Please note that this conference is being recorded. I now hand the conference over to Ms. Jhalak Rastogi, Associate Director, Investor Relations. Thank you, and over to you, ma'am.
Thanks, Doris. A very good afternoon, everyone. I welcome you all to Hindustan Zinc's Fourth Quarter and Full Year ending 31st March 2024 results briefing. In this call, we'll refer to Q4 FY24 Investor Presentation available on our company's website. Some of the information on this call may be forward-looking in nature and is covered by the safe harbor language on the second slide of the said presentation. Today on the call, we have with us our CEO, Mr. Arun Misra, and our CFO, Mr. Sandeep Modi. Mr. Misra will begin with an update on business performance, while Mr. Modi will walk you through financial performance, after which we'll open the floor for questions. I now request Mr. Misra to begin today's call. Over to you, sir.
Thank you, Jhalak. A very good evening to one and all. Thank you for joining us for the Fourth Quarter and Full Year Results briefing. FY 2023-2024 has indeed been a year of significant achievements for Hindustan Zinc, characterized by highest-ever metal and silver production, sharp reduction in cost, and global best performance in ESG. This has been possible due to our efficient utilization of assets, well-planned mining and smelting, talented team, and resilience of our organization. Even amidst the challenging conditions of LME environment, our company has not only preserved its stride, marking another landmark year. On this note, I'm elated to share that Hindustan Zinc, after recording its highest-ever silver production in FY 24, has become the third-largest silver producer globally, making India proud. Here, it is imperative to note that all the accomplishments that I have outlined were made possible on the foundation of safety excellence.
It gives me immense satisfaction to report six consecutive quarters of fatality-free operation, demonstrating our steadfast commitment to ensuring the safety and well-being of our employees. With Zero Harm as a core tenet of our business and to prevent reoccurrence of similar incidents within the group, we have launched programs like Critical Risk Management and also started overall infrastructure to ensure continuity of operation without any fatality. Our efforts in safety have been recognized by the British Safety Council International Safety Awards with multiple recognitions. On sustainability front, we have demonstrated remarkable global ESG leadership by ranking first in the S&P Global Corporate Sustainability Assessment during the year. We have also A- in water security and climate change by CDP. As a result of the decarbonization journey, we are actively integrating LNG and electric vehicles into our operations.
I'm pleased to share that our renewable energy Power Delivery Agreement is also progressing well and has been accelerated with first flow of power expected this month. Furthering on our vision of circular economy, I'm happy to announce that Hindustan Zinc has entered into MoUs with key innovative and technology partners dedicated to transforming waste into valuable resources, thereby driving sustainable growth and innovation. During the year, we had also Commissioned Fumer Plant in Chanderiya for recovery of metals from smelter residue. These developments are contributing to our ongoing efforts to develop our recycling business further. On diversity and inclusion, we launched our flagship initiative Zinclusion during the year. Under this program, we have onboarded 16 transgenders till date across various key functions, while also providing an inclusive workplace through compulsory DE&I awareness sessions for every employee. These efforts were recognized at the prestigious 3rd National Transgender Awards.
I'm also pleased to share that Hindustan Zinc has been awarded the Leadership in HR Excellence Award by Confederation of Indian Industry at the 14th CII National HR Excellence Award. Coming to our CSR activities this year, we have extended our footprint by covering over 3,500 villages with 1.9 million beneficiaries under initiatives spanning across areas including but not limited to women empowerment, sustainable livelihoods, skill development, healthcare, and safety, sports, culture, etc. Moving on to markets, inflation persists in the U.S. services sector, while Europe continues to contend with weak construction and manufacturing sectors. But with expectations on interest rate cuts by the U.S. Fed, coupled with geopolitical tensions between Iran and Israel, commodity prices have surged in April 2024, with silver touching its highest in INR terms.
The global Manufacturing PMI entered expansion zone in February for the first time since August 2022, and India is still the brightest spot among the major economies, with its Manufacturing PMI recording its 16-year high at 59.1 in March 2024. Global steel demand is forecast to grow in FY 2025, with India contributing the most with projected growth of 8.2%. During the quarter, zinc prices fell to an average of $2,450 per ton. Despite multiple suspensions and closures during the year, zinc prices have plunged by 25% year-on-year. Total zinc stocks rose to 386,000 tons at the end of March 2024, as compared to 243,000 tons at the end of December 2023 on account of subdued demand.
However, in April, due to the rebound in global manufacturing activity, there has been a push in prices of all commodities, and zinc prices have been on a rise due to supply disruptions and increased global demand. The domestic zinc consumption has grown by 20% year-over-year on the back of stronger PMI and is forecast to stay strong in line with the steel market. Coming to lead, the prices averaged at $2,077 per ton during the quarter, down two percent sequentially and three percent year-over-year on account of softened demand and lower global automobile sales at the start of the calendar year. Moving forward, with a budget focusing on infrastructure and additional spend on EV charging, etc., the Indian lead market is expected to expand.
Silver prices hovered around $23.3 per troy ounce during the quarter and $23.6 per troy ounce during the year, up 10% year-over-year. The prices have rallied lately, tracking the gold prices, and the market continues to look very strong. On silver demand, while current Indian industrial silver consumption is relatively lower, it is expected to increase significantly with developing industrial car uses like EVs and 5G, etc. The rally in prices and this momentum is a great start for the new financial year. Giving an update on the operational performance, I'm pleased to restate that we have recorded highest-ever mine metal production of 1,079 KT and refined metal production of 1,033 KT and silver production of 746 tons on the back of relentless efforts and collaborative ideas. We also have generated the highest-ever sales in our value-added portfolio, about 20%.
We produced these with zero fatality and at a zinc cost of only $1,117 per ton. These production figures grew at an industry-leading compounded annual growth rate of over four percent in the last five years, and the guidance for FY 2025 indicates a continuation of this trend. Our FY 2025 guidance for mine metal production is set at 1,100 KT-1,125 KT, refined metal production at $1,075-$1,100 per ton, and sellable silver production of 750-775 tons. On companies' reserve and resources, with an emphasis on ensuring the longevity of the mines through strategic exploration, we have managed to increase the total R&R by about 35% in the last five years. Putting in absolute terms, our five-year ore production adds up to 65.1 million tons. We have added an ore of 118 million tons to the R&R through exploration.
We have added metal reserves of 2.5 x as compared to FY 2020 on a net-of-production basis. Presently, at the end of FY 24, our total R&R stands at 456.3 million tons, with a total metal content of 30.8 million tons underpinning an overall mine life of 25+ years. During the quarter, in line with the national vision and with our strategic exploration objective to upgrade R&R, we incorporated Hindmetal Exploration Services Pvt Ltd., a wholly owned subsidiary of HZL, with an objective to explore, discover, develop, and tap mineral resources. Coming to our expansion projects, our 160,000 tons per annum roaster and 510,000 tons per annum of fertilizer plant progress is on track.
I'm happy to share that during the quarter, we have received regulatory approvals with respect to Bamnia Kalan Mine, which will be a new mine to be started by us, and accordingly, site activities will start operating soon. Once again, on the guidance, please note that we are giving a guidance of mine metal production between 1,100,000-1,125,000 tons, refined metal production between 1,075,000-1,100,000 tons, and sellable silver production between 750-775 tons. With this, I hand over the call to Sandeep for an update on the financial performance.
Thank you, Mr. Misra, and a very good afternoon, everyone. As Mr. Misra already shared, it was a pivotal year marked by significant achievements in volume, cost management, project completion, and new growth paths. Happy to share that zinc cost of production for the full year improved by 11%, $1,117 per ton. During quarter four, company crossed a 12th quarter lowest cost of production at $1,051 per metric ton. It was down four percent quarter-on-quarter and 13% year-on-year. It was supported by better grid, better linkage coal utilization, softened coal and input commodity prices, partly offset by lower asset utilization. This quarter marked the fifth consecutive reduction in the cost of production, with a commodity sustained reduction of the cost by $250 per ton. Despite the volatility in zinc prices, our financial performance demonstrated resilience as we adeptly sustained margins through agile navigation of market challenges.
Silver production has been a standout success for the company during the year. With record high production positioning as the third-largest silver producer worldwide, this achievement is worth highlighting once more, by me. While I'm going to give an overall picture of the financials of the company, I would like to start by sharing two key highlights demonstrating how ESG principles are integrated across various functions of the company, including the finance. Hindustan Zinc has been recognized by CXO Genie for exemplary contributions in diversity, equality, and inclusion with the finance domain, with a gender diversity of 50% in the finance function. In the metal and mining company, Hindustan Zinc comprises a professional with a background of CA, CMAs, MBAs, graduates from esteemed institutions. This award is a testimony of our progress in DE&I.
In line with the government's focus on empowering the MSME sector, Hindustan Zinc has taken a lead and prioritized payments to its MSME vendors with an average payment cycle of 29 days during the quarter, which is 37% better than the institutional requirements. This underscores our sincere commitment towards ESG principles, bolstering trust in our supply chain partnerships to enhance social responsibility. Delving into our performance, the revenue from operations for the full year was approximately INR 29,000 crore, down 15% year-on-year. Even though we had better volume and silver prices and strong dollars, revenue was largely impacted due to lower revenue. The revenue from operations for the quarter was INR 7,549 crore, three percent quarter-on-quarter up on account of higher zinc volume, partly offset by lower lead and silver volume and metal prices.
Revenue for the quarter was down 11% year-over-year, though the zinc and silver volume were better along with the silver prices and a favorable exchange rate. It was largely impacted by the lower metal prices and lead volume. The full-year EBITDA stood at INR 13,677 crore, down 22% year-over-year, in line with the revenue, partly offset by significant cost improvement. For the quarter, the EBITDA was INR 3,637 crore, up two percent quarter-over-quarter and down 14% year-over-year. It is in line with the revenue from operations and, again, the good cost improvement. Please refer to EBITDA grid from slide 30-32 for more information. Consolidated net profit for the full year stood at INR 7,759 crore, though it was down 26% year-over-year. It is in line with the EBITDA, partly offset by lower tax expenditure. As we move to new regime, our ETR remained 25% approximately.
For the quarter, the consolidated net profit recorded was INR 2,038 crore, flat sequentially and down year-on-year, in line with the EBITDA and tax expenditure. I wish to highlight here that despite a 25% year-on-year fall in zinc prices, we successfully maintained our industry-leading margin of 47%, underscoring our strong foothold in the first decile of zinc mining cost curve. This year, we have issued a total dividend payout of INR 5,493 crore, with a total contribution of INR 13,197 crore to the exchequer in the form of royalty and direct taxes and indirect taxes. On the back of strong liquidity with a healthy cash flow of INR 9,000 crore in the FY 24, which is after the post-growth CapEx and R&R investment of INR 1,200 crore approximately.
It is also noteworthy to mention that we have recorded a seventh-quarter highest domestic primary zinc market share at 80% during the quarter, backed by highest-ever quarterly domestic sales. With recovering economies and brighter outlook for base metal, supplemented by our proficiency during the year gone by, we are geared towards pursuing our guidance of cost $1,050-$1,100 per ton for FY 2025 and growth CapEx of $270 million-$335 million, which will be mostly for roaster, fertilizer, RE power, and Zinc water making, while leveraging the market dynamics strategically. With this, I conclude my comments, and we open the floor for your questions. Thank you for listening.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Yeah, hi. Good evening, everyone, and thanks for taking my question, sir. I have a couple of questions. The first one is essentially on our guidance. So I look at the fine metal guidance, and if I compare it with this year, it's up between four to 6.5%. While your silver guidance is just 0.5%-4%, so is it fair to understand that we'll be targeting zinc over lead and silver this year?
So, no. Last year, we mostly operated our pyro facilities on only lead ore. That helped us to increase lead production and also increase silver production. In a low zinc price environment, that helped us. This time, the zinc prices are looking up, and we hope the prices really continue while silver prices are also up. As of now, our strategy is to operate on zinc plus lead ore, and hence, the metal numbers are as high as you are looking at, and corresponding growth in silver is not visible. However, we have to understand that even if I try to operate the whole year in lead plus zinc ore, only selectively producing that much of lead concentrate will not be feasible. So a balanced view has to be taken.
If the situation persists like this zinc environment, we will stick to the guidance on metal and silver that we are giving, and that is the most practical guidance that is possible.
Okay, but depending on the price movement, I mean, as the year flows by, you can dynamically change it as well.
Absolutely. Absolutely.
Okay. Understood, sir. The second question is on the exploration subsidiary. I'm a little bit intrigued because we have a very rich history of exploration, as is very well evidenced in our R&R. So what's the rationale for floating a new subsidiary? Is it that we are trying to go beyond our zinc, lead, silver?
Yeah. So the government is coming up with a new scheme that they would allow exploration companies to explore areas or blocks that they can earmark themselves. Now, this is a new scheme, and if we explore, then government is going to return part of the expenditure. Then that data will be available to the parent company for tomorrow to bid whenever they become auctionable blocks. So we being in that base metal and deep-seated mineral business, we feel that we have a larger chance, one, to succeed with exploration, and second, use that data to bid fruitfully in auctions and gather further leases. So that's why this is a new development, and we are hopeful that this will help Hindustan Zinc to grow beyond lead, zinc, and silver.
Does it extend to rare earth also? Is there any endeavor to go to?
Yeah. Absolutely. Absolutely. Absolutely. Rare earth, atomic minerals, all the critical minerals that the government has enlisted.
Okay. One last housekeeping question is, what was the grade this quarter? And if you can also highlight the revenue and CapEx mine development.
This quarter, grade was 7.62%, and this is the highest grade in the last couple of quarters. For the capital revenue, total was 26 kilometers. 50%-50% capital revenue.
Wonderful, sir. Thank you, and all the best.
Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah. Good evening, everyone, and thank you for this opportunity. My first question is on the operational guidance for FY 2025. Now, if you look at FY 2024, it's been almost a stagnant year as far as refined metal is concerned. And we are now guiding just for four to five percent growth in 2025, much lower than what our capacity is of around 1.2 million tons. So just want to understand, I mean, given all the projects are complete, at the current capacity, is 1.1 the peak capacity to consider in future years also, and future growth will come in only after more expansion?
No. So when we did 1.2 million ton expansion, it was primarily for the mine metal capacity of 1.2 million ton, whereas the finished metal was designed to be 1,123,000 tons, 1.123 million tons, right? So we are trying to first, three years in consecutive years, we have achieved more than 1 million ton in metal in concentrate, and two years in succession, we have achieved 1 million ton plus in finished goods. So now that gives us confidence to go beyond 1.1 million ton, and that will be the first test whether we can go closer to our design capacity of 1.123. And as we speak, we have launched a number of de-bottlenecking projects to take the capacity from 1.123 million- 1.25 million tons. So it will take maybe another 18 months to close all that.
And then after we achieve 1.123, 1.1 million ton plus this year, then next year, we can surely attempt at 1.2 million ton, hoping that in between, all the de-bottlenecking projects are completed.
Okay. Got it. Second question is, since you were in between considering the demerger of metal, silver, and recycling from the third division as well, what is the status and update on that, sir?
No. So as you have seen in the filings as well as the newspaper reports that we have read, so government has written to us saying that perhaps the timing is not appropriate considering they are in the process of disinvestment of the company on the 29% stakes that they have. And at this point, a demerger may create confusion in the minds of potential investors when they do the OFS route. However, looking at the rally of zinc prices, we have spoken to government, and we feel that this is the right time for government to disinvest and also help us to demerge these entities and create a silver as a separate entity because we continuously believe that that will unlock another $3 billion-$4 billion on the market cap.
However, it has to be, again, after the board comes to a consensus and a decision on this, then we can come back.
Okay. Last question on the cost. So we are guiding for mid-range around $1,075 versus fourth quarter. This time, it's around $1,050. So in terms of commodity price inflation, do we I mean, are we seeing that all the tailwinds or benefits are already priced in or in this quarter and no further benefits are expected? Is that the way to read?
Yeah. So Sumangal, if you see, there are a couple of things which happened in the quarter four. The best ever grade we got was 7.62, which has an impact on the core fixed cost. Also, we had the highest linkage coal consumption. This was 46% in the overall quarter four. So I think for the full year, it was 37%. So we are moderating with the 40% kind of linkage coal consumption. And import coal prices also, we are assuming by quarter four. But as we go more to mine deeper and the higher mine development, as we have to improve volume, some impact may be there, which are all factored in the INR 1,050-INR 1,100. And secondly, as Mr. Misra had said, that we are assuming zinc lead mode completely for the whole year.
So Pyro Plant which has a zinc lead mode, it has a $15 cost extra compared to on the overall basis, I'm saying. So this is also being factored into $1,050-$1,100. So if you exclude that Pyro Plant in that manner, actually, we are talking about a $1,035-$1,085 kind of thing on a like-to-like basis. So all these factors have been factored into part.
Got it. Got it. Thank you so much, and all the best.
Thank you.
Thank you. We have the next question from the line of Ritesh Shah from Investec Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, first, a couple of questions on the mining part. Sir, Bamnia Kalan, finally, I think it has come to four. Sir, can you detail over here? Basically, you indicated that we have secured the regulatory approvals. So what sort of regulatory approvals do we have? How should we read into resource reserves we see and timelines on the mining output over here?
So, yeah, this can be clear. Bamnia Kalan mine has almost 1 million tons of the resource in the metal term, 700 tons of kind of the silver. So that kind of it has annual potential revenue at current LME, INR 1,000 crore plus, and assume the EBITDA margin kind of this, so maybe INR 400 crore. So we have received all the approvals from the IBM for the mining plant, consent to operate, consent to establish. Everything has been received. And now, we have to hit the ground with the site activities for which we are working with the business partners to start the portal and the initial mining activities. And this is adjacent to the SK mine. So it's strategically located near to the same mine. So that benefit of SK, we will also get.
Sir, what are the timelines that we are looking at over here?
So it will be around any mine to start. It takes one to two years to get a full ramp-up. But I think to hit the ground and then start the portal, it may be in the next year, it may be coming to the main operation part.
Okay. Sir, my second question is, as per MMDR, we will see a certain percentage of our reserves face expiry by 2030. If my memory serves me right, I think it's Rampura Agucha, SK, and Kayad. So these three mines will be what percentage of our?
Rampura Agucha, Kayad, Zawar.
Agucha, Kayad is 2030. SK is 2048. Bamnia Kalan is 2035.
Sir, can you please come again a little slowly? Sorry.
I'm saying SK mine is 2048. Bamnia Kalan is 2035.
All right.
Kayad is 2048. Kayad is 2048. Remaining mines are 2030.
So Rampura Agucha, and basically, Zawar is 2030. So this is what percentage of our mine output at this point in time?
Which? Agucha and Zawar?
Yes.
Agucha and Zawar will be put together 65%. But in terms of profitability point of view, 50% given that SK has the silver in its mines.
Okay. Sir, how do we see a scenario come 2030 given that we will probably look to retain the leases? How the royalty content can actually change?
Very difficult to speak as of now, okay, because such kind of a distributed mineral auction has not happened to another brownfield. Most of the auctions that have gone for are bulk mineral which are close to surface exploration results can be easily verified. So we'll wait as it happens. But we know our scenarios. We have already calculated, and we know that we'll be able to maintain our profitability close to the current level even if in the auction, we have to provide for a certain amount of extra premium.
Okay. And sir, Bamnia Kalan until 2035, right? Did I hear it right?
Yes, yes.
You heard it right.
Okay. Perfect. Sir, that's helpful, sir. A couple of questions on financials, sir. If you could please quantify, what is the GR and RE number as on March 31st?
GR is basically INR 10,384 crore. Including GR and RE, it's INR 15,000 crore.
Okay. And sir, what is the status on GR to RE? I think there was an ongoing court case.
Yeah. So GR to RE, next date of hearing is 17th May 2024. So I think that should be the last hearing that we expect.
So 17th how?
May 2024.
Okay. Lastly, sir, in the prior call you had indicated, I think we have also referenced it on one of our slides on waste to basically valuable resources. You had indicated one of the American companies for a potential buyer. Is it possible if you could provide some technical color as well as some quantification on the scope of the opportunity that we are looking at over here?
So we will not be able to give the name of the company with whom we are going to have tied up. But the quantification, if you see our slide number on the sustainability, if you see the IR presentation, slide number 13, where we have talked about Hindustan Zinc has the potential of recovering 1 million ton of the metal and 3 kg of the silver from its accumulated waste stockpile. This is the opportunity which we are talking, total opportunity which we are talking. And ties are already done, and we are in the pilot stage. And at appropriate time, we will be able to comment upon how much CapEx is involved here.
Sir, when we say 1 million ton of.
We request you to please return to the queue if you have further questions. Thank you. Ladies and gentlemen, we request you to please limit your questions to two questions per participant. You may rejoin the question queue if you have follow-up questions. The next question is from the line of Pallav Agarwal from Antique. Please go ahead.
Yeah. Good evening, sir. So in this quarter, we had a sequential increase in interest costs. But I think Europe probably generated cash or maybe our borrowings have come down. So any particular reason for that?
So, finance quarter in line with the debt. And also, the last quarter, we have actually repaid the low-cost short-term borrowing. And the short-term borrowings have been there. So, this is normal routine movement. And I think there is not a much larger impact of the cost increase is there in case if you see it from the finance cost. It's INR 243 crore-INR 262 crore.
Sure, sir. Also, sir, after many years, we've seen reserves and resources being stagnant compared to the previous year. So normally, we do replace whatever we mine out, and there's been an increasing trend in reserves and resources. So will we increase our exploration activity this year, or how will this pan out over the next few years?
So overall, see, reserve and resource may look stagnant, but you have to appreciate how quickly we are converting more and more resource into reserve. So there are mining in the current level of 1 million ton plus metal in concentrate capacity at seven percent grade and about 16 million-17 million ton ore mining is able to continue year after year. That is the first priority. And second priority, yes, large part of Zawar is requested greenfield exploration. So our next concentration of effort will be in Zawar, where currently, we have moved up the ore production, and we want to take it to 6 million ton and then 8 million ton from the current level of 4.5 million tons of ore production. So for, say, 8 million ton ore production, we would require a proven reserve of about 18 to five, 40 million ton.
So we are working mostly in Zawar now to increase the reserve and also add more to the resource. But however, you would appreciate that we have to do it in a very the judgment has to be taken rightly so that we are in a position to continue mining. That is most important to us. We are able to control grade by enough of underground exploration. At the same time, we try to replenish a little bit more than what we are consuming. Unless if a new block we get, then, of course, we will have a sudden jump in reserve and resource based on the new block.
And sir, just to supplement, Mr. Misra, if you see bias between resource and reserve separately, reserve will actually increase in spite of depletion by 0.3 million.
Sure, sir. So just lastly, how do we distinguish between sustenance and growth CapEx? Because I think we probably have been maintaining about $300 million-$400 million of sustenance CapEx every year. So is this basically just to ensure the continuity of output, or what is basically the distinction between these two?
Majority of sustenance goes into equipment replacement because we have about 900 equipment in the underground. 900 equipment in the underground, at the same time, every year, about 100-200 equipment on a 5-year life cycle basis, they are due for replacement. That is number one. Second, there are various aspects of environment and safety which also require investment. We are on a path to reduce our freshwater consumption, and hence, we are putting up water treatment plants everywhere. Then we are looking at sewage water treatment plants to protect ourselves from the inadequacy of rainfall in some years. Then third bit is we are also looking at small CapEx's which give a quick payback, a less than 12 months kind of a payback that we include in sustenance.
Whereas growth would typically have a higher CapEx outlay, say, anywhere between, say, INR 300-INR 400 crore kind of a project which increases the design capacity of the plant by not debottlenecking but by adding new assets. At the same time, you can expect a payback period of anywhere between 2.5 to three years. Those kind of criteria will apply for growth CapEx. So fertilizer plant and our new roaster, they would all qualify for growth CapEx. Whereas small, small improvements, as I said, between 1.1 million-1.3 million ton and 1.2 million ton will be unlocking through small, small debottlenecking projects. But number of them with an investment for each one of them may be somewhere between INR 5 crore to maybe about INR 70 crore or INR 80 crore.
Sure, sir. Thanks. So basically, we can expect this level of sustenance to continue in the future also, sir. This would be a steady state.
Yeah, yeah, yeah. It's a steady state.
Right, sir. Thank you so much. Yeah.
Thank you. The next question is from the line of Kunal Kothari from Centrum Broking Limited. Please go ahead.
Yeah. Thanks for the opportunity. Sir, one clarification of the capacity expansion of refined metal. Have I heard right that current capacity is 1.123 million ton per annum, and it will be expanded to 1.5 million ton in the next 18 months?
No, no, no, no, no, no. I didn't say that. We see 1.123 million currently, and we are launching a lot of dewatering projects to take it to 1.25 million tons. But safely speaking, it will be close. It will be about 1.2 million tons in about 12-14 months or maybe 16 months.
Okay, okay. Our target is to raise it to 1.5 million tons. So by when we can say that we can reach the target by which year that is feasible according to you?
See, we are on the drawing board to actually we were earlier thinking of taking it in steps, maybe 1.2 million, 2.5 million ton in FY 2026, 1.35 million ton in FY 2027. But what we understand is much better to plan for something like 2 million ton metal in concentrate production as quickly possible. So we are in the process of engaging global consultants. We have placed order on two mining consultants already to look at the mine expansion. We are working on an order for a smelter and infrastructure consultant so that we can come back to you and place before you a vision of making this company 2 million ton. And we are keeping ourselves the timeline anywhere between two and a half to three years' time to take this company from 1 million ton to 2 million ton.
After the designs are done, then you know whether it will be 2 million ton or it will be 1.7 million ton. That final number we will be able to project to you.
Okay. Got it. Sir, my second question is in regard to our new fertilizer plant. Sir, can you state what is the capacity and business economics that we are looking forward and from when will contribute to our overall numbers as well?
Of what? Fertilizer plant?
Fertilizer plant.
Yeah. Fertilizer is 510,000 metric tons DAP and NPK, and it has a project cost of around INR 1,800 crore with a good double-digit IRR. And from the EBITDA, I think there are two: one is a strategic objective for the forward integration of the asset usage and making it more sustainable. That is one objective. From financial benefit, EBITDA point of view, it will be at current level of the prices, INR 350-400 crore.
When is it likely to get commissioned?
FY 2026.
FY 2026. Okay. Thank you so much. Thank you.
Thank you. The next question is from the line of Aditya Welekar from Axis Securities. Please go ahead.
Yes, sir. My question is on the guidance which we have shared today. If I compare it with the analysts' presentation, we have given guidance of 800 tons per annum for silver. In today's presentation, it is now cut down to 775. Similarly, for refined metal, 1,200-1,100. Zinc COP from $1,000/ton - $1,100/ton. There is a slight deviation from the.
I think yes. Yeah. No, no, no. No division at all. In analysts' meet, we did not give guidance for next year. We said that that is the potential and the vision for Hindustan Zinc. And we said anywhere between three to four years' timeline to come to those numbers. We said that the company has the potential to achieve up to, say, 1.5 million ton metal, has the potential to produce between 800 tons of silver, and also has the potential to become less than $1,000 per ton on the cost. So it's more from that angle. Whereas next year concerned, these are the guidance we have given. Of course, we still will continue to work towards going to $1,000 per ton cost of production.
Okay. Thanks for the clarification. That's it from my side.
Thank you. We have the next question from the line of Vikas Singh from PhillipCapital. Please go ahead.
Good afternoon, sir, and thank you for the opportunity. Sir, just wanted to understand one thing. If you look at our silver growth guidance of around two percent versus the refined metal guidance of five percent, even with the fact that the Fumer just contributed 3 tons out of the 30 tons potential, so why is the silver not growing at all with refined metal?
As we said, we will be operating mostly in zinc plus lead mode in the Pyro. So correspondingly, our lead production will go down, and hence, the attached silver production will go down. It is just because of the Fumer that we are able to make up for that and still produce 750-775 tons of silver at this level of metal of 1.1-1.125. Otherwise, this number would have gone down to anywhere between 730-735 tons of silver only.
Understood, sir.
Sir, given zinc prices have jumped up significantly, with this, our cash flow would also be increasing. So our preference would be debt reduction, or this kind of debt we will maintain, and whatever the additional money we would have, this can be distributed as a dividend going forward. So what's your take on that?
So Sandeep, I think dividend is a matter for the board to comment. Whenever it will come, we will all come to know. At this point of time, if I will have the cash, obviously, I will either invest in the long-term investment where I can get the best of the return, or in case there is an option, we will repay. So I think I will be more concerned about the net cash level or net debt level rather than taking out the gross cash or gross yield.
Point taken, sir. Sir, just one last thing. Just from our understanding purpose, sensitivity-wise, how much five percent additional value-added sales would move our EBITDA?
Yeah. Value-added production like zinc alloy, this is not from the EBITDA or PAT point of view. This is more from being the strategy and making India self-reliant. Zinc alloy has a total market of 30 KT, and you have also put up the plant for 30 KT. So we want to reduce the import dependency. That is more from that point of view. If you see the value addition from the zinc alloy, it will be INR 40 crore-INR 50 crore. But I think we should not look from profitability point of view everything. Look at more from the holistic, how we make India self-reliant by making zinc alloy internally in India only.
Understood, sir. Thank you. That's all from my side and all the rest of the team.
Thank you. The next question is from the line of Shweta Dikshit from Systematix Group. Please go ahead.
Hello, sir. Good evening.
Good evening.
Sir, from my understanding, could you just throw some light on the zinc plus lead mode of operations that you were talking about?
Oh, so we have a Pyro facility that furnace can run with input of zinc concentrate and lead concentrate mixed together and converted to sinter. And that sinter is fed to the furnace. After melting, we produce both zinc as a finished good, also lead as a finished good in that process. And balanced residue carries the silver that frees up from the lead, which is again taken to silver refinery plants and produces silver. Now, in this process, if I don't feed in zinc and only feed in lead, you can understand that then the furnace is full of lead. The furnace residue is full of lead residue with the silver, and then it can produce more silver. That is a very simplistic way of understanding.
Understood, sir. Thank you. My next question is on the line. What's your outlook on zinc prices in the near or medium term?
Zinc prices near- and medium-term? No, there are various reports that speak on something which the current movement looks like. Some of the reports are even slightly conservative. The first report I will refer to had predicted, when we are in the month of February, predicted that by December, zinc would touch $3,000 per ton. But if I follow the last 20, 30 days of movement of price, it looks like we'll breach that mark of 3,000 much earlier than December. Maybe somewhere closer to August or September, we'll breach the mark of 3,000. By December, I'm very hopeful that we'll be closer to the mark of 3,200 also.
Sir, I mean, is the underlying demand favorable for such a price movement? Because the recent uptick has been more on the geopolitical or external factors. But are we looking at a favorable underlying demand here as well?
So apart from the underlying demand, you should also know that TCRC is also growing at the lowest. Currently, what we read in the media, Teck Resources and Korea Zinc entered into TCRC of $165, and current export is going $75, which clearly indicates that a concentrate market is in a quite tight supply because of the higher cost. Many of the smaller mines have got closed. So concentrate market is in a shortage, and that's how you can see it is impacting on the overall supply-demand situation where the MIC is short and the prices are going up. So you are right. The current supply chain issue may also be, but fundamentally, what Mr. Misra has said, sooner than around in December, we can see around $3,000.
Sure. Thank you so much.
Thank you.
Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to Ms. Jhalak Rastogi for closing comments. Over to you, ma'am.
Thank you, everyone. With this, we close today's earnings call. For any follow-up questions or clarifications on the results, please feel free to reach out to the investor relations team. Thank you so much.
Thank you.
Thank you. On behalf of Hindustan Zinc, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.