Hindustan Zinc Ltd
Hindustan Zinc (NSE: HINDZINC) is India’s largest and world’s second largest zinc-lead miner. With more than 50 years of operational experience. With reserve base of 114.7 million MT with an average zinc-lead grade of 8.7% and mineral resources of 288 million MT, its mine life is over 25 years. The company's fully integrated zinc operations currently hold 78% market share in India’s primary zinc industry. Hindustan Zinc is the 6th largest silver producers globally with an annual capacity of 800 MT.
Hindustan Zinc is a subsidiary of Vedanta Limited which owns 64.9% stake in the Company while the Government of India retains a 29.5% stake. Hindustan Zinc is listed on the NSE and BSE.
Hindustan Zinc’s operations comprise lead-zinc mines, hydrometallurgical zinc smelters, lead smelters, pyro metallurgical lead-zinc smelter as well as sulphuric acid and captive power plants in northwest India. Total metal production capacity is 890,000 MT of zinc and 205,000 MT of lead. Hindustan Zinc has facilities located in Rampura Agucha, Chanderiya, Dariba, Kayad and Zawar in the state of Rajasthan, along with zinc-lead processing and refining facilities and a silver refinery at Pantnagar in the state of Uttarakhand.
|Mining Units (all in Rajasthan):|
|Rampura Agucha Mine||Bhilwara District|
|Sindesar Khurd Mine||Rajsamand District|
|Zawar Mines||Udaipur District|
|Rajpura Dariba Mine||Rajsamand District|
|Kayad Mine||Ajmer District|
|Smelting Units (all in Rajasthan)|
|Chanderiya Lead Zinc Smelter||Chittorgarh District|
|Dariba Smelting Complex||Rajsamand District|
|Debari Zinc Smelter||Udaipur District|
|Captive Power Plants (all in Rajasthan)|
|Chanderiya Lead Zinc Smelter||Chittorgarh District|
|Dariba Smelting Complex||Rajsamand District|
|Processing & Refining Units|
|Pantnagar Metal Plant||Rudrapur District (Uttarakhand)|
|Vizag Zinc Smelter||Visakhapatnam District (Andhra Pradesh)|
|Tundoo Lead Smelter||Dhanbad District (Jharkhand)|
|Maton Mine||Udaipur District|
|Haridwar Zinc Plant||Haridwar District (Uttarakhand)|
|Wind Power Farms|
|Samana||Jamnagar District (Gujarat)|
|Gadag||Gadag District (Karnataka)|
|Gopalpura||Hassan District (Karnataka)|
|Mokal||Jaisalmer District (Rajasthan)|
|Osiyan||Jodhpur District (Rajasthan)|
|Chakala||Nandurbar District (Maharashtra)|
|Muthiyampatti||Tirpur District (Tamil Nadu)|
Hindustan Zinc is one of the world’s largest and India’s only integrated Zinc-Lead-Silver producer.
Hindustan Zinc’s mines are located at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Zawar and Kayad in the state of Rajasthan.
The current ore production capacity today stands at 12 million tonne per annum. The Company is aggressively expanding its mining capacities, implementing with six ongoing major mining projects.
Rampura Agucha Mine, with the ore production capacity of 6.15 million tonne per annum, is the world’s 2nd largest Zinc-Lead mine with best-in-class Zinc-Lead reserves grade. The mine is currently operating through open-cast and underground routes.
The Sindesar Khurd Mine, with the ore production capacity of 4.5 million tonne per annum, is a highly mechanised under-ground mine. As part of the on-going expansions, the ore production capacity is set to increase to 6 million tonne per annum in the coming years. Sindesar Khurd Mine expansion is expected to significantly contribute to the Company’s integrated Silver production.
Zawar Mines comprises 4 different mines with footprints of ancient mining and has a combined ore production capacity of 4 million tonne per annum. As per the radio carbon dating, the mines at Zawar are over 2500 years old. The Company is on-course to expand Zawar Mines capacities to over 8.0 million tonne in the next five years through mechanisation and by switching-over to trackless mining. Zawar also has 80 MW of captive thermal power plant.
Rajpura Dariba Mine is an underground mine and currently has ore production capacity of 0.9 million tonne per annum. The ore production capacity at Rajpura Dariba Mine is all set to increase to 1.2 million tonne per annum.
Additionally, a new underground mine with fastest ramp-up has been opened up at Kayad, in the district of Ajmer and is scheduled to achieve its planned capacity of 1 million tonne within this year.
The Company’s smelters are located at Chanderiya, Dariba and Debari in the state of Rajasthan and Zinc-Lead-Silver metal refineries at Pantnagar in the state of Uttarakhand. The Company’s Zinc, Lead and Silver metal production capacities have seen five-fold increase since disinvestment in 2002. The metal production capacity which was 204,000 tonne per annum in the year 2002 has grown to over 1.0 million tonne per annum.
Chanderiya Smelting Complex, located in the district of Chittorgarh, is world’s second largest single location integrated Zinc smelting complex with Zinc production capacity of 535,000 tonne and Lead production capacity of 85,000 tonnes per annum. The location also has captive power plants of 234 MW. Additional green power is generated through waste heat recovery boilers. Dariba Smelting Complex, located in the district of Rajsamand, has production capacity of 220,000 tonne of Zinc and 116,000 tonne of Lead per annum.
Dariba Smelting Complex is uniquely self-sufficient with Zinc smelter, Lead smelter and captive power plants of 160 MW, all located in the vicinity of Sindesar Khurd Mine and Rajpura Dariba Mine.
India’s oldest Zinc smelter, located at Debari in the district of Udaipur, has Zinc metal production capacity of 88,000 tonne per annum.
Zinc, Lead and Silver metal refinery at Pantnagar has a capacity to produce 600 tonnes of Silver per annum.
The Company’s total metal production capacities currently stand at 843,000 tonne of Zinc, 201,000 tonnes per annum of Lead and 600 tonnes of Silver, which are all being de-bottlenecked to achieve smelting capacity of 1.2 million tonne per annum.
In FY 2020, ore production was up 5% y-o-y to 14.5 million MT on account of strong production growth at Rampura Agucha and Zawar mines, which were up 18% and 14% respectively. The impact of operations shut-down related to COVID-19 on ore production was an estimated 0.5 million MT. Mined metal production for FY 2020 was 917kt compared to 936kt in the prior year on account of COVID-19 related lockdown and low grades at Sindesar Khurd in H1 and Kayad mines.
Integrated metal production was down 3% to 870kt and silver production was lower by 10% to 610 MT due to COVID-19 related lockdown, lower lead production in Q2 & Q3 due to temporary operational issues and lower silver grades.
The Company generated 3,880 million units of thermal based power in FY 2020 as compared to 3,961 million units in FY 2019. Total green power generation was 609.35 million units as compared to 451 million units in FY 2019.
The refined zinc metal sales in the domestic market during the year was 486kt, while export sales accounted for 194kt as compared to 513kt and 181kt respectively a year ago. The aggregate sales were lower by 2% than previous year, in line with production. Lead metal sales in the domestic market were 157kt, while export sales were 23kt leading to lower aggregate sales of 9% from a year ago, in line with the decrease in lead metal production during the year. Silver sales were 586 MT in FY 2020, all in the domestic market and 13% lower than previous year.
The Company reported ‘Revenue from operations’ including other operating income of Rs 18,561 Crore, a decrease of 12% y-o-y primarily on account of an average 12% decline in LME Zinc prices and lower volume, partly offset by higher silver prices and rupee depreciation. The ‘Other income’ was Rs 1,934 Crore during the year compared to Rs 1,782 Crore in the previous year on account of higher treasury income due to a higher investment corpus as well as higher rate of return on account of mark-to-market gains resulting from decline in interest rates.
Zinc’s cost of production (COP), excluding royalty for FY 2020 was Rs 74,172 (US$1,047) per tonne, higher by 5% y-o-y (4% in US$). The COP increase reflects higher mine development expense, higher R&M expense, lower grades and volume, lower acid credits and higher cement prices, partly offset by lower coal costs, lower employee expense and digitisation led operational efficiency. The COP was impacted by higher electricity duty on captive power plants from Rs 0.40 to Rs 0.60 per unit starting July 2019.
The above revenue and production cost resulted in profit before depreciation, interest and tax (PBDIT) of Rs 10,781 Crore in FY 2020, down 13% on account of lower revenue and higher cost of production.
Net profit Net profit was Rs 6,805 Crore, down 14% on account of lower PBDIT and higher D&A expense partly offset lower tax rate due to one-time deferred tax reversal. Tax rate for the year was 18.9% as compared to 23.9% as in the previous year. The lower tax rate is on account of reversal of deferred tax liabilities related to prior years, amounting to Rs 365 Crore pursuant to Company’s expectation of moving to a lower tax regime under Section 115BBA of the Income Tax Act, 1961. Excluding this one-time reversal, the effective tax rate for the year was 23.2%.
Earnings Per Share (EPS)
The EPS for the year was Rs 16.11 per share as compared to Rs 18.83 per share in FY 2019.
Interim dividend of 825%, i.e. Rs 16.50 per share on equity share of Rs 2 each amounting to Rs 6,972 Crore was declared in May 2020.
Results for the Fourth Quarter and Full Year Ended March 31, 2021
April 27, 2021: Hindustan Zinc Limited, the leading global integrated producer of zinc, lead and silver, reported its results for the fourth quarter and full year ended March 31, 2021.
Mined metal production for the quarter was up 15% y-o-y to 288kt on account of higher ore production, partly offset by lower overall grade. Sequentially, MIC production was up 18% on account of higher ore production and better overall grades. For the full year, MIC production was up 6% y-o-y to record 972 kt primarily on account of higher ore production partially offset by slightly lower grades. This was despite losing 18 days equivalent of production in the fiscal year 2021 due to lockdown and other workforce related restrictions to combat Covid-19.
Sequentially, mined metal production was up 18% mainly on account of improvement in ore grades across mines. For the full year, mined metal production was 972kt, up 6% y-o-y primarily on account of higher ore production.
Integrated metal production was 256kt for the quarter, up 16% y-o-y and up 9% sequentially in line with higher mined metal availability and higher closing MIC inventory. Integrated zinc production was 195kt, up 14% y-o-y and 7% sequentially. Integrated lead production was 61 kt, up 24% y-o-y and 16% sequentially in line with higher mined metal availability.
Integrated silver production was 203 MT, up 21% from a year ago in line with higher lead production, partly offset by lower grades at Sindesar Khurd (SK) mine, while it was up 11% sequentially on account of higher lead production and better grades at SK.
For the full year, metal production was up 7% to 930kt and silver production was up 16% to a record 706 MT in line with higher lead production and better silver grades at SK.
Revenue from operations during the quarter was INR 6,725 Crore, an increase of 56% y-o-y led by higher metal & silver volumes, higher zinc, lead & silver prices. Zinc sales volume increased 15% y-o-y and lead by 29% y-o-y in line with higher production and robust demand.
Sequentially, revenue was up 14%, primarily driven higher zinc, lead and silver prices, higher metal premium, partly offset by rupee appreciation. Zinc LME prices were sequentially up 5%, while lead prices were up 6%. For the full year, revenue was higher by 20% to INR22,071 on account of an average 38% increase in silver prices, higher metal & silver volumes, rupee depreciation partly offset by lower zinc premium.
Zinc cost of production before royalty (COP) during the quarter was $945 (Rs. 68,969) per MT, lower by 5% y-o-y, both in INR & USD terms and flat sequentially (down 1% in INR terms). The y-o-y decline in COP is primarily due to higher volume, lower power costs, higher sulphuric acid credits and lower cement costs partly offset by higher met coke and diesel costs.
For the full year, zinc COP excluding royalty was $954 (Rs. 70,681), lower by 9% y-o-y (5% lower in INR terms). The full year COP decrease reflects higher production volume, lower met coke and power costs, lower cement costs partly offset by higher diesel costs and Covid-related donation.
Overall, the COP for the quarter and FY benefitted from ongoing structural cost reduction initiatives partly offset by increase in mine development. The company's steadfast focus on executing critical priorities on all fronts of consumption, contracting, procurement and fixed costs resulted in sustained reduction in costs.
EBITDA for the quarter soared to INR 3,875 Crore, up 98% y-o-y and 17% sequentially on account of higher revenue, favourable pricing environment and well controlled operating costs. EBITDA for the full year was at INR 11,739 Crore, up 33% from a year ago primarily on account of higher LME prices and lower costs.
Net profit for the quarter was INR 2,481 Crore, up 85% y-o-y and 13% sequentially, driven by recovery in metal prices and strict cost discipline. For the full year, Net profit was INR 7,980 Crore, up 17%, wherein higher EBITDA and lower D&A expense was partly offset by lower investment income due to lowering interest rate environment.
Outlook for FY22
Both mined metal and finished metal production in FY2022 will be higher than last year and is expected to be c.1025-1050 KT each.
FY2022 saleable silver production is expected to be higher and projected at c.720 MT.
Zinc cost of production in FY2022 is expected to remain below $1000 per MT.
The project capex for the year is expected to be approximately US$100 million
During the quarter, Shaft Integration at Rampura Agucha Shaft was complete. This improved the accessibility of shaft section, alternate emergency evacuation, ease in mine equipment deployment at lower levels, face charging with emulsion explosives, face drilling with long feed jumbo.
During the quarter, RKD circuit of Fumer plant was commissioned & is now in operation. Delay is primarily on final commissioning of complete plant. This is on account of restrictions around travel outside China. Given the fast-evolving situation with Covid-19 infections in the country, the company expect to commission complete Fumer plant by Q2 of this year.
Commenting on the Q4 and FY performance, Mr Arun Misra, CEO, said: “Hindustan Zinc is conscious of the fact that its country is going through COVID Pandemic the scale of which has not been seen before. Hindustan Zinc is doing whatever the company can including supplying liquid oxygen from its smelters to hospitals in and around Udaipur. Hindustan Zinc is proud to announce that the company delivered record production volumes of mined metal, finished metal and silver production, while ensuring 22-months of fatality-free operations. I am also happy to inform that the company exited the year at run-rate of 1.2mtpa. The company also maintained its first rank in Asia pacific region in the metals & mining category in Dow jones Sustainability Index for third consecutive year and amongst India’s first companies to be rated ‘A’ in climate change CDP 2020.”
Mr Vinaya Jain, Sr. VP & Head Finance, said: ““The company's firm focus on operating efficiencies has led to cost optimization and improved profitability. The company delivered highest ever quarterly EBITDA which nearly doubled from same quarter last year, The company's PAT is up 85% Y-O-Y and Hindustan Zinc has achieved lowest ever annual dollar cost of production since the transition to underground mining operations. The company will continue its endeavour to improve business efficiencies and reduce costs through enhanced use of technology, digitalization efforts, data-driven decision making and most importantly, investment in people capabilities to sustainably generate industry leading returns and create long term value for all stakeholders.”