fifteen years from 41 tonnes in FY2002 to 679 tonnes in FY2019 and plans to take it to 1,000 tonnes.
Q. What are your plans for new, diversified, value-added products? Are there any new lines of businesses that HZL is targeting?
We are progressing well in our minor metal initiative, which is a new source of value generation. The project for converting copper matte to copper sulphate has been commissioned this month in Dariba. We have partnered with a global technology expert for the cadmium recovery project, which is expected to be commissioned in Q4. Apart from copper and cadmium, we are focusing on bismuth and antimony and will be laying emphasis on cobalt, nickel and other minor metals as well. Our vision is to convert Hindustan Zinc into a global natural resource company. We have been granted our first European patent for the process related to the production of a value-added product using antimony-bearing residues, which is subsequently routed back to our smelting process. Similar test work and initiatives are at the technical evaluation stage.
Q. What is your outlook on zinc prices and supplies in the near term?
Zinc is fundamentally strong. We have also noticed that Chinese authorities have bolstered their spending on infrastructure recently to mitigate the impact of the dispute with the US. Zinc consumption growth is healthy in China at 1.5 per cent this year. The mine production forecasts for this year and the next have been pared by almost a million tonnes due to lower-than-expected production at several mines across China, North America and Latin America. There is no major smelting capacity addition in the pipeline for the next two years. Moreover, there are temporary disruptions and closures in China, Canada, Namibia and the US, equivalent to 200 ktpa (kilotonne per annum) refined metal production. The overall reduction in the forecast for the year 2019 is about 700 kt. The global metal market, therefore, continues to be in deficit and we expect this shortfall to remain next year as well, as it will take much longer for stocks to reach normal levels. Given this background, we expect limited supply and low stocks to not only support zinc prices but also push them higher as some of the negative sentiments subside. Historically, zinc price maintained itself at around $3,000 at similar stock levels.
Q. Your performance in Q2 showed that the company's Ebitda and revenues have suffered due to fragile silver prices. Are you hoping for a turnaround in the near term?
As a company, we have always focused on volume, cost and efficiency. Our costs have always been lower than the global cost and our margins have been maintained. We are firming our basics of low-cost operations and long mine life in order to be in the forefront and deliver industry-leading returns to our shareholders. We are focusing on structural design changes and opening new mining areas, which will reflect a stronger performance going forward in H2 of FY20 and in FY21.
Q. Can you give us guidance on the capex for FY20 and the next financial year? Where will be the capital be invested?
Capex for expansion is well on course and will be completed in Q4 of FY20. Project Capex is expected to be $300 million for this year and the next.
Q. What headway have you achieved on your planned fertiliser plant?
We have a positive outlook on the development of the project. The project is in the larger interest of the community and the nation. We have received strong representations favouring the project from ministers, public representatives, and village sarpanches, besides the public at large. We are in the last stage of the process and expect it to be constructed by FY21.