Hindustan Zinc — Q1 FY27 earnings call

So the power and fuel cost during the quarter has dincreased majorly due to our materialization of linkage coal, which is slightly lower due to the various reasons, including the mine conditions from where we take coal. On top of it, there is an impact of imported coal, which is slightly at a higher cost as compared to earlier, although we have consumed more RE power. So this quarter is slightly higher on the power and fuel cost.

Analyst questioned the increase in power and fuel costs despite lower production and higher renewable energy use, which management attributed to lower linkage coal and higher imported coal costs.

Asked by Pallav Agarwal

We still don't sell concentrate. We still have the same policy that we don't sell concentrate. However, if you recall, when we commissioned the 1 million ton capacity, new mill in RD mine. So in the initial days, during stabilization of the plant, we have produced lots of lead concentrate which were slightly inferior grade and unusable in our own smelters. ... That's what we sold in the market taking opportunity of the high LME, and we realized almost silver equivalent of 9 tons through the sale and about 6 KT of metal through the sale.

Analyst inquired about the company's policy on selling concentrate, which management clarified was due to disposing of inferior grade old stock to capitalize on high LME prices, not a change in policy.

Asked by Pallav Agarwal

No, no. We have done 260 KT. Even on a straight line method, we are already at 1,040, right, and we have given a guidance of 1.1 million ton only. So it's only little so we are absolutely confident of producing typically quarter 2, quarter 3 as we go forward, the production numbers are the highest and quarter 4, normally, we touch even close to 280, 290 KT. So I don't see any reason why we will have any difficulty in reaching 1.1 million ton.

Analyst questioned the confidence in meeting the 1.1 million ton production guidance given Q1 output, and management expressed high confidence based on typical quarterly production trends.

Asked by Suman Kumar

So it's -- the way it operates is all the related party transactions, we take a omnibus approval and staying with that limit we operate. Suppose an omnibus approval, I had say, INR300 crores per metal quantity of. I'm just giving a number of, say, 100,000 tons, right? So the operating people always focus on the 100,000 tons but now if the LME increases, the value crosses INR300 crores. Then that is what perhaps now -- internally, the SOP, we will do is at the 80% level, alarms will be generated, that we are about to cross 80% of the value approval. So go back to Board and inform the Audit Committee and take that approval. Otherwise, there is no bridge as such.

Analyst sought clarification on SEBI's observations regarding related party transactions, and management explained their internal process for managing approvals when transaction values exceed initial limits due to LME price fluctuations.

Asked by Suman Kumar

So this capex outlay, we just can't -- because we are now going through the tendering process and maybe another 1 months' time, we would know exactly. But if I do a straight line method, for a 250 capacity, we see around INR12,000 crores. So we can see, including mines, somewhere around 650 KT will be about 2.5x of that, so roughly about INR24,000-25,000 crores. But yet, I will wait for that tendering to be done. And second, we are estimating a time line of 36 months of construction period post approval by the board, which we expect by quarter 3 of this year, we will move for board approval.

Analyst asked for details on the conceptualized 600 KT smelter, and management provided estimated capex (INR24,000-25,000 crores) and a 36-month construction timeline post board approval (expected Q3 FY27).

Asked by Suman Kumar

So at this point of time, we have a 48 KT of zinc, which are open at the rate of USD3,162 per ton, and silver, 34 tons at the rate of 63 per ounce. As of now, we are not doing any hedging considering the volatility in the market and at the appropriate time, whenever we do, we will update.

Analyst inquired about current hedges, and management disclosed open positions for 48 KT of zinc and 34 tons of silver, stating they are not actively hedging due to market volatility.

Asked by Manav Gogia

Yes, it is for the government to give the update. We really can't get any update on what government will do.

Analyst asked for an update on the government's stake sale, but management stated they could not provide information as it is a government matter.

Asked by Pratim Roy

I guess in the second quarter, we have just done 260 KT of metal. In second quarter, if I had to meet 1.1 million ton guidance should cross around 280 KT, right? So that means more mining has to happen. And in that case, automatically on the input side, the cost will go down. And if you produce more metal and more acid will be produced. And if the prices remain at current level, the cost is supposed to be better unless we are struck by higher input commodity prices, which is also a likelihood.

Analyst asked if strong sulfuric acid prices would further reduce cost of production, and management confirmed that higher metal and acid production, assuming stable prices, would lead to better costs.

Asked by Pinakin