HINDZINC - Hindustan Zinc Ltd. Share Price

Management provided a positive outlook for Hindustan Zinc, emphasizing strong operational and financial performance amid a challenging global economic backdrop. The company achieved its highest-ever mined metal production in the second quarter, leading to a record EBITDA of INR 4,467 crores, and a profit after tax of INR 2,649 crores"”up 19% quarter-on-quarter. The zinc cost of production for the quarter was USD 994 per ton, marking a 7% improvement year-on-year.

Key forward-looking points include:

1. Refined Metal Guidance: Management has revised FY 2026 refined metal guidance to 1,075 ± 10 thousand tons and silver guidance to 680 ± 10 tons, factoring in lower plant availability and silver input in the first half of the year.

2. Growth Projects: Projects are progressing as planned, including the commissioning of a 160,000 tons per annum roaster and the upcoming completion of debottlenecking initiatives that will increase production capacity.

3. Capex Plans: For FY 2026, growth capex is expected to be in the range of USD 350 million to USD 400 million, while maintenance capex is projected to be around USD 400 million. The total investment for forthcoming expansion projects is estimated at INR 16,000 crores over the next few years.

4. Zinc and Lead Price Trends: Zinc prices have shown resilience, crossing USD 3,000 per ton in October, which is critical for profitability, while silver continues to surge, enhancing margins.

5. Sustainability and ESG Commitments: The company's commitment to sustainability is underscored by its recent membership in the International Council on Mining and Metals and ongoing CSR initiatives.

These initiatives position Hindustan Zinc well for continued growth and profitability in a favorable demand environment, particularly in the context of India's resilient economic outlook with expected GDP growth between 6.5% and 6.8% for FY 2026.

Question 1: Are we running the plant on lead mode or zinc-lead mode given pricing economics favor lead mode?

I clarifed that we are currently operating in zinc-lead mode. We are adjusting our strategy to maximize silver production by utilizing concentrates from the SK Mine, which is rich in silver. Given the silver grade from the mine is around 90 ppm, a lead-only approach wouldn't yield enough benefits. Hence, running on a zinc-lead mode optimizes our silver output under present conditions.

Question 2: Based on our 680 tons of guidance for silver, how are we expecting to achieve this in the second half? Can we see 800 tons in FY '27?

We redirected resources to SK Mine and incentivized our contractors to prioritize high-silver stopes. This strategy aims to boost H2 production to meet our guidance confidently. As for 800 tons in FY '27, we believe this is achievable. Stability from the fumer and acid leaching, coupled with the new 250 KTPA plant, should support increased output.

Question 3: Can you elaborate on the capital expenditure projections for FY '27 and FY '28?

The 250 KTPA smelter and tailings project combined will total about INR 12,000 crores and INR 3,800 crores, respectively. Expect around 20% of this capex in FY '26, with 50% in FY '27 and the remainder in FY '28. This structure helps manage cash flow and resource allocation during project execution.

Question 4: For FY '26, what will be the total capex including maintenance?

For FY '26, we estimate growth capex between USD 350 million and USD 400 million, while maintenance capex will be around USD 400 million. Together, this gives us a comprehensive view of our capital investments for this year.

Question 5: What refined metal output do we expect from the tailings project?

The 10 million tons tailings project is expected to produce around 100 KTPA of zinc. There might also be a small fraction of lead and approximately 25 tons of silver in the concentrate as part of this initiative.

Question 6: How much was the average mining rate for this quarter?

The average mining rate for this quarter was 7.4%. While we aimed for around 7%, the achieved rate reflects a slight improvement from 7.3% in the same period last year, showcasing our operational efficiency.

Question 7: What proportion of renewable energy was utilized this quarter and the expected proportion at FY '26's end?

In this quarter, renewable energy constituted 19% of our energy mix. We are targeting an increase to around 25% by the end of FY '26, which will further help in managing our cost of production.

Question 8: What is our current hedging position for zinc and silver?

We currently have zinc hedged at 87 KT at an average price of $2,872 per ton and silver hedged at 131 tons at $37 per troy ounce. Our strategy remains flexible, allowing for adjustments as market prices fluctuate, ensuring a balanced margin.

Question 9: Can you share the outlook for refined metal production in FY '27 and FY '28?

At this moment, we cannot provide specific guidance for FY '27 and FY '28. However, with improved operations from the newly commissioned roaster and ongoing expansions, we are targeting increased production above 1.1 million tons for FY '27.

Question 10: What is the expected increase in refined metal capacity from the debottlenecking process?

The debottlenecking process is projected to increase our refined metal capacity by about 25,000 tons annually, focused primarily on zinc production. This enhancement will help optimize our output and better meet market demands.