Hindustan Zinc Ltd (HZL), the leading global integrated producer of zinc, lead, and silver, reported its results for the fourth quarter and full year ended March 31, 2024. Stating that FY 2023-24 has been a year of solid growth for HZL, with mined metal, refined metal, and silver recording its highest historic production levels, supported by a backdrop of fatality-free operations, Arun Misra, CEO, HZL, said, “As part of our strategy, it was driven by our increased focus on silver & metal production and cost optimization. The company withstood the market headwinds during the year, ensuring preservation of margins and shareholder value.”

Fueled by the company’s robust silver maximization strategy, he continued, “I am thrilled to announce that HZL has now become the 3rd largest silver producer globally. Additionally, during the quarter, HZL also incorporated ‘Hindmetal Exploration Services Pvt Ltd’, as a wholly owned subsidiary, with an objective to explore, discover, develop, and tap mineral resources aligning with the national focus and vision.”

“Our commitment to sustainability efforts remains robust. I am happy to share that our renewable energy (RE) power delivery agreement of 450 MW is advancing well, and the first flow of RE power is now preponed and expected to begin on April 24, contributing to our journey towards achieving net zero targets,” Mishra added. “Our company has been awarded the CII National HR Excellence Award, underscoring our exemplary people practices. With the full implementation of commissioned projects, HZL is poised for another exceptional year ahead.”

Despite the plunging metal prices—according to Sandeep Modi, CFO, HZL—HZL has consistently sustained its margin at a steady 47 percent by recording its fifth consecutive quarter of sustained cost reduction, clocking the lowest cost in the last 3 years. “This demonstrates the effectiveness of our agile decision-making strategy, with instances such as maximization of silver production leveraging the soaring silver prices, power plant modifications ensuring better linkage coal consumption, thereby lowering power costs along with operational & commercial efficiencies,” he further stated. “I firmly believe that the challenges encountered throughout the year have strengthened our resilience and fortitude, propelling us to strive for even greater performance in the upcoming year towards our aspired annual targets and strong balance sheet.”

 Operational Performance

Mined metal production for the quarter was 299 kt, up 11 percent sequentially, driven by higher ore production across mines, further supplemented by improved mined metal grades, but marginally down y-o-y. The full year mined metal recorded the best-ever production of 1,079 kt, up 2 percent y-o-y on account of improved mined metal grades.

Refined metal production for the quarter stood at 273 kt, its highest-ever. Production was up 6 percent sequentially on account of better plant availability, and up 1 percent y-o-y.

 Refined metal production for the full year stood at its highest-ever, reaching 1,033 kt, marginally up y-o-y.

Refined zinc production for the quarter was 220 kt, up 9 percent sequentially and 2 percent y-o-y. Refined lead production for the quarter was 53 kt, down 5 percent sequentially and 2 percent y-o-y. For the full year, refined zinc production stood at 817 kt, marginally down y-o-y, and refined lead production was at 216 kt, up 3 percent y-o-y, on account of pyro operations being operated on lead mode for a longer duration during the year to maximize silver production. 

Saleable silver production for the quarter was 189 MT, down 4 percent q-o-q in line with lead metal production, partly offset by WIP depletion, and up 4 percent y-o-y on account of WIP depletion during the quarter. Full year saleable silver production stood at its ever highest of 746 MT, up 5 percent y-o-y in line with lead metal production.

Financial Performance

Revenue from operations during the quarter was INR 7,549 crore, up 3 percent q-o-q on account of better zinc volumes, partly offset by lower lead & silver volumes, and lower metal prices. The revenue plunged by 11 percent y-o-y on account of significantly lower zinc & lead prices and lower lead volume, partly offset by increased zinc & silver volumes, silver prices, and favorable exchange rates.

Revenue from operations for the full year stood at INR 28,932 crore, down 15 percent y-o-y on account of lower zinc prices and volumes, strategic hedging impact in the base period partly offset by better silver & lead volumes and prices, and favorable exchange rates. 

Zinc cost of production before royalty (COP) for the quarter stood at US$ 1,051 (INR 87,284) per MT, lower by 4 percent q-o-q and 13 percent y-o-y in both US$ and INR terms. Zinc COP for the full year was US$ 1,117 (INR 92,470) per MT, down by 11 percent y-o-y (8 percent lower in INR terms). Cost improvement is majorly on account of better grades, softened coal and input commodity prices, and better linkage coal materialization, partly offset by lower acid realization.

EBITDA for the quarter was INR 3,637 crore, up 2 percent q-o-q and down 14 percent y-o-y in line with the revenue from operations and cost, and for FY24, EBITDA was INR 13,677 crore, down 22 percent y-o-y, mainly on account of lower revenue partly offset by cost improvement.

 Net profit for the quarter stood at INR 2,038 crore, marginally up sequentially and down 21 percent y-o-y. FY24 net profit was INR 7,759 crore, down 26 percent y-o-y, primarily on account of lower EBITDA, partly offset by lower tax expense.

Reserves & Resources (R&R)

Total R&R as of March 31, 2024 stood at 456.3 million tonnes containing metal of 30.8 million tonnes (net of production of 1.1 million tonnes in FY24). At current mining rates, R&R underpins metal production for more than 25 years. In the last 5 years, R&R has increased by 35 percent (incremental ore of 118 million tonnes) considering production of 65.1 million tonnes of ore in this period.

Total ore reserves stood at 175.1 million tonnes (net of production of 16.5 million tonnes in FY24) at the end of FY24 (173.5 million tonnes at the end of FY23) led by a continued focus on resource-to-reserve conversion during the year. Exclusive mineral resources totaled 281.2 million tonnes. The contained metal in ore reserves is 9.9 million tonnes of zinc, 2.8 million tonnes of lead, and 312.2 million ounces of silver. The mineral resources contain 12.7 million tonnes of zinc, 5.5 million tonnes of lead, and 542.1 million ounces of silver.

Projects Update

●      Fumer and alloy plant have already commenced their commercial production in Q2 & Q3 FY24 respectively. Full ramp up is currently underway

●      New Roaster at Debari of 160 ktpa and Hindustan Zinc Fertilisers Pvt Ltd (HZFPL) of 510 ktpa: project progress is on track

●      Received requisite regulatory approvals for Bamnia Kalan Mines and company is in process of finalizing the business partner to start the site activities

ESG Update

●      The company’s commitment to prioritizing safety has resulted in six consecutive quarters of fatality free operations

●      It secured 2 Indian patents titled ‘Method for production of lead by performing dross removal procedures’ and ‘Method for production of zinc by utilizing lead plant slag’, ensuring circular economy and resource utilization

●      HZL has been recognized by CDP with the leadership band (A-) in climate change and water security

●      The company is pursuing an optimized strategy for metal recovery from waste streams. This is in line with the company’s philosophy of circular economy and waste reduction. It plans to advance on key projects like fumer plants for silver recovery from jarosite, tailing, and jarofix treatment for metal recovery. Partner locked-in and technical evaluation are ongoing, contributing to the company’s ongoing efforts to develop our recycling business further

●      The company has prioritized payments to its MSME vendors, with an average processing time of 29 days during the quarter (37 percent better than the statutory requirement), strengthening trust in its supply chain partnerships

●      It organized ‘Wednesday for Transition’, a training series for equipping suppliers with critical knowledge on ESG topics, facilitating ESG risk management throughout the value chain

●      HZL shined in the British Safety Council International Safety Awards, with its locations winning seven awards across distinction, merit, and pass categories

●      The company won Mission Energy Foundation Award for efficient management of fly ash - CPP in the northern region

●      It won Apex India Occupational Health and Safety Award 2023 in the platinum category under the metals and mining sector

●      People practices:

○      Received the prize for ‘Leadership in HR Excellence’ from the CII National HR Excellence Award, highlighting our industry-leading people practices

○      Recognized at the prestigious 3rd National Transgender Awards for the company’s commitment to creating a truly inclusive work environment under the umbrella of its flagship initiative, #ZincIusion

Contribution to the Exchequer

During the year, the company contributed INR 13,197 crore to the Government treasury.

Liquidity and Investment

The company generated cash flow of INR 2,099 crore during the quarter. As on March 31, 2024, its gross investments and cash & cash equivalents were INR 10,186 crore as compared to INR 9,743 crore at the end of December 23, which was invested in high quality debt instruments. Total borrowings outstanding as on March 24 were INR 8,455 crore. It has a robust free cash flow from operations post capex of INR 9,004 crore for FY24 (sustenance capex of INR 3,038 crore and growth capex of INR 1,172 crore), contributing to a healthy balance sheet, while maintaining a consistent AAA credit rating.

Outlook for FY25

Both mined metal and refined metal production in FY25 is expected to be higher than last year, given the ramp-up of all major projects commissioned in the last year and better capacity utilization. Mined metal is expected to be between 1,100-1,125 kt and refined metal production in the range of 1,075-1,100 kt. FY25 saleable silver production is projected to be between 750-775 MT. Zinc cost of production in FY25 is expected to be in between US$ 1,050-1,100 per MT. Project capex for the year is expected to be in the range of US$ 270-325 million.

For more information: www.hzlindia.com