Ladies and gentlemen, good day and welcome to the First Quarter FY2026 Earnings Conference Call of Hindustan Zinc. 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. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Miss Raksha Jain, Director of Investor Relations of Hindustan Zinc. Thank you, and over to you, Miss Jain.
Thank you, Sagar. Good evening, ladies and gentlemen. Thank you for joining us today to discuss the First Quarter Results of FY2026. In this call, we will refer to our investor presentation available on our company's website. Please note that today's entire discussion will be covered by the safe harbor clause mentioned on slide two of the presentation. Today, we have our CEO, Mr. Arun Misra, and CFO, Mr. Sandeep Modi. The management will be discussing the operational and financial updates for the quarter, followed by a Q&A session. Now, I would like to invite Mr. Arun Misra to present the results. Over to you, sir.
Thank you, Raksha. A very good evening to all of you. Thank you for joining us today for the First Quarter FY2026 Results briefing. The current financial year has commenced on a steady note, with the company achieving its highest-ever first quarter mined metal production, with the lowest-ever first quarter cost of production since underground transition. This reinforces our position as the world's largest integrated zinc producer and one of the lowest cost producers globally. The quarter was also marked by zero fatalities, underscoring a positive beginning on the safety front. We have established globally practiced critical fatality risk management-based safety management system, CRM, and have ensured tracking and reviewing at senior-most levels of management. Continuing our efforts in water conservation as a part of our ESG initiatives, we have become 3.32 times water positive.
On the sustainability front, we have launched our ambitious sustainability goals 2030, spanning across various thematic areas such as climate action, water stewardship, biodiversity conservation, safety and well-being at workplace, responsible sourcing, circular economy, workforce diversity, and social performance. These targets reflect our determination to set new sustainability benchmarks for the metal and mining industry. The zinc mark certification process for Chanderiya and Rampura Agucha is currently underway. Once obtained, this certification will affirm our commitment to responsible production. During the first quarter, we also completed the ICMM assessment, which will help in strengthening our present position as a sustainable global leader among metal and mining companies through the adoption of globally benchmarked practices across the organization. Currently, Hindustan Zinc is engaged with more than 40 technology startups on over 60 different projects and is further engaging with nearly 50 startups through Vedanta Spark program to explore potential use cases.
Vedanta Spark is Vedanta's unique global corporate accelerator where Hindustan Zinc participates and innovation-led transformation projects that address critical business challenges. Under Vedanta Spark program, Hindustan Zinc has unlocked high-potential opportunities by leveraging technologies such as artificial intelligence, machine learning, computer vision, drone technology, the Internet of Things, and augmented reality and virtual reality issues. These projects cover diverse areas, including process optimization, enhanced metal recovery, asset reliability, productivity, and sustainability. Turning to the market update, global economies face multiple uncertainties during the quarter, including rising U.S. tariffs, the Iran-Israel conflict, and other macroeconomic challenges. While major economies like China and Japan continue to experience subdued production demand, India stood as a bright spot. The country's manufacturing PMI climbed to a 14-month high of 58.4 in June 2025, reflecting strong domestic momentum.
Positioned as an attractive alternative investment destination and supported by strong government focus on infrastructure development, India is poised to be a significant driver of global economic growth. During the quarter, zinc and lead prices softened amid prevailing global headwinds. However, both metals saw a swift recovery, closing the quarter at $2,764 and $2,025 per ton, respectively. Silver, on the other hand, recorded a strong performance, with prices surging 17% year-on-year, even currently running over $37 per troy ounce, creating new all-time high levels. This rally was driven by heightened industrial demand and silver's appeal as a safe haven asset. Looking ahead, zinc and lead prices are expected to remain resilient near current levels, while silver prices are likely to stay bound in the coming quarter.
Moving to quarter performance, as I have already mentioned, the quarter witnessed highest-ever first quarter mined metal production of 265,000 tons, with the lowest-ever first quarter cost of production since underground transition. This drives our profit after tax for the quarter to INR 2,234 crore, despite the softened output commodity prices. Our zinc alloy plant also clocked a record quarterly production of 5,000 tons, taking the overall value-added product portfolio to around 24%. During the quarter, our refined metal production stood at 250,000 tons, in line with the plant availability and impacted by ongoing maintenance activity. We recorded $1,010 per ton of zinc cost of production during the quarter, lowest quarter-one figure since underground transition. The reduced cost of production is driven by better mine grade, high renewable energy usage, increased domestic coal consumption, better byproduct realization, and softened input commodity prices.
Our sellable silver production during the quarter stood at 149 metric tons, and our precious metal portfolio continues to contribute significantly to the overall profitability of roughly around 41% during the quarter. As the company progresses with multiple growth projects, commissioning activities for the new 150,000 tons per annum roaster at Debari have commenced and are expected to be commissioned by mid of quarter two, and we will complete all our debottlenecking activities in smelter well before the scheduled timeline in quarter two, starting from August at Dariba, followed by Chanderiya. As you already know, in June, our board approved the initial phase of growth plan to double the expenditure of around INR 12,000 crore. The expansion will increase our refined metal capacity to 1.38 million tons per annum and our mining capability to 1.5 million tons per annum.
We remain committed to meeting India's rising zinc demand and may announce additional projects over the course of the year. Advancing our vision to become a multi-metal enterprise and becoming a leader in India's strategic mineral ecosystem, I'm happy to share that we have secured LOIs for all the three new critical mineral blocks: potash in Rajasthan with 1,841 hectare block size, rare earth element in Uttar Pradesh with 201 hectare block size, and tungsten in Andhra Pradesh with 308 hectare block size. This is India's time to drive resource nationalism, and we are proud to play a part in it in alignment with our country's goals and critical mineral security. Looking ahead, we remain steadfast in our commitment to expedite expanding our capacity to meet rising domestic and global demand while upholding the highest standards of ESG excellence.
Our strategic focus on portfolio diversification, including our strategic entry into critical minerals, continued exploration to sustain long mine lives, and investment in innovative technologies will further reinforce our position as a cost leader in the industry. With these priorities at the forefront, we are confident of delivering sustainable growth and creating long-term value for all our stakeholders. With this, I now hand over to Sandeep for an update on the financial performance.
Thank you, Mr. Misra, and very good evening, everyone. Amid the evolving global economic landscape, we have seen a notable decline in LME prices, with zinc down by 7% and lead by 10% year-over-year. On the positive side, silver prices maintain their upward momentum, registering a 17% increase over last year. Despite this challenging price environment, our steadfast focus on the operational efficiencies and cost discipline has helped us to deliver resilient and sustainable financial performance and consistent EBITDA margin of around 50%. Before we dive into details, I am pleased to share that we have recently published our tax transparency report of eight editions, reinforcing our commitment towards voluntary disclosure for transparency. The company has contributed around INR 19,000 crores to the exchequer in financial year 25, taking the cumulative contribution over the last five years to INR 87,000 crores.
Adding another feather to our strong governance framework, our ESG risk management practices were recognized at the India Risk Management Awards, organized by CNBC TV18 in the large-cap category. Coming to the numbers, in the first quarter, we delivered revenue from operations at INR 7,771 crores. It was down 4% year-over-year on account of the lower production volume, lower zinc, and lead prices, which was partly offset by higher silver prices, stronger dollar, and better byproduct realization. During the quarter, we recorded zinc cost of production of $1,010 per ton. It is the lowest-ever first-quarter cost performance since underground transitioning. It is pertinent to note that Q1 average costs normally remain around 4% higher than the full-year average. With the present cost performance, we are highly confident to achieve the lower end of the guidance for the full year.
It was better 9% year-over-year, driven by improved metal grades, higher domestic coal utilization, renewable energy increase, and softened commodity prices, especially the imported coal. This was also supported by the increased share of renewable energy, as I mentioned, which currently stands at around 19% of the overall power requirement as compared to 13% during the last fiscal year. It has increased on account of largely with the Serentica capacities getting commissioned and supplying the power and benefiting to the cost. Resultantly, the EBITDA for the quarter stood at INR 3,860 crores. It was marginally down by 2% year-over-year, despite zinc and lead commodity prices lower and volume. This was partly offset by higher silver prices, lower COP, and stronger dollar. We continue to maintain industry-leading margin of around 50%. Our PAT for the quarter stood at INR 2,234 crores, bit down 5% year-over-year.
During the quarter, we also hedged forward 119.5 metric tons of silver, which is around 17% of our expected production for the year, in line with our commitment to sustain and deliver lucrative shareholder value. Further, the company also paid INR 10 per share as the interim dividend, totaling the overall dividend payout during the quarter to INR 4,225 crores. Looking into the future, the zinc COP is consistently advancing towards our desired target of $1,000 per ton, which we have set for our debts. With the newly announced 250 KTPA integrated metal capacity expansion, revenue and EBITDA are projected to increase approximately INR 40,000 crores and INR 21,000 crores in the next three to four years, respectively.
Reiterating from our last investor call, with a pre-growth capex free cash flow generation of around INR 45,000-INR 50,000 crores and an estimated capex of around INR 32,000 crore-INR 35,000 crores over the next five years, we are comfortably positioned to create long-term shareholder value. In conclusion, what lies ahead is a new beginning for Hindustan Zinc, built on stronger momentum and transformative vision, aligned with the priorities of a greener world and a stronger nation. We remain deeply invested in the metal of the future, supported by premium assets and our position as one of the lowest-cost producers globally. Our precious metals continue to contribute significantly to our profitability, while our leadership in the domestic zinc market reinforced our competitive strength. With a sharp focus on high IRR projects and disciplined capital allocation, we are committed to delivering sustainable growth and creating long-term value for all our shareholders.
With this, I now hand over to the operator for a Q&A. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star then 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. Our first question comes from the line of Manan Gogia from YES Securities Limited. Please go ahead.
Yes, hi. Good evening, and thank you so much for the opportunity. It was good to see that the zinc COP was on the lower end of the cost guidance, and we have more or less taken the factors behind the same. I just wanted to have one question on what would be the current renewable power mix in the total energy mix, and what would be our coal mix for the same?
Current energy in the overall basket, renewable energy is 19% in our overall total power consumption. Compared to the last year, around 13%. Overall. Remaining 80% is the coal.
Yes, and can you give the breakup of the coal mix as well? Locally sourced and imported one.
Domestic was 55% during the quarter, and 45% was the imported coal.
Okay, got it.
This was a highest-ever domestic coal metalization and utilization.
My second question is on the silver front. Q1 saw lower silver volume, so I just wanted to know what steps would be taken ahead for the company to achieve that 700-710 tons guidance that was given earlier?
If you look at the silver volume, partly a part of it can be attributed to lower metal production by itself. Since we have produced lower metal, so associated silver is also lower. Other part is also in the beginning of the year, the current location in SK Mine, where we are encountering lower grade of silver in the overall grade. I think the overall grade at Hindustan Zinc level is around 88 PPM, which is lower by about five to 10 points compared to what we had same time last year. This is what is the primary reason. Going forward, we are now, as we said, debottling projects will be over, as I have stated in my speech, and also our commissioning of new roasters is expected in the middle of this Q2.
Q3, Q4, we'll see much better numbers of silver and metal, which will compensate for the loss and help us to reach the guidance numbers.
Where are we in terms of the forward ramping up for the silver volumes? Any updates on that?
Fumar is running at 60% of its capacity. As you are aware, we still had issues of Chinese visa did not get. Our team has operating team has done a wonderful job by indigenizing it. And at this point of time, while we have been talking 33 tons equivalent to lead silver cake coming from the fumar route, at this point of time, the run rate is 20 metric tons. Again, if you have lower input itself, your availability of silver in the residues for fumar will also be less, and it is also reflecting that way.
Okay, got it. Basically, we're maintaining the guidance for FY2026 also. We are comfortable on that front, right? Okay, sure. My last question is basically on the Debari roaster and DAP NPK, the fertilizer plant. We are seeing that now these plants are basically delayed by a quarter each. Can you just highlight the factors behind this?
Debari is already almost 99.9% of the construction work is over, and quarter two is the time when we'll see the commissioning. We have started coal trial and all that on the ground. Other side, fertilizer project is on, and we expect in the guided timeline, we will be doing the fertilizer project. We will try to bring in part of the project earlier. Even in that 0.5 million tons project, we will try to get the phosphoric acid plant earlier so that we can start generating some revenue out of it.
Okay, sure. Thank you so much, sir. I'll join back at you for more.
Sure, thanks.
Thank you. A request to all the participants, please limit yourselves to two questions each per participant. If you have any follow-up questions, you can rejoin the queue. Our next question comes from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.
Yeah, good evening, sir. First question was, I think this quarter mined metal production was fairly good, but the refined metal was impacted. So was there any shutdown, and are other plants operating at normal levels now?
No, there were a few shutdowns, and we had to time it because we had expected additional capacity to kick in from the roaster six. But at the same time, we had prepared for some shutdowns because the furnaces would run till quarter two, while in the quarter one itself, we started losing production from them, and hence we had to take the shutdown earlier. That has impacted, but nevertheless, by quarter one and quarter two, all shutdowns we are putting behind us so that we will have a fantastic run from August till about the end of the year.
That should help us meet the production guidance.
Absolutely.
Secondly, I think it's commendable that you've recorded $1,010 of COP. Now with the increasing refined metal production, we should probably see this, I mean, this should go down with the higher benefits of everything that is coming in.
Yeah, all directions are looking like that. We are also equally enthusiastic as you are, and we hope that renewable power mix will go up, volumes will go up, fixed costs will spread. We should be going toward, as Sandeep told in his speech itself, our North Star was $1,000 COP, and it looks like we are headed that way.
Sure, so you don't see any inflation in coal during the monsoon quarter or the auction premiums going up?
That's how we see it. Looking at everything as it is happening currently, we are directed that way. Now, if we see suddenly rise in commodity costs and all that, that may put us back. But looking at current things, the way things stand as of today, we are in that direction.
Right, yeah. Thank you so much.
Thank you. The next question comes from the line of Anirudh Nagpal from JM Financial. Please go ahead.
Hi, good afternoon, sir. Thank you for the opportunity. My question is related to the recent rally in silver prices, which is already at a lifetime high. Given we had lower volumes of silver in Q1, is the company planning to shift to late mode to increase the silver volumes in the coming quarters and to maximize the benefits from this rally? And also.
Very, very.
Yeah.
Very important question what you have asked. The way we have operated is, since we had lesser production of metal, we maximized from the choice of concentrate, the concentrate with best silver, we finished it fast in quarter one so that in the silver numbers, we can get the maximum usage at the current prices. And yes, that direction is always in our mind. Since right now we are flush with concentrate, and we are enough of concentrate with us, so we don't want to increase that stock further. We will surely, because now the Rampura is running well, so we should be able to make up for that by not running late, running in late plus zinc flows, and yet producing good amount of silver. We are working on that. I can assure you that no concentrate is left where there was a good quantity of silver.
Only the concentrate with lower quantity of silver are left with us in the stock.
Got it, sir. Thank you.
Thank you. Our next question comes from the line of Amit Dixit from Goldman Sachs. Please go ahead.
Yeah, hi. Good evening, everyone. Thanks for the opportunity and congratulations for a good performance in a testing company. Two questions. The first one is on if I look at the ESG scorecard. First of all, congrats for putting it up. If I look at the greenhouse gas emissions in first quarter, they seem to have gone up. I mean, just actually highest level since FY2022 maybe, while we have increased the renewable energy power proportion. Just wanting to understand the reason for that, whether it is a typical first quarter phenomenon or it is the higher usage of domestic coal, how is it, and how do we see the trajectory of this emissions going in the near term?
As quarter two, quarter three, quarter four pans out, we will have one increase in percentage of renewable power by September. Almost all of wind power will come into the place. We will have more renewable power in the nighttime than what we are having now. That is number one. Number two, yes, we've had lesser production in quarter one, which is also impacted on the intensity. That will also get corrected if we produce more going forward. Both together, we will come back. We will reduce the overall emission numbers in quarter two, then correspondingly quarter three and quarter four. Absolutely.
This 4.86 number that we have in Q1, I mean, where do we see it going, let us say, by the end of FY2027 also?
We should go down below 4.6, 4.5 level.
Okay, got it. The second question is on the recent LOIs that we have obtained. So for mines, actually, the potash one. Are we planning to integrate it with the fertilizer plant that is slated for commissioning?
Yeah, yeah. The whole basket of diversification from lead zinc silver idea is, of course, to add more value to the fertilizer business. So if we add that for potash block and make it diversify into fertilizer, that will help there. Also, we are very upbeat about the block we have got in UP, which will look at rare earth magnet material because it is likely to have monazite, and we should be able to. If exploration proves that we have got enough of reserve and we can crack the technology problem of extracting neodymium from monazite, then yes, we have a Hindustan Zinc as again a huge bright spot in the future.
Sir, coming to the two blocks, tungsten and rare earth, have we done any preliminary study over there? I mean, are there any timelines that you would like to give? And what kind of ROI you can mention we will be looking from these blocks?
Look, first we have to do the exploration itself. There is not much of a data of a proven reserve there. Because it's a very preliminary exploration data that was there during the auction. We will have to do full exploration, establish the reserve, then look at the business case and all that. We are not yet ready with the business case. We will have to first place order for exploration that we are currently going through.
Okay, all right. Got it. Thank you so much and all the best.
Thank you. Our next question comes from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Thank you.
Yeah, thank you, sir, for the chance. So first question is on the capital structure and balance sheet. Sir, net debt is now almost INR 4,000 crores. So what sort of debt or leverage level should we look at as we start spending more CapEx and also maybe looking for maintaining dividends?
So Sandeep, yeah, thanks. I think as I said in my opening statement, the free cash flow generation at the current level of the LME and the volume pre-CapEx is almost INR 10,000 crores overall. So even if you factor and overall, if you see the horizontal three to four years, INR 45,000 crore-INR 50,000 crores, you take it up and around INR 30,000-INR 32,000 crores, the overall CapEx. Still, you have availability of INR 18,000 crores, which can be distributed subject to the board approval from the shareholders' reward point of view.
Okay, understood. Should we expect the surplus after the CapEx is required to be shared with the shareholders, or we are okay with leveraging further and maintaining the payout?
I think from a modeling point of view, you should factor what you said at this point of time.
Okay, only the surplus. Okay, got it. My second question is with respect to our expansion plan for the mining and the smelting capacity. Now, all the mines where we are putting capital and expanding are set to expire in 2030. In a base case, while we were evaluating these projects, what sort of royalty increase have we baked in? Just wanted to know that.
We have seen the worst case and the most positive case. Most positive case remaining that we get a very, very minimal royalty increase. Worst case, we see there is a competition. But looking at our current margins, we are very confident with the worst kind of cases that we have planned in our mind, we will have a good amount of profitability, much better than all other metal businesses in India.
Understood. Can you share what could be the worst case number of royalty increase?
That will give an indication to what price will be there, so I should be.
Okay, okay. Understood. All right. Just one last question on this $500,000 ton fertilizer plant. What would be the, if you can remind, what is the total CapEx that will be spent and what sort of asset turn are we looking at?
Fertilizer total CapEx cost is around INR 1,800 crore. And around INR 1,000 crore has already been spent, and remaining will be spent in the next nine months to get complete 500,000 tpa of the fertilizer.
What sort of revenue or say EBITDA potential on a steady shared basis are we looking at?
As we said earlier, in case of fertilizer, we are expecting around INR 400 crore-INR 450 crores of the EBITDA and around INR 2,000 crore-INR 2,500 crores of the revenue.
Understood. Understood. The ramp-up, so we are looking at Q1 2027. So should we expect the ramp-up over what, two years or something, or?
No, no. The ramp-up once it will be two years. Maximum three months we will have the ramp-up.
Okay, okay. Potentially second half FY2027, we can see this run through.
Correct. At least most of the chemical process, it is not a hot furnace process. So hence it will be easier.
Got it. Got it. All right, sir. Thank you and all the best.
Thank you.
Thank you. Our next question comes from the line of Ashish Kejriwal from Nuvama Wealth Management. Please go ahead.
Yeah, hi. Good evening, everyone. Thanks for the opportunity. Sir, question on our expansion. When will we start ordering our equipment? Because we mentioned earlier that it will take 36 months from the date of ordering. As well as in last call, we said that we will give some indication of our second phase also. That's my question.
The last 250,000 tons per annum smelting complex that we have spoken about, for the smelter portion of that, we have already placed order. For the mining portion of it, we will place order in 10, 15 days' time. And then we will do the concentrator. We should be able to place order by August second week. That is the first phase. Now in the second part, we should be placing all the orders for two million ton expansion should be placed by September 30th.
Okay. We have formed up the plan for second phase also, sir?
Absolutely. Absolutely. Absolutely.
Okay. That's great. Secondly, in terms of this quarter, a couple of data points. One is what's the average grade this quarter versus last quarter? Secondly, power cost, is it possible to share on a per unit basis how it has changed? Because the delta which you are talking about, that 19% renewable versus 13%, it could be maybe because of lower volume. If you think that we can do 19% for the entire year, then please communicate that also. Thirdly, how much grant fee we have paid in this quarter? Because we have increased grant fee to 3% of the revenue versus 2% earlier. We just want to get more comfort also that. Whether it's going to change further or not.
I will give the answer from this grade. The grade was 7.53% this quarter compared to last year quarter one year-over-year around 7.41%. There is an improvement in the grade. That has also helped into the cost. In case of the power cost, I think we don't specifically talk about the power cost, but it's lower. Not on account of the renewable energy, it's 19%. Overall, as I said, the power cost has reduced for about three reasons. One is the Serentica power is coming better compared to the last year year-over-year as they are commissioning the facility. Secondly, the imported coal price is being softened. Third, which I talked about, the highest ever domestic coal utilization of 54%. These are the reasons for you can see the power cost is towards the INR 5 kind of thing.
Something like you can model in your numbers in case you wish to, especially I can. Thirdly, about the numbers of the grant fee payment, the grant fee payment of this quarter at the beginning of the year with government as per the agreement has been around INR 1,060 crores. This is the number which I talked about. There is no change. There is no change in any other things in terms of the terms and conditions.
Because last year grant fee was 2% of revenue and which increased to 3% now. And do we in this task that this can sustain at 3% or it can go up to 5% also because we don't need shareholders' approval?
It will remain at 3% till the end of the contract period.
What is the contract period too?
It's beyond next two fiscal years.
That means at least till FY2028, it will remain at 3%.
If you model up to FY2027, it will remain same.
Okay. And sir, in power cost, actually, I was looking at more of a Q1 to Q1 basis, not year-over-year basis.
Power cost on Q1 basis. Sir, quarter-on-quarter basis also, it has reduced only.
That is mainly because of renewable power?
More domestic coal and more renewable. So I think, again, repeating, more domestic coal has helped us, and the better quality of the coal from the Coal India has helped us. Renewable energy has helped us. So if you talk, over 20% reduction has happened compared to last quarter in the per unit basis.
Sure. Lastly, just to get more comfort, we have already seen some reports going on that we are in sync with the government nominee directors also in all the proposals which we are taking right now. So no issues at all at that front. So that will give a good comfort.
Absolutely. There is only one proposal that the board approved, which is apart from routine business matter, is that expansion program. Everybody is fully supporting expansion of Hindustan Zinc, and the first phase of 250 KTPA has brought in huge enthusiasm. The entire board of directors were happy to see that finally Hindustan Zinc is getting out of comfort zone of 1 million ton plus production every year.
That's cool, sir. Thank you so much. That gives a comfort.
Thanks.
Thank you. We'll take last question from the line of Ritesh Shah from Investec. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity to take a couple of questions. First, if you could detail the status on Bania Kalan mine. If you could put in context, basically, if you look at the grade from Rampura Agucha, SK, RD, it has been deteriorating if you look at the trend line over the last seven to 10 years. So in the last call, we have given a COP number, which is pretty much static. So if you could just marry the two parts to the question and help us understand what is the status and how should one comprehend the COP number.
See, practically speaking, overall grade if you see, as you go down deeper into the mine, there are chances of the grade being worse. But it is a general statement. But then you look at the various patches of the mine, and we have to balance between those patches to ensure that we have a consistent grade, if not better grade overall. That's the strategy call we take, which part to mine when. Depending upon, suppose if I take quarter one, last quarter, if you look at that we had a grade which was worse than the grade that we had in quarter four. Typically, in quarter four, we try to maximize production to get the best at that point of time. So we also pick and choose where to mine, how to mine. Basically, the mine is developed in three, four different levels about some 15, 16 different areas.
So that always we have a choice to make among the grades that we take. So that stage will continue. But seeing that, you will also appreciate Rampura Agucha is the best grade, then followed by SK and RD, and then followed by Jhava, which is the worst grade. Bamnia Kalan, when we develop, my expectation it should be somewhere between RD mine and SK mine, between 5%-6% grade material it will produce. We are currently about 44, 45% work has happened on the development of the mine, and we expect the mine to open somewhere in 2026, end of 2027 early. Only thing that in case you want to model in your numbers, the R&R SRK audited numbers which we publish, that is the final number from the minable grade point of view, which is 7.2%. That you can model in your financial model for the COP purpose.
Sure. That's helpful. Sir, my second question is on roasters. Can you help us refresh what is the current status? Do we have silver contribution production coming out of roasters right now?
Okay. Finish your question.
Yeah, yeah. Once basically it gets operationalized, what is the sort of contribution that we expect from roasters to come through?
Roasters primarily produce calcine, which helps us to produce zinc. They do not produce silver. However, when we from calcine, when we produce zinc by the leaching process, the residue that we have, then that residue, weak acid leaching residue as we call it, we can take it to fumer. And after fuming, from that residue, we can make late silver cake. And that late silver cake, again, sent to furnaces to produce silver. That is the whole circuit. Roaster per se does not produce silver. But as long as if I have more capacity of leaching and purification circuit, then I will have more amount of silver being produced. As of now, we are not adding to leaching and purification circuit, but we have added fumer.
As long as that fumer 33 ton capacity is there, even if I put 20 more roasters, that 33 ton is the only capacity I have. That's why you will see that our expansion plan, new leaching and residue leaching and purification circuits that we'll make, it will all come with new fumer. That from the zinc circuit, we can produce more silver than the way actually we have been hinting.
Sure. This is helpful. Sir, two wider questions. One is, how should one understand the increase in brand fee from, say, 1.7% - 3%? What is the underlying rationale for that?
Look, so the brand fee is a thing that has been widely discussed in the boards. The rationale is a bundled services. There are various strategic services, and you will all appreciate that this company, when it was taken over, it had only five years of remaining life, had only 100,000 tons of production. That complete transformation of this company to a 1 million ton production with about 25, 30 years of life left, huge amount of risk taken in exploration. There was no silver production, making it world's third largest silver producing country, 700 tons of silver, migration from open pit Rampura Agucha mine to complete underground without disruption in production, thousands and thousands of crores of wealth creation for shareholders. Imagine all that cannot be attributed to existing management that was when the Hindustan Zinc was disinvested.
There is something, brand and services which helped that transformation, that due is there. All that justification was discussed in the board, duly vetted by external consultants, benchmarked with similar fee arrangements in all other conglomerates, and then finalized. Just to clarify, it's not 1.7%. It was 2%. It's not 1.7% - 3%. It's 2% - 3%.
Fair. And what should we make of, I think, Vedanta's reducing its stake in Hindustan Zinc during the quarter? So on one side, the parent is reducing the stake, and on the other side, basically, the brand fee is actually increasing. Is there any relation between the two events, and how should one understand the ownership of the promoter into Hindustan Zinc? Will this number continue to reduce? How should one look at it?
No, as Hindustan Zinc management, we cannot comment on any one of the or many of the owners of the company, their strategic moves and what they do. As far as the operations are concerned, we will appreciate that management control remains, even at a much lesser holding of the company. So as long as management control is there, then as long as strategic directions are set. Strategic services are provided, the brand fee also is there.
Sure. Just last one question. Is it possible to convert silver sand to gold? I think this was one of the points in one of the recent reports which popped. Just wanted to understand, has there been any movement of silver sand from Hindustan Zinc to Fujairah Gold? How should one understand the mass balance and the underlying economics and grades?
No, no. We sell silver, and residues of silver also we sell. So we sell many of these smelter residues as it is based on the primary metal existence to people. But if there are trace elements somewhere, and I really that's not the way the metal business is done. Silver sand counts as 93% of the silver. And it goes. So we sell many other less. Suppose the SHG Zinc, we say it might have some traces of something we don't know. So just to give a government of India has also put a lot of IBM and other things to see if there are any critical minerals there out of these 24 strategic minerals in any of the mines. They are also searching. If there may be traces which become commercially viable, it can always be recoverable. At this point, it doesn't become commercially viable to recover.
Right. Sir, my simple question is, basically, do we sell something called silver sand to Fujairah Gold? And is it possible to recover gold out of silver? Because honestly, I haven't heard of anything of this sort.
No. Silver sand is being sold on the basis of the LBMA prices, which contain the 93% silver, which goes to Fujairah Gold as well.
Okay. In the annual report, is it possible to figure this particular line item?
It won't be possible, Ashish, because it is not my finished goods, sir. You will see a lot of other income which will be there. It will be part of the other income. For me, it's a residue. I think you are getting a bias because of somebody putting that it should be a separate segment. It cannot be. It's a byproduct. It's a residue for me.
Yes, sir. Sir, it's perfect. Sir, I honestly wasn't aware of anything of this sort, so just that clarification.
No, no.
Thank you so much for the answer.
Yeah, yeah. Like we sell zinc alloy and all that. Many of the alloys we sell too.
ISM cloth is being sold. Oswald Clay is being sold. It also contains the zinc and lead. That's why, Ashish, just to take the conversation forward, to give you the perspective, that's why how the Runaya facilities were set up. Because there are two options. Either you sell the residues in as it is form, or you recover the zinc lead matter out of it. More and more you recover, it becomes beneficial for us. That's why the ancillary facilities are getting set up.
Sure, sir. Thank you, sir.
Thank you.
Very appreciate it.
Thank you.
Thanks.
Thank you. Ladies and gentlemen, I now hand the conference over to Ms. Jain for closing comments.
Thank you, Operator. Thank you, everyone, for joining us today on this call. If there are any follow-up questions or any clarifications required, you can reach out to the Investor Relations team. Thank you.
Thank you. On behalf of Hindustan Zinc, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.