Hindustan Zinc Ltd to foray into copper, lesser known metals

KOLKATA: Hindustan Zinc Ltd is diversifying into extraction of copper, gold and lesser known metals like cadmium, antimony and bismuth to insulate its earnings from the volatility of global metal prices.
The move could add up to Rs 1,000 crore per annum to the company’s profitability, Sunil Duggal, chief executive officer of Hindustan Zinc, told ET, adding that the company is in the process of shortlisting a global consultant to advise and walk it through to the next phase of growth.

Vedanta group flagship HZL, whose traditional business is extraction of zinc, lead and silver, also plans to expand mined metal capacity to 1.35 million tonne per annum (mtpa) as it nears conclusion of expansion to 1.2 mtpa. “For this, we have ramped up our exploration to leverage the potential of existing deposits and new ore bodies to secure our future,” Duggal said.

While HZL’s ore to metal ratio is currently at 80%, the company is targeting a level of 90-95%. On a volume of 1.2 mt, this could translate to addition of nearly 0.12 mt. “We would like to look at what we can extract from our ore. We are looking to appoint a consultant for end-toend delivery. This kind of engagement is almost unheard of in the industry,” Duggal said. HZL is in talks with a clutch of advisers, including the likes of WorleyParsons, he added.

The consultant will look at HZL’s entire portfolio and its resources to grow volumes, advise it on newer ore bodies in its leases, and suggest the best technology for tailing and treatment of waste and slag, he said.

According to Duggal, some top global names in consultancy are doing a due diligence and conducting dip-stick survey to prepare a pre-feasibility report. Based on this, HZL will shortly appoint an advisor.

Duggal’s remarks came after HZL reported an 8% decline in first-quarter net profit from a year ago to Rs 1,765 crore, pulled down by lower price of zinc. Revenue dropped by 6% to Rs 4,987 crore.

The company took a hit on profitability mainly due to a 13% decline in average zinc prices on the benchmark London Metal Exchange. While the slide in profitability was offset partly by the rupee’s depreciation and higher volumes of silver and lead, net profit also benefitted from higher investment income from a year ago on account of a mark to market gain on investment portfolio. EBITDA for the quarter dipped by 11% year-on-year to Rs 2,480 crore, primarily due to lower metal prices as higher volumes and lower manpower costs offset the impact of higher power costs.

On Friday, HZL’s share hit a new 52-week low of Rs 217.95 on the BSE before closing at Rs 219.75, down 2.33%.

Regarding the coming quarters, Duggal said that with an uptrend in production, costs are likely to come down. HZL’s product portfolio is already changing as the share of lead --which has firmed up by $250/ tonne in last 30 days—has gone up from 10% to 20-25%.