‘Hindustan Zinc is back at 90% capacity utilisation’

Global zinc capacity has come down by about 7 per cent which helped Hindustan Zinc (HZL) produce the metal at a viable price. The company’s net revenue saw a decline of 20 per cent in Q1 at ~3,989 crore due to a 29 per cent fall in zinc prices and 11 per cent slide in lead prices as Covid-19 led to lower volumes. Its silver division, however, outshined with 80 per cent margin. In an interview with Jyoti Mukul & Aditi Divekar, chief executive officer (Ceo)-designate ARUN MISRA says the company is on road to increase silver production. Edited excerpts:

How much of your business was impacted by the lockdown? And, what are the expectations in the current quarter?

The effect of Covid (coronavirus) started from end of March as abruptly everything came to a standstill and then we started working under the guidelines from the central and Rajasthan governments. We slowly started operations in our mines and smelters. By April-end, we had about 50 per cent of our capacities working in mines and about 70-80 per cent in smelters. May and June have been very good months compared to last year. We are now at about 90 per cent capacity utilisation. The only issue is London Metal exchange (LME) prices, which had softened badly since February, and due to Covid, were down to $1,900 levels. It has now started to pick up to $2,000. Prices of silver are also up.

Do you see an uptick in zinc prices?

There is an overall 7 per cent cut in mine capacity. There are some US mines which are putting their capacity down by about 500,000 tonne, so we are expecting a 5 per cent contraction in mining capacity to happen. But some of the countries, which went through Covid early, have started opening their economy. China has started consuming more zinc. The mines have cut production to that extent that it would help prices.

Did you have to curtail operations due to weak prices?

We are at an advantage in starting the mines quickly because we are on the right side of the cost curve. Even at lower LME rates, we are in a position to start the mines.

How far has silver helped in overall profitability in the last quarter and will it continue to give good margins?

Silver price rallies are a recent phenomenon. Over the quarter, our silver production is much less compared to the same quarter last year. It depends on investor confidence in other forms of investment vis-à-vis investment in gold and silver. As long as uncertainty prevails in economies due to Covid prices, it will push gold and silver prices.

Will you increase production volume for silver?

We are not making any new investment in silver. But our first zinc fumer plant is about to be commissioned in Q2 provided international flights are restored and foreign experts can come. Once the fumer plant is commissioned, it will add to the silver capacity. Project-wise, it should add about 30 tonnes of silver.

Are you looking at gold mining?

We are part of the Vedanta group, which is known as a global resource company. So, we are open to any metal where we have experience.

Would you be going for a cut in capital expenditure?

Capex conservation is a natural reaction in any such meltdown but our growth projects were at the ending stage. We are working on a 1.5 million tonne expansion project for which basic engineering work has to happen. HZL has been growing in the last few years and it has been the fastest growing metal company in India. Capex is just a corollary.

Did you resort to any lay-off or change in hiring strategy?

No lay-offs. We have focused on improving productivity. Our way of operations is contracted operations and we buy service from people. These are big companies that provide services in mining activities or operations of smelters.

“THERE WILL BE CONTRACTION (IN DEMAND) COMPARED TO LAST YEAR BUT THE FACT THAT THE MINES HAVE CUT PRODUCTION WOULD HELP PRICES ”