Hindustan Zinc plans to increase earnings through diversification

The company will have its cadmium metal unit up and running by the first quarter of FY22

With marketing plan for every new minor metal being chalked out, Hindustan Zinc, the country’s only integrated zinc producer, will have its cadmium metal unit up and running by the first quarter of FY22.

“We have strong plans in the minor metal space, which will not just help the company in diversification, but also yield incremental earnings amid converting the waste into wealth,” Arun Misra, chief executive officer at Hindustan Zinc, told Business Standard. The company is seeing ample scope for backward integration and, hence, is planning to utilise byproducts such as slugs or residues that the smelters produce into ancillary products.

“There are teams dedicated to creating technologies, which can help bring into the portfolio products such as cobalt, nickel, copper, and also sulphuric acid needed for fertilisers. There is an in-house R&D that continuously looks into this aspect,” said Misra.

Currently, Hindustan Zinc produces refined silver, recovered as a by-product of its zinc-lead facility.

“The cost of setting up the planned cadmium unit will pay back in five months. Similarly, other minor metals that are being planned to get added to the portfolio will have different payback timelines. Eventually, the minor metal vertical alone is expected to create $200-$250 million (Rs 1,462-1,827 crore) incremental value to the company’s existing Ebitda (earnings before, interest, taxes, depreciation, and ammortisation),” Misra said.

In the December quarter, the company’s Ebitda stood at Rs 3,314 crore, up 45 per cent on year-on-year (YoY) basis and up 12 per cent sequentially on account of higher revenue and well managed operating costs. While the company remains engaged in chalking out marketing plans for its minor metals, it is open to both domestic as well as export markets to sell its ancillary products. 

Meanwhile, the company will also continue to lay thrust on reducing its cost of production further, in a bid to enhance its overall Ebitda.

In the quarter gone by, Hindustan Zinc saw its cost of production come to $946 per tonne, well below the $1,000 per tonne mark.  

“There is potential for another 3-4 percent reduction in cost of production and to that extent we are expecting the southward movement in this space to continue in coming quarters,” explained Misra.

In the December quarter, the company’s total mined metal (MIC) production was up 4 per cent YoY to 244,000 tonne on account of higher ore production partially offset by slightly lower overall metal grades. Sequentially, the MIC production grew by 2 per cent driven by higher ore production.