Q2 21/22

Oct 22, 2021

Quarterly report

Ladies and gentlemen, good day and welcome to Hindustan Zinc Limited Q2 and First Half FY 'twenty two Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations. Thank you, and over to you, Ms. Arora. Good afternoon, everyone. I welcome each one of you for Hindustan's 2nd quarter and first half FY twenty twenty two results call. Today on the call, we have with us our CEO, Mr. Arun Mischa and our recently appointed Interim CFO, Mr. Sandeep Modi. Mr. Mishra will begin with an update on business performance, while Mr. Modi will walk you through financial performance, after which we will open the floor for questions. I now request Mr. Mishra to begin today's call. Over to you, Mr. Misha. Thank you, Shweta. Good afternoon and a very warm welcome to all of you. I trust that you and your family are staying safe and following all necessary precautions as well as taken dose of vaccination to fight the spread of COVID-nineteen pandemic in the country. It gives me satisfaction to report fatality free operations during the quarter. Nothing is more important to us than safety of our people and we as leadership team reiterate our commitment and vision to ensure all employees go home safely. In certain things, safety team continuously tries various initiatives to meet our vision, and working committees identify critical areas for improvements to address any potential risk. It is heartening to see that the shared vision of holistic, inclusive and sustainable growth that we have set as leadership team for the company is yielding desired results. Progressing well on our water positive journey, Dewari Inc. Zinc smelter commissioned 0 liquid discharge plant as part of water recycling. Krat mines have received Fimi Balagushan Wilson Attendant Award for Excellence for the year 2020 2021 for the longest accident free period and National Safety Award from DGMS. This reinforces our commitment to safety of our people. Our Chandaria Late Jinkx Mentor was given the most innovative project award for restoration of Xerox here at the CII National Award for Environmental Best Practices 2021. Also at India ESG Leadership Awards, Hindustan Zinc won in overall environment category as well as greenhouse gas emission reduction category. I am also delighted to report the bold steps that Hindustan Zinc is taking on sustainability front. We have committed to net zero emission by 2,050 and published our first Task Force on Climate Related Financial Disclosure also known as TCFD report. We have also joined the Task Force on Nature Related Financial Disclosure also known as TNFD to tackle nature related risks proactively. I am also proud to represent Hindustan Zinc and participate in person at the British High Commission Conference of the Parties also known as COP26 next week at Glasgow. I'm proud to announce that we won Industry Leadership Award at the prestigious S&P Global Platts Global Metal Awards 2021. As a group, our core value and priority is to give back to society and our CSF team has doubled up efforts during these trying times and carefully balanced both the ongoing long term core initiatives as well as health and COVID related support to the villages and communities surrounding our operations. I'm happy to share that Hindustan Zinc has won the CSR Leadership Award 2021 presented by World CSR Day for transforming lives of community nearby. Our Samadhan program received an appreciation from FICCI for commendable work under the food security and agriculture category. Turning to market update. Zinc prices continued the momentum gained in quarter 1, FY 2022 and crossed the $3,000 mark on multiple occasions, though prices retreated briefly in the face of macroeconomic worries about the softening global economy. Over the last 1 year, we have seen global zinc supply facing uncertainties in form of COVID related stoppages to later logistical challenges due to bottlenecks at major ports, which caused long delays and shortage of containers to ship concentrate. More recently, industry is also dealing with coal shortage. Earlier, China announced curtailment of power supply to energy intensive sectors, which also impacted output. Energy crisis, which started from China, quickly spread to Europe, which is also facing rising natural gas prices. We have seen big players such as NASDAQ announcing curtailing production up to 50% at 3 of its European smelters because of rising electricity cost. All these supply side constraints are pushing zinc prices higher and partly also helping to offset rising input energy cost for low cost players such as Edison Zinc. Talking about LME exchange stocks at their current levels that is at the end of September, they are only sufficient to meet 7.5 days of global demand, which is one of the lowest level for the current calendar year. We feel relatively low stocks, supply side disruptions and robust demand will continue to put upward pressure on spot metal premiums globally. Despite the supply chain and synergy related constraints, manufacturing activity in North America and Europe remained buoyant, always below the peak seen earlier in the year. End use demand in most of the world's major economies remains robust. On domestic front, India's manufacturing PMI stood on the higher side of 52 during the quarter, suggesting a strong confidence of the market on economic progression. Quarter 2 of this year saw a continuation of the Indian manufacturing sector's recovery. New orders continue to rise during the quarter, suggesting favorable market conditions. As government spending continues in infrastructure, highway, electrification and transmission projects, the major demand for zinc came from the structural segment, followed by the alloy segment, which after a dull year exhibited strong recovery as automobile demand improves. Lead prices fell during the quarter, but fundamentally, we see OEM battery consumption, replacement demand and electric bike batteries to remain intact. Silver market in India has seen some headwinds in the quarter of this year, majorly owing to increase in premiums. The increase in premiums is being caused due to the increasing demand and decreasing price. Onset of imports from the international market is another development, which is being observed since the end of July due to low global prices as compared to domestic prices. As we are increasingly seeing focus shifting to green energy in India in line with global practices, we foresee strong pickup in industrial demand of silver for renewable power projects such as solar cell manufacturing. As we have seen some recent merger and acquisition activities from reputed corporate houses on green energy, we progressively expect more investment to come into this space. Coming to update on operational performance. During the quarter, mined metal production was 248,000 tonnes, up 4% year on year on account of higher ore treatment at Rangpur Agucha, Jawar and Rangpur Agariva mines, supported by improvement in recovery, which has been partly offset by lower mining grades. Sequentially, mined metal production grew by 12% mainly due to higher ore treatment at Syneser Court, Kyad mine and improvement in mining grades and recovery. On a half yearly basis, H1 of this year, mined metal production was 470,000 tonnes, up 7% year on year, in line with the higher ore treatment at Rambura Bucha, Jawar Mines and Raspura Dariba mine and increased recovery offset by a slight dip in overall mining grades. Integrated metal production was 209,000 tonnes for the quarter, down 12% sequentially on account of extended shutdown at 1 of the roasters at Chandaria Splinter for repairs and overall structural components. We lost close to 25,000 tonnes due to the roaster maintenance work shutdown. The shutdown, which was originally planned for 60 days, however, was finished in 52 record days. Integrated zinc production was 162,000 tonnes, down 14% quarter on quarter. And integrated lead production for the quarter was 47,000 tonnes, down 4% sequentially. Integrated silver production was 152 tonne, down 5% quarter on quarter, in line with lower lead production. I am proud of our teams at Hindustan Zinc, who with their metal continue to successfully overcome formidable challenges ranging from pandemic, operational and other macro challenges like energy crisis. They in turn have strengthened the backbone of our operations through effective systems and planning and have set the stage right for us to deliver 1,000,000 production mark. Coming to project update. We are awaiting public clearing date for Tosawada's implant. Once that is cleared, we will proceed for environment clearance process and follow the statutory approval from state and central governments. Also, we will continue to engage with technology partners for closure of best in class technology. After all necessary approvals within the system and from government, teams will start the groundwork. Due to ongoing COVID-nineteen related restrictions on visa for Chinese nationals, we expect human commissioning to be completed by end of this fiscal year. Before I hand over the call to Sanjeet for an update on financial performance, I would like to reiterate our production guidance for the fiscal year 2022. We maintained our mined metal and refined metal production guidance for the fiscal year in the range of 1025 to 10 50 kiloton each and sellable silver production at 7 20 tonnes. With this, I hand over to Sandeep to update on the financial performance. Thank you, Mr. Mishra, and good afternoon, everyone. Coming to an update on the financial performance for the Q2 and first half year ended September 21. Revenue from operations during the quarter was at INR 6122 crores. This is an increase of 8% YOY led by higher zinc LME and lead LME. We also had a higher premium as well. This was partly offset by lower metal and silver volume. Zinc and LME price were up 28% and 25% YOY, respectively. Sequentially, revenue decreased 6% primarily due to the lower metal and silver volumes and lower silver prices. It got partially offset by higher zinc and lead LME prices and higher premium. Zinc volume was sequentially down by 12% and lead was down 4% in line with lower production due to the maintenance shutdown. Drink cost of production before royalty during the quarter was $11.24 per tonne in the INR terms, INR 83,208, higher by 22% YOY and up 5% sequentially. The COP has been affected by higher input commodity prices like coal, diesel, met coke and higher revenue mine development. It got partly offset benefited from the operational efficiencies and better recoveries. Sequentially, metal maintenance shutdown and lower metal volume also weighed on the cost of production. EBITDA for the quarter was INR3332 crores. It was 13% Y o Y and down 6% sequentially. It was a drop was driven by lower volume and higher cost primarily on account of input commodity inflation. I'm happy to share that on H1 basis, we delivered record high H1 EBITDA of INR6890 crores, an increase of 51% Y o Y. This was driven by higher zinc and land economy prices, higher premium as well as higher silver prices. While an uncertain macro environment where we are facing headwinds in form of input commodity inflation led by global energy shortages, headwinds in form of higher LME is acting as a help to protect our margins. In addition, our continued efforts in operational efficiencies and recoveries are also supportive of lower cost. Net profit for the quarter was INR 20.17 crores, up 4% YOY and 2% sequentially. This increase was mainly driven by recovery in metal prices and lower ETR. Net profit for the H1 for FY 'twenty two was INR 4,000 crores, which is YOY up 21%. Moreover, effective tax rate for the quarter was approximately 30% and H1 32%. Based on the projection of our ETR guidance for the full year remains unchanged at 32%. Our cash rate tax rate would be 17% as we have met credit available. Once we move to new tax regime from FY 'twenty three, 'twenty four onwards, our tax rate will be around 24.5%. Coming to our cost and CapEx guidance for the full year. In the previous quarter, we had cautioned against the risk to cost from rising input commodity prices. In light of the same, we would like to revise our cost guidance upwards. For the fiscal year 'twenty two, zinc cost of production is expected to remain below 10.75 per tonne, which was from $1,000 per metric tonne earlier. Project CapEx guidance for the year remains unchanged and is expected to be approximately dollar to $100,000,000 With this, I open the floor for your questions. Thank you very much. We will now begin the question and answer session. The first question is from the line of Amit Dixit from Wedelweiss. Please go ahead. Yes, hi. Good evening and thanks a lot for the opportunity. I have two questions. The first one is on the coal sourcing currently. What is the split between linkage and imports? And what is the likely increase in power and fuel cost in Q3 FY 2022 as a result of imported coal prices? Do you know where they are? Sandeep? Yes. So our mix of the linkage and non linked coal, which is the import, is the 25% in the linkage and around 75% is the import. That is the overall mix for the coal. The likely increase in the coal cost, which is resulting in our cost guidance, which I said about $10.75 per tonne, is largely on account of the import commodity prices. In the Q3, Q4, almost $50 cost increase is coming on account of the full cost increase. Okay. That's helpful. The second question is a data based question. Essentially, what is the export quantum in I mean, you can say even expresses the proportion in Q2 and what it is likely to be in Q3? So, can I just? Typically, exports are roughly around anywhere between 10 kt to 14 kt per month is the export depending upon the production volume. However, in the Q2, since our overall metal production was lower, so overall, we tried to maximize the domestic component. And in fact, our domestic share went up in Q2 in spite of lower production, and that has resulted in additional earnings. Okay. And what will be the proportion entry? Will it come back to 10 to 14 kt per month or I mean is there some other problems there? It depends on the volume. Typically, Indian market has an absorption capacity of 45 kt to 50 kt zinc production. And if we produce 65 kt zinc in order to produce, say, 90 kt plus metal, in that case, 14 kt to 15 kt export will come back, which is the normal case in our case for a 90 kt production in a month. Okay. Thanks. Thanks a lot. That's helpful and all the best. Thank you. Thank you. The next question is from the line of Sumangal Nevetya from Kotak Securities. Please go ahead. Hi. Yes, thank you for the opportunity. My first question is with respect to the production. Now in the first 6 months, we've seen a lot of issues with respect to Rostra that Teleria shutdown and the reimbursement there. So, Gomesh, if you could share with the issues are behind. I know you've already reiterated the full year guidance. But then in Q4, do we expect to run at full rated capacity at around 1,200,000 tonne? And what will be your confidence level for next year whether we can deliver as per our retail capacity at 1,200,000 tonnes, which would mean a very significant growth from FY 2022 levels? No, absolutely. I also share your views. So we were actually slated for 1,200,000 tonne delivery this year. However, we never anticipated the second wave of COVID, which affected us badly in the beginning of the year that was in quarter 1. And then it was subsequently followed by disruption in supply chain across Europe. So most of the equipment which we tried to introduce this year as a replacement, which was scheduled to arrive in quarter 2 have not yet arrived and expected in quarter 3. So that and also what that's why we took the decision when the roster there was a breakdown in Chandania where the shutdown got extended for the dome failure. We performed the shutdown which was there in H2 into the same quarter 2 assuming that most of the new equipment will arrive in this quarter and then we'll be in full throttle as far as operations are concerned. And the current level of operations that I see, I can say from December onwards, we should be able to demonstrate our capacity of delivering 1,200,000 ton annual capacity, and we will reach that mark in quarter 4 0 year, but we should demonstrate a monthly capacity even before that. Understood. So Mr. Mishra, this is more of the delays and we don't see any structural issue of grade slippage or something to deter us from achieving 1,200,000. Is that the right understanding? Overall, if you look at the grade compared to last year, it's almost similar if we look at quarter on quarter. Annual wise, we are still slightly, say, worse than what it was last year, but the development targets that we have taken for ourselves will liberate better grade ores in the coming H2. Our H2 number plan was also for better typically in the mine planning compared to H1, H2 grades are better, and we are looking to that. And H2 should provide better grades, should provide better numbers and should also demonstrate our capability of 1,200,000 and I am sticking to that. Understood. Just a follow-up, I mean this Yuma project, we were delaying the commissioning by month and earlier it was September, October and November. And now it has been pushed to end of FY 2022. So I mean things have opened up and there are these issues of visa etcetera for Chinese officials still there and that is why we are I mean, delaying by another 6 months? Correct. So the visa issue remains same. So that's what is also affecting us. However, we are interested we are for commissioning, but we are unable to get the same thing done in absence of the expert visiting us. So we have to wait till quarter 4. At the same time, I can assure on the production front since we have got enough of MIC in stock because of higher mined metal production in this quarter compared to metal production. So we will be full on as far as H2 is concerned and any commissioning of FEMA will only give benefits for the Q1 of next year. Understood. So my second question is with respect to the capital allocation. So generally, we have in last 2 years, we've been giving a big interim dividend around 1H result. And this time also there was a board meeting scheduled, but suddenly overnight it was canceled. So any thoughts on that? And secondly, the media report suggesting that we might look to take on Zinc International business from the parent. So any thoughts on that media speculation if you could share? So we are just into the festive season. And going on to the Christmas, I think good news is there for all. We need to just wait for that. And good news will, of course, arrive at the right time. And I am very optimistic about the festive season delivering good news for us as far as dividend is concerned. The other part is Zinc International. I have also committed earlier in our Annual General Meeting with respect to questions from our respective shareholders that should Hindustan Zinc look at South Africa and in particular, Zai. Of course, all we have to grow inorganically as well and the targets do include ZI as well as other facilities around the globe. I will rest my comments there. Whenever we are matured on that thought process and we have new approval from all relevant agencies, we will come back and would be sharing the good news with you. Understood. Thank you so much, sir, and all the best. Thank you. Thank you. The next question is from the line of Rashi Chopra from Citigroup. Please go ahead. Thank you. Sir, just to clarify, you mentioned that the coal cost will be higher, the power cost will be higher by $50 in the second half. So just kind of tallying it with the guidance that you have, which is $10.75 for the full year versus $10.95 in the first half. So apart from higher volumes, where are you expecting cost savings and to offset the or more than offset the power increase? Sandeep, I will take this question. So if you see my cost structure, so almost whatever the volume driven would be there, the volume will be helping in the offsetting this core cost increase. And apart from this, I have a water asset prices are also there. So we have better realization in case of asset prices. So these are the 2 factors apart from the operational efficiency or recovery improvement and what Mr. Jee has also said about the better ore metal grade. So ore grade, that will also help me to reduce my cost. So with that, we should be able to meet the below $10.75 And we also had some exceptional item in the shutdown cost in the other expenses category, so which was in the H1, especially in the Q2. So now leaving behind everything and we don't have any plant shutdown in the H2, we should not be having such a shutdown cost also. So can you quantify the exceptional amount, please? No, I mean, I'm taking one off item in the part of the other expenses that is shutdown cost was there, which is not there, would not be there in the S2. Okay. And what was the grade lighter in this quarter? Sorry? Grade in this quarter was 7.12%. It was better than last quarter of 6.91%, I guess. Yes. Okay. Thank you. Mathur. Thank you. The next question is from the line of Pinakin from JPMorgan Chase. Please go ahead. Yes. So my first question is that if tomorrow the visa issue is not resolved, would it be fair to say that the fumar will not come into line by the FY 'twenty two deadline that has been mentioned? So we are also looking to we are desperately looking for alternative expertise available in the globe. We have done similar commissioning. I am hoping that if this PISA issue doesn't get resolved and in next 3 to 4 months' time, we are also able to locate experts who have commissioned similar tumors of similar make and we have confidence on that expertise, then surely we'll go for that. Sure, sir. So by the time you make alternate arrangements and it gets pushed out into FY 'twenty three, what would be the volume impact from the guidance that we have been we have given this year so far? So this guidance that we have given, we are not factoring anything for the tumor access because we had anticipated that tumor commissioning perhaps would get delayed because of the COVID and all that. So we are intact on our volume guidance with or without tumor. So we will deliver that guidance. Understood. Thank you very much, sir. Thank you. Thank you. The next question is from the line of Vishal Chandra from Dam Capital Advisors. Please go ahead. Yes. Thank you very much for the opportunity. So my question is with regard to Zinc International. Now I just wanted to understand, do we really have any synergies with Zinc International or it would just be a means of acquiring because ultimately we give dividend, dividend goes to the parent and instead of paying dividend, we acquire an asset from the parent and from there onwards, the dividend moves through the parent entity relatively. So how does that Zinc International fit into our entire scheme of things? I understand expansion at Rajasthan is the primary opportunity. And then probably the Gujarat plant can also come up, but Zinc International is a little difficult to understand. If you could just help us on that? So I don't think I have said anything to indicate that I am right now getting into the Zinc International as an acquisition fondly. I only said that if another geography has to be seen, South Africa does provide an alternative geography. Now the question of Zinc International, whenever they come, I'm sure a proper due diligence, valuation related approval and something on the solid foundation on which I can present to you. Saying that, since Zinc International is part of our group company structure and I am also Zinc person being part of many discussions, all I can tell you is Zinc International has a resource base of about 32,000,000 to 32,000,000 tonnes, which is equivalent to Hindustan Zinc, right? So that should give us a comfort if that were to happen. But nevertheless, if Hindustan Zinc has to grow, it should look at a property which allows it to remain in the 1st decile on the cost curve, which uses its expertise of converting resource into reserve with its huge experience of exploration in base metal. And third, it rests on its expertise of high metal recovery from the reserve in the smelting process. If these three attributes are there and satisfied, therefore, it would have a right synergy to do something. This particular entity of this red eye is concerned, till the time we are firm about what we have to talk about or we are committing or we are considering, until that time, I would not be able to address that question. I would take it purely hypothetical. Sure. That helps. Just let me rephrase it once more. If I look at any overseas acquisition done by any commodities player in India, whether it's under steel or non ferrous, generally we have seen that it has been EPS dilutive to the shareholders. So in that light, would you still would want to pursue anything that would be more accretive or better than Hindustan's current assets at Rajasthan itself? If you were to just compare between Zai and the existing assets that we have? Again, you are dragging me to comparing on a particular entity. I cannot comment on that. But nevertheless, those are all whatever you are saying are the right things to be talked about, and they should also always form part of a due diligence and part of the valuation exercise. Ultimately, in the business, how much do I pay for how much value to be created in future? Rest all are internal matters of calculation. As a shareholder, from outside, I will look at each money that I invest, how much money that investment can make there. As long as these two equations satisfy, I'm okay. Rest all are internal calculations, we can keep on arguing which is better where, right? That really helps. So my second question was with respect to the Gujarat project. If you could just update us on what are the likely time lines over there? So we are waiting for a new date for public hearing. Once the new date is announced, then our team on the ground will work for that public hearing to be successful. And then frankly speaking, any greenfield project in India do have some hiccups to start with. We also had a hiccup of public hearing not being held successfully. So let us public hearing is the 1st success. Once that happens, we buy the confidence of the society around. And then we will think about design and declaring to you when, how much and where and who will do that. All that will fall in place. Sure. Thank you very much, sir. Thank you. Thank you. The next question is from the line of Rahul Jain from Systematics Group. Please go ahead. Yes. Hi. Thanks for taking my question. Sir, on volume side, I mean, you're sticking to a guidance, but it does look very aggressive at this stage given how the first half has gone through. And by you're saying by your interest in the international assets, are you trying to imply that the growth opportunities in Rajasthan are not so exciting anymore? Group opportunity in Rajasthan is attractive. It's not that not attractive. Provided that option has to be physically in place. Right now, if you look at Rajasthan, all the other blocks surrounding our mines or the blocks between Gujarat and Rajasthan on the border areas where the GSI data shows there is potentially high reserve of zinc lead and some of the places also lead and silver. The question is when does the government bring them out for allocation either through the auction route or any other method and through the PL cum ML, which perhaps is the only route for red metal that one would get a combined license of EN and ML and get it. Now the question is whenever that comes Hindustan Deep would be in the best place to go for it and get new blocks. Till the time new blocks come, which also would take anywhere between 5 to 6 years to development of underground projects and then delivering numbers. We are also flush with cash as far as cash reserves are concerned. If the cash reserve is to grow and get earning more than whatever is earning on the treasury side, then a new investment has to be thought of. And then logically, if I have to think as a CEO, zinc material available elsewhere, wherever there the mine is currently at a concentrated stage, that means I don't have to prove the reserve or explore and mine the reserve, which is already there, and it is available in the concentrate stage, my future investment will be only a semester, then it will be a quick start up, a quick investment and cash return for the investment that I make. And my shortlisting of tentative targets would be based on that. No, right. So sir, you are basically I think what we understand now from here on that we are kind of clearly at a peak production level and next 2, 3 years probably this is the other number we should look at? No, surely my reason for feature is from 1.2, we should look at first sustaining because we have not yet delivered 1.2, we need to deliver 1.2 sustainably for at least 2 to 3 years before we can make the next jump to 1,350,000 tonnes, if possible, from the current resources. At the same time, if I have to go for, say, overall ambition would be Hindustan Drinks would be of a capacity of a 2,000,000 tonne kind of producers across the globe. So anywhere if I can add another 500,000 tonne through inorganic process anywhere in the world, that would help me take the company to a globally 2,000,000 tonne kind of capacity. Gauti, your current volume run rate sounds more like in where the numbers every time the guidance is very high, it's very not met for quite a long time now. And so essentially, it's kind of is it like a very mature phase? Or even what you said about these new blocks which you get, you will essentially have to pay a premium, right? So I don't think much will be left on the plate, right, how we have seen for a lot of the iron ore options and other options. So it's not really very value accretive, right? So in that sense, you would want to increase our dividend. Is that not an option with you? Dividend is always as per the policy. That option can never be moved up. So that's always there. But as I'm speaking plainly from the business sense of investment and earning more returns from the money that we have, then perhaps expansion into a frontier where concentrate is available and only smelting and quick conversion is possible, then I would surely look at that. And at the same time, on the auction and premium that you spoke of, it depends upon the competition. Now who would be there to develop a mine with a 600, 700 meters depth is a question that all of us need to ask. We are in the best place possible and we should have that advantage as far as bidding is concerned. That is helpful. Sir, also you said that in Java you've got some extension. How much is that going to add? No, I said that in Java, we have got some intersection. As you explore, every time you drill, intersection means you find more ore. So that is how in our R and R we add resource, then we convert it to reserve. So Jawahar, we have the lead area, which is huge. And only in that, more explorations are going on. If I look at future, Jawar's production can go up from 4,000,000 tonne to 8,000,000 tonne kind of ore production. And in Vazura Garivah mine, the production has to go up from 1,500,000 to 4,000,000 tonnes. So these are the potential places for more exploration, addition of resources and opening up new frontiers as far as mining is concerned. That move to give us some guarantee that 1,200,000 tonnes will not be a flatten a pan. It should be there steady for next 4 or 5 years, if not more. Sorry to interrupt you, Raghu. I'll look closer to come back in the question queue for a follow-up question. I request to all the participants, please restrict to 2 questions per participant. The next question is from the line of Noelle from Ashwa Group. Please go ahead. Hello. Yes, sir. So regarding the higher cost of production that we have seen, the increase of about $54 per ton quarter on quarter. So regarding that, I just wanted to know you had mentioned that the increase is mostly due to the higher coal costs, right? P. Vijay Kumar:] So you are talking about the quarter 2. In the quarter 2, if you recall, I said that there were 2 reasons. One is about the coal cost obviously and the details which is the commodity input cost has been putting the pressure. However, since they were in the quarter 2, there was a metal production also lower. That has also impacted the cost of production and there because to have a maintenance shutdown. So these are three primary reasons for the overall cost increase. Okay, okay, okay. Understood. But generally, if we're looking at sensitivity of cost of production to higher coal prices, so I mean, let's just say if we see coal prices, say, if common coal prices are sustained again another upward by around $20 to $30 So would I mean how would that move the overall cost of production assuming that there is no I mean no production related difficulties? So if you see that our cost guidance, I would say that to the extent we foresee this fast evolving situation, we have revised already our cost guidance. How it remains to be seen how quickly and proactively various operators and industry bodies around the world would resolve this at local and global level. In turn, how this dedicated trilogy of coal, natural gas and oil balance itself out of work in the short to medium term because if this is left unattended, it has the potential to snowball into something big, which may even lead to overall economic growth. So I would leave at this interest from the overall cost guidance and this point of view. Okay. Yes, that is all my questions. Thank you. Thank you. The next question is from the line of Vikash Singh from Philip Capital. Please go ahead. Good afternoon, sir. Good afternoon. Sir, previously couple of quarters back, we were guiding that concurrently apart from 1,200,000 tonnes, we would be concurrently doing CapEx of 1,350,000 tonnes as well, at least the mine development thing solved. So looking at our current project CapEx of just RMB100 1,000,000, just wanted to understand what happens to that project. Have we kept it on a back burner for the time being? Or is this still going on and initial CapEx is very low? No. If you look at our exploration, we have actually been adding we are focusing first on converting resource to reserve and adding more resource because if you want to do 1,350,000 tonnes, so the mining volume that will go up, you need to file for revision of mining plan. And for every mining plan, revision, they require 5 years of reserve to be proven first. So first priority for 1,350,000 when we back calculate, we have focused on R and R increase across the mines. Part of the increase of Jawar mine from 4000000 to 8000000 tonne and the Hratchparadariva expansion, SK mine from 6000000 to 7000000 tonne, starting off some old blocks after due clearance, Mamiya Callan like that or getting hold of prospecting license and mining license from SK North, SK South. So those are the actions that have to be frozen first before we can start declaring about 1,350,000 tonnes. So that was it's not on the back burner. As I said clearly, if Hindustan Zinc has to become a 2,000,000 player in India, it has to be 1,500,000, 500,000 has to be inorganically elsewhere in the world. And for 1,500,000, currently at 1,200,000, the growth has to come in 2 stages, 1.2 to 1.35 and then 1.35 to 1.5. I am hoping in between there will be additional leases, which will give me more resource and reserve to support this theory of or my ambition of higher production to 1,500,000 tonnes. Understood, sir. And sir, my second question pertain to recently we had some shutdowns in Europe in terms of wind capacity because of soybean energy crisis. So any expectation from our side in terms of some more supply cuts, which could still benefit us or with recent some correction in the power prices, there is a risk of the supply coming back? Any thoughts on that? So we are working over the situation very, very closely whether that expected cut down in production, finally, 45 materializes, how much would be the exact drop? That's number 1. Number 2 is world sitting logistics as well as container availability, work conditions are a matter of concern. As the world has coming out of COVID, suddenly we find direction of material movement all across the globe has completely changed from what it used to be earlier, primarily because, 1, sudden realization or withdrawal of many American companies out of China and shifting of production basis. 2nd, we find that the delay in the port, which is holding gas containers, releasing of ships from ports are not allowing free flow of material across the globe. So even if we want to serve at this moment in European market, perhaps the high logistics cost or delivery time line commitment would be key challenge for us to serve that market. However, we're saying that we look at the upward cushion prices for us would be one way to counter the upward cushion commodity prices, which is on the input side. But the situation what you said is yes, something we are looking at very slowly. But using that market for our supply may not be as remunerated as it would be if we are only supplying to domestic. Understood. Sir, any idea to hedge any of your I'll request to come back in the question queue for a follow-up question. Sure, sure. Thank you. Thank you for answering, Ofer. A request to all the participants. Please proceed to 2 questions per participant. The next question is from the line of Amit Dixit from EDWYSE Financial Service. Please go ahead. Hi, thanks for taking my question again. I had a couple of questions. One is, what tell us about the Capital Mine development in the quarter? Capital? Mine development. So capital mine development in the quarter was about 12 kilometers. Yes, it was about 12 kilometers this quarter, almost same as that of the quarter 1 of this year at about 2 kilometers more than quarter 1 of quarter 2 of last year. Okay. And the second question is just wanted to pick up from the card's question actually. So there as you mentioned in your opening remarks also that there is like Magistar has temporarily guided some of its refining capability. So do we since we are also dependent on imported coal, so do we see any threat on the imported or domestic coal availability that might impede our smelting operations? Do we see a threat as of now? As of now, on the supply side, we have tied up with supply and fully protected till about February or early March of next year. So this business plan here, we don't see much break. And the way the dynamics are playing, we will see some interventions, some big coal producing vessels going forward, and I am hopeful that the situation will come back to control. Availability is not a concern just as of now. We'll have to make 2 weeks savings on other fronts as Sandeep had narrated. Although there will be a price from the coal side, we will try to make gains by working with better grade of ore, better recovery as well as cost of water. We have prepared the shutdowns of H2 to H1. The cost has already got absorbed, so the planned cost of H2 will be avoided. At the same time, we would aim at more recovery from the other income that sources that we have, which is asset sales or other residues that we sell, we'll make more recovery from that front. So those are the levers that we have in our hand to counter in case the coal cost becomes too high. Sir, just a follow-up on this, have you seen coal availability from Coal India improving in October so far? I think more than the availability, the current issue is the domestic power plants or energy sector plants have a priority and rate allotment of transportation would be in a bottleneck because every power plants are in different locations where logistics time, turnaround times are different. Government has a clear focus on energy priority first on the energy sector. We come in the metal producing sector, so that priority does impact the amount of domestic coal available to us. Okay, fair enough. Understood, sir. Thanks and all the data. Thank you. Thank you. The next question is from the line of Ashish Kejriwal from Centrum Broking Limited. Please go ahead. Hi, good evening everyone. Sir, this question is on coal cost only. When you are talking about $50 increase in wind production cost on account of coal, so this is you are talking you are taking into account both international coal supply which we have since February as well as disruption in the domestic coal market because now Colinda is not giving it in October. So incorporating these two events, we are saying that $50 increase will be in Q3 as well as in Q4? So I'm saying that compared to the overall H1, whatever my cost of 196, I'm assuming that approximately $50 cost increase from them. And we've captured both the import coal prices increase and some pressure on the lesser metallization of the coal from the domestic, which is obviously the situation as Mr. Anya said with everyone who is in the non power sector. This $50 will be fixed in Q3, you said? So I am putting the it will be in the sequential manner, but I am putting the overall from the S2 point of view when I give revised my guidance for the overall $10.75 which will build up into that. Sure. Sure. And secondly, sir, in terms of volume guidance, though you are maintaining the volume guidance, but in any of the earlier quarters historically, we have not seen that kind of volume in a quarter. So is it possible to share that in a quarter how much maximum you can produce? So I would say that in the March of last year, we exited at 1,200,000 capacity because of high mining volume as well as smelting. So our aim is to recreate that in quarter 3. The enablers that we look for that is all the equipment that we placed order each year's business plan was supposed to be delivered in quarter 2 have got postponed. So quarter 3 would have more equipment new equipment in place. 2nd, ambient temperatures are less. Typically mine operates at the highest productivity when the weathers are good and comfortable. We have also finished all our infrastructure work related to ventilation in mines. We have commissioned new chilling, air chilling plants in S. A. Mine. Those investments that we have planned have already in place. All that gives us confidence that both quarter 3 and quarter 4 will be exceptional years and we would have better volumes to turn so that, that gives us confidence of maintaining the guidance. Yes, so volume wise, definitely it's going to be there, but do you think that we can do 300 rupees in the quarter, especially in Q3? Because we already have some data on October. So that confidence still you are seeing that 300 rupees can be done in the quarter. At the end, the effort will always be there for that. In case of 1,200,000, ultimately boils down to 3rd net, 30,000,000 per quarter has to be delivered, right? So the attempt is there, and we'll see how it stands out. Sure. And then lastly, because now ZYN prices are already on a higher side, so we see by looking at I'll request you to come back in the question queue. Ladies and gentlemen, we'll take the last question from the line of Pallav Agarwal, Formantik Stock Booking. Please go ahead. Yes, good evening. So you had mentioned that this quarter we sold more on the domestic market rather than the export market because our volumes are low. So is that reflecting in the premiums that we realized? Because sequentially, I think there has been an increase of both zinc and lead premium. So is that something that has happened, played out in the 2Q? Yes, it is a reflection in my premium because in the domestic whatever the I feel, I get a duty factor and including also we have the excess ex works premium. So I can't disclose the number, but it's a reflection in my overall revenue increase. Sure, sir. So just on that, look, with auto volumes coming down, so are we seeing any impact of that on our lead demand because lead primarily goes into batteries? So is that impacting our demand or not really? So if you look at sorry, Arun Musa here. If you look at my change in operating strategy in H2 is operate the pyro in zinc and lead mode, whereas in H1, we were operating the pyro in all lead mode. So comparatively, my zinc production will be up. And from my late delivery will remain at the current level, somewhere around 17 kT, 18 kT per month. And so that absorption is not a very difficult target to achieve. We have not seen yet any impact on the auto battery side, but also you would appreciate more and more EV vehicles are being launched, which also run on a combination of lithium battery as well as lead acid battery, primarily lithium battery being used for the motor drive, whereas the lead acid battery is being used for the window drives and auxiliary power consumption. So we would see a shift towards EV would also result in more lead acid batteries, so that demand will be intact. As of now, I can assure you there is no indication for us to see that there will be a drop in demand as far as auto customers are concerned. Sure, sir. So, basically, sir, if we produce less of lead, will that impact our silver volumes because most of our silver production is linked to the lead production? Will the silver guidance be lower because of that? It's a balanced operation. So, the guidance that has been given, we'll stick to that and we'll ensure that the grades are such that we produce that. Sure, sir. Thank you so much. Thank you. Thank you. I'll now hand the conference over to Ms. Sheeta Dora for closing comments. Thank you, Idav. With this, I close today's call. On behalf of Hindustan Inc, I wish you and your family a very happy and safe festive season ahead. For any follow-up questions on results, please feel free to reach out to the Investor Relations team. Thank you. Thank you very much. On behalf of Hindustan Inc. Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.