For the potash critical mineral block, are you planning to integrate it with the fertilizer plant in FY27? And are there timelines and ROI numbers for tungsten and rare earth blocks?
Yes, the whole basket of diversification from lead, zinc, silver idea is, of course, to add more value to the fertilizer business. So, if we add that for potash block and make it diversify into fertilizer, that will help there. Also, we are very upbeat about the block we have got in UP, which will look at rare earth magnet material because it is likely to have monazite and we should be able to, you know, if exploration proves that we have got enough of reserve and we can crack the technology problem of extracting neodymium from monazite, then yes, Hindustan Zinc has again a huge, bright spot in the future. First, we have to do the exploration itself. There is not much of a data of a proven reserve there. So, we will have to first place order for exploration that we are currently going through.
Should we expect the surplus after capex to be shared with shareholders, or are you okay with leveraging further while maintaining payouts?
I think from your modeling point of view, you should factor what you said at this point of time.
All mines are expiring in 2030. What royalty increase have you baked in for your expansion business case - what's the worst case?
So, we have seen the worst case and the most positive case. Most positive case, meaning that we get a very, very minimal royalty increase. Worst case, we see there is a competition. But looking at our current margins, we are very confident with the worst kind of cases that we have planned in our mind, we will have a good amount of profitability, much better than all other metal businesses in India. That will give an indication to what price we will bid there, no? So, why should we?
How should one understand the increase in brand fee from 1.7% (actually 2%) to 3%? What is the underlying rationale?
No, so the brand fee is a thing that has been widely discussed in the books and the rationals are known it is a bundled services. There are various strategic services and you will all appreciate that this Company, when it was taken over, it had only 5 years of remaining life, had only 100,000 tons of production. That complete transformation of this Company to a 1 million ton production with about 25-30 years of life left, huge amount of risk taken in exploration, there was no silver production, making it world's third largest silver producing country, 700 tons of silver, the migration from open pit Agucha Mine to complete underground without disruption in production, thousands and thousands of crores of wealth creation for shareholders.
Vedanta is reducing its stake in Hindustan Zinc while brand fee is increasing. What is the rationale, and will the stake continue to reduce?
No, as Hindustan Zinc Management, we cannot comment on any one of the or many of the owners of the Company, their strategic moves and what they do. But as far as the operations are concerned, we will appreciate that management control remains even at a much lesser holding of the Company. So, as long as management control is there, then as long as strategic directions are set, strategic services are provided, the brand fee also is there.
What is the current renewable power mix and the coal mix breakup (domestic vs imported)?
So, current energy in the overall basket, renewable energy is 19% in our overall total power consumption compared to last year around 13%. So, overall, the remaining 80% is the coal. Domestic was 55% during the quarter and 45% was the imported coal. This was the highest level domestic coal materialization and utilization.
Q1 saw lower silver volumes. What steps will be taken to achieve the 700 to 710 ton guidance?
So, you look at the silver volume. Partly a part of it can be attributed to lower metal production by itself. Since you have produced lower metal, so associated silver is also lower. Other part is also in the beginning of the year, the current location in SK Mine where we are encountering lower grade of silver in the overall grade, I think the overall grade at Hindustan Zinc level is around 88 ppm, which is lower by about 5 to 10 points compared to what we had same time last year. So, this is what is the primary reason. Going forward, we are now, as we said, debottlenecking projects will be over, as I have stated in my speech, and also our commissioning of new roaster is expected in the middle of this Q2. So, Q3, Q4 will see much better numbers of silver and metal, which will compensate for the loss and help us to reach the guidance numbers.
Where are we in terms of fumer ramp-up for silver volumes?
So, fumer is running at 60% of its capacity. So, as you are aware, we still had issues of Chinese Visa did not get. So, our operating team has done a wonderful job by Indianizing it. And at this point of time, while we have been talking 33 tons equivalent to lead-silver cake coming from the fumer root, at this point of time, the run rate is 20 metric tons.
The Debari roaster and DAP/NPK fertilizer plant seem delayed by a quarter each. What are the factors behind this?
Debari is already almost 99.9% of the construction work is over and Quarter 2 is the time when we will see the commissioning. We have started coal trial and all that on the ground. On the other side, the fertilizer project is on, and we expect in the guided timeline, we will be doing the fertilizer project. We will try to bring in part of the project earlier. Even in that 0.5-million-ton project, we will try to get the phosphoric acid plant earlier so that we can start generating some revenue out of it.
Mine metal production was good but refined metal was impacted. Was there any shutdown and are plants back to normal?
No, there were few shutdowns, and we had to time it because we had expected additional capacity to kick in from the Roaster 6 but at the same time we had prepared for some shutdowns. We thought the furnaces would run till Quarter 2 while in the Quarter 1 itself we started losing production from them and hence we had to take the shutdown earlier and that has impacted, but nevertheless by Quarter 1 and Quarter 2, all shutdowns we are putting behind us so that we will have a fantastic run from August till about the end of the year.
$1,010 COP is commendable. With higher refined metal production, should COP go down further through operating leverage?
Yes, all directions are looking like that. So, we are also equally enthusiastic as you are. And we hope that renewable power mix will go up, volumes will go up, fixed costs will spread. So, we should be going towards, as Sandeep told in his speech itself, our North Star was $1,000 COP and looks like we are headed that way.
Do you see any coal inflation during the monsoon quarter or re-auction premiums going up?
No, that's how we see it. Looking at everything as it is happening currently, we are directed that way. Now, if we see suddenly rise in commodity costs and all that, that may put us back. But looking at current things, the way things stand as of today, we are in that direction.
Given the silver price rally, is the Company planning to shift to lead mode to increase silver volumes in coming quarters?
Very important question what you have asked, but the way we have operated is since we had lesser production of metal, we maximized from the choice of concentrates, the concentrate with best silver, we finished it first in Quarter 1, so that in the silver numbers we can get the maximum usage at the current prices. And yes, that direction is always in our mind, but since right now we are flushed with concentrate, and we have enough of concentrate with us, so we don't want to increase that stock further. But we will surely, because now the fumer is running well, so we should be able to make up for that by not running in lead, running in lead plus zinc load and yet producing good amount of silver, we are working on that. But I can assure you that no concentrate is left where there was a good quantity of silver. Only the concentrate with lower quantity of silver are left with us in the stock.
GHG emissions in Q1 appear highest since FY22, possibly due to higher domestic coal. What is the emissions trajectory in near term?
So, as the Quarter 2, Quarter 3, Quarter 4 pans out, we will have one increase in percentage of renewable power by September. Almost all of the wind power will come into the place. So, we will have more renewable power in the nighttime than what we are having now. That is number one point. Number two, yes, we have had lesser production in Quarter 1, which is also impacted on the intensity. So, that will also get corrected if we produce more going forward. So, both together, we will come back. We will reduce the overall emission numbers in Quarter 2, then correspondingly Quarter 3 and Quarter 4. Absolutely.
By FY27, where do you see greenhouse gas emissions going given current 4.86 level?
We should go down below 4.6, 4.5 level.
Net debt is now almost Rs. 4,000 crores. What debt or leverage level should we look at as capex ramps up while maintaining dividends?
So, Sandeep here. Thanks. I think as I said in my opening statement, the free cash flow generation at the current level of the LME and the volume pre-CAPEX is almost Rs. 10,000 crores overall. So, even if you factor in the overall, if you see the horizon of 3 to 4 years, Rs. 45,000 crores to Rs. 50,000 crores, you take it up and around Rs. 30 crores to Rs. 32,000 crores, this overall CAPEX. So, still you have availability of Rs. 18,000 crores, which can be distributed subject to the Board approval from the shareholder's reward point of view.
What is the total capex and asset turn for the 0.5 million ton fertilizer plant?
So, fertilizer total CAPEX cost is around Rs. 1,800 crores and around Rs. 1,000 crores has already been spent and the remaining will be spent in the next 9 months to get a complete 5 lakh ton of the fertilizer. As we said in earlier in case of fertilizer, we are expecting around Rs. 400-450 crores of the EBITDA and around Rs. 2,000-2,500 crores of revenue.
Fertilizer plant commissioning is in Q1 FY27 - should the ramp-up take 2 years?
No, no. The ramp up, why should it be 2 years? Maximum 3 months, we will have the ramp up. Yes, correct. It is most of a chemical process. It is not a hot furnace process. So, hence, it will be easier.
When will equipment orders be placed for the expansion (36-month delivery time) and what's the status of phase 2 planning?
So, the last 250,000 tons per annum smelting complex that we have spoken about. For the smelter portion of that we have already placed order. For the mining portion of it, we will place order in 10-15 days' time. And then we will do the concentrator, we should be able to place order by August 2nd week. So, that is the 1st Phase. Now in the second part, we should be placing all the orders for 2-million-ton expansion which should be placed by September 30th.
What was the ore grade this quarter vs last quarter? What's the power cost per unit, and how will 19% renewable vs 13% last year change the cost? Also, what was the brand fee this quarter?
So, I will give the answers on this grade. So, the grade was 7.53% this quarter compared to the last year's Quarter 1 Y-o-Y around 7.41%. So, there is an improvement in the grade that also helped into the cost. And in case of the power cost, I think we don't specifically talk about the power cost, but it's lower. Not on account of the renewable energy, it's 19%. Overall, as I said, the power cost is reduced on about three reasons. One is the Serentica power is coming better compared to last year Y-o-Y as they are commissioning the facility. Secondly, the imported coal price is being softened. And third, which I talked about the highest ever domestic coal utilization of 54%. These are the reasons for, you can see the power cost towards the Rs. 5 kind of thing, something like you can model in your numbers in case you wish to. Thirdly, about the numbers of the brand fee payment, the brand fee payment of this quarter at the beginning of the year which goes as per the agreement has been around Rs. 1,060 crores. And this is the number which I talked about. There is no change in any other things in terms of the terms and conditions.
Brand fee went from 2% to 3% of revenue. Can it go up to 5% later as no shareholder approval is needed again?
Now it will remain at 3% till the end of the contact period. It is beyond next two fiscal years. If you can model up to FY '27, it will remain same.
What is the status of Bamnia Kalan Mine, and can you address the grade deterioration trend at Rampura Agucha and other mines in the context of long-term COP sustainability?
See, practically speaking, overall grade, if you see, as you go down deeper into the mine, there is chances of the grade being worse. But it is a general statement. But then you look at the various patches of the mine, and we have to balance between those patches to ensure that we have a consistent grade, if not better grade overall. And that is a strategy call we take which part to mine when depending upon suppose if I take Quarter 1 last quarter if you look at that we had a grade which was worse than the grade that we had in Quarter 4. Typically, in Quarter 4, we try to maximize production to get the best at that point of time. Basically mine is developed in three, four different levels, about some 15, 16 different areas so that always we have a choice to make among the grades that we take. Agucha is the best grade, then followed by SK and RD, and then followed by Zawar, which is the worst grade. Bamnia Kalan, when we develop, my expectation, it should be somewhere between RD Mine and SK Mine, between 5% to 6% grade material it will produce. And we are currently about 44-45% work has happened on the development of the mine and we expect the mine to open somewhere in 2026, end of 2027 early.
What is the current status of roasters and their contribution to silver production?
So, roasters primarily produce Calcine, which helps us to produce Zinc. They do not produce silver. However, from Calcine, when we produce Zinc by the leaching process, the residue that we have, then that residue, weak acid leaching residue as we call it, we can take it to fumer. And after fuming from that residue, we can make lead silver cake. And that lead silver cake again sent to furnaces to produce silver. That is the whole circuit. So, roaster per se does not produce silver, but as long as if I have more capacity of leaching and purification circuit, then I will have more amount of silver being produced. As of now, we are not adding to leaching and purification circuit, but we have added fumer. So, as long as that fumer 33 ton capacity is there, even if I put 20 more roasters, that 33 ton is the only capacity I have. That's why you will see that our expansion plan, new leaching and purification circuits that we will make, it will all come with new fumers, so that from the zinc circuit we can produce more silver, the way actually you have been hinting.
Is it possible to convert silver sand to gold? Do you sell silver sand to Fujairah Gold and what is the mass balance?
Silver sand contains 93% of the silver. Silver sand is being sold on the basis of the LBMA prices which contain the 93% silver which goes to Fujairah Gold as well. It won't be possible Ashish, because it is not my finished goods, sir. You will see lot of other income which will be there. It is a part of other income. For me, it's a residue. It's a residue for me.