Vedanta to sell its foreign zinc assets to Hindustan Zinc for $2.98 bn

Hindustan Zinc's Q3 net profit drops 20% on lower output, prices

Metals and mining major Vedanta on Thursday said that its board had approved the sale of its international zinc assets in South Africa and Namibia to subsidiary Hindustan Zinc (HZL) for $2.98 billion.

In a disclosure to the stock exchanges, Vedanta said the transaction would be an all-cash deal, which would be completed in a phased manner over 18 months. The deal is subject to regulatory approvals, including shareholders’ nod, Vedanta said.

Following the transaction, THL Zinc, which is a unit of Vedanta, and holds the international zinc assets, will become a wholly-owned subsidiary of Hindustan Zinc.

HZL Q3 results

HZL, the world’s second-largest zinc producer, reported a 20 per cent year-on-year (YoY) drop in net profit in the December quarter (Q3) of financial year 2022-23 (FY23) on Thursday, hit by lower zinc prices and silver production.

The zinc, silver and lead miner said consolidated Q3 net profit stood at Rs 2,156 crore versus Rs 2,701 crore reported in the corresponding period a year ago. On a sequential basis, the drop in net profit was 19 per cent in Q3, its results showed. It reported a profit of Rs 2,680 crore in Q2.

Revenue from operations, meanwhile, declined 2 per cent to Rs 7,628 crore as against Rs 7,841 crore in the same quarter last year. Sequentially, the fall in revenue was nearly 8.5 per cent in Q3, with revenue in Q2 coming in at Rs 8,336 crore.

The company’s integrated zinc production fell 1.7 per cent YoY to 210 kilotonnes (kt) due to the unavailability of quality ores, while silver production dropped nearly 7 per cent YoY to 161 kt on account of lower feed grade at its SK Mine, the company said.

The demand for zinc has been hit by high inflation, rising interest rates, and the slowdown in China. While zinc prices have recently firmed up on the reopening in China, it remains volatile, weighing on HZL’s revenue, analysts said.

Moreover, zinc’s cost of production, before royalty, jumped 12.7 per cent in the quarter due to higher prices of coal and other input commodities as well as lower domestic coal availability, sector experts said.

The company has a small wind energy business, but more than 99 per cent revenue comes from mining.

HZL’s board has also approved its third interim dividend of Rs 13 per share for FY23, amounting to Rs 5,493 crore, it said.