Hindustan Zinc Limited: Results for the First Quarter Ended June 30, 2019

The following release was issued today by Vedanta Limited's subsidiary Hindustan Zinc Limited

"Production grows as expansion projects approach completion"

Highlights for the quarter

• Refined metal production at 219kt, up 3% y-o-y
• Silver production at 159 MT, up 15% y-o-y
• Mined metal production at 213kt, up 1% y-o-y

MUMBAI, India, July 19, 2019 /PRNewswire/ -- Hindustan Zinc Limited, the leading global integrated producer of zinc, lead and silver, reported its results for the first quarter ended June 30, 2019.

Commenting on the Q1 performance, Ms Kiran Agarwal, Chairman, said, "Our expansion projects are on track and as they near completion, our position as an industry leader with large sustainable operations gets strengthened. We are one of the lowest cost producers with world-class assets which can deliver high returns to all our stakeholders in any market environment."

Mr Sunil Duggal, CEO, said, "We expect production volume to trend up in the coming quarters and along with internal efficiencies, technology and digitisation initiatives, costs to progressively reduce. As we approach the conclusion of 1.2 mtpa expansion, the journey towards 1.35 mtpa has been initiated. For this, we have ramped up our exploration to leverage the potential of existing deposits and new ore bodies to secure our future."

Mr Swayam Saurabh, acting CFO, said, "We are investing to make our operations future ready through digital transformation and environment friendly & cost effective technologies to increase ore-to-metal ratio. Our balance sheet remains one of the strongest in India with zero debt and we have operational discipline to achieve strong cash conversion, generating about $1 bn in free cash flow."  

Financial Summary
Rs. Crore or as stated

(1)  Including other operating income

(2)  Excluding Captive consumption of 1,822 MT in Q1 FY 2020 as compared with 1,778 MT in Q1 FY 2019 and 1,403 MT in Q4 FY2019.

(3)  Excluding captive consumption of 9.4 MT in Q1 FY2020 as compared with 9.4 MT in Q1 FY 2019 and 7.5 MT in Q4 FY2019.

(4)  Silver occurs in Lead & Zinc ore and is recovered in the smelting and silver-refining processes.

Operational Performance

Mined metal production was 213kt, up 1% from a year ago, on the back of 10% higher ore production offset by lower grades. The sequential decline in mined metal production was due to lower ore treatment.

Integrated metal production was 219kt, up 3% from a year ago. Integrated zinc production was 172kt, flat y-o-y in line with mined metal production. Integrated lead production jumped by 13% y-o-y to 48kt. Integrated silver production was 159 MT, up 15% y-o-y on account of higher lead production. Sequentially, integrated metal production was down 4% on account of lower mined metal and annual maintenance shutdown at smelters, partly offset by WIP conversion.

Financial Performance    

Revenue from operations during the quarter was Rs. 4,987 Crore, a decrease of 6% y-o-y primarily due to an average 13% decline in LME prices, partly offset by higher lead & silver volumes and rupee depreciation. Lower metal volumes and weak lead & silver prices along with rupee appreciation led to a sequential decline in revenue.

Zinc cost of production before royalty (COP) during the quarter was $ 1067 (Rs. 74,219) per MT, higher by 8% (7% in Rs) from previous quarter and higher by 2% y-o-y (6% in Rs). The COP during the quarter was impacted by higher power cost on account of lower generation due to water scarcity, more than offsetting the decline in coal price. Other reasons for the year-over-year increase were lower ore grades, higher mine development and higher prices for input commodities like cement, partly offset by higher metal volume and lower diesel prices. The sequential increase in COP was mainly on account of higher power cost, lower volume and lower grades.  

EBITDA for the quarter was Rs. 2,480 Crore, down 11% y-o-y due primarily to lower metal prices, as higher volume and lower manpower cost offset increase in power and other expenses. EBITDA declined sequentially by 11% on account of lower volume and higher power cost.

The resultant Net Profit for the quarter was Rs. 1,765 Crore, down 8% y-o-y and down 12% sequentially primarily due to lower EBITDA, partly offset by lower tax rate. Additionally, Net Profit benefited from higher investment income from a year ago on account of mark-to-market gain on investment portfolio.

Expansion Projects

Update on ongoing expansion projects during the quarter

Capital mine development increased by 8% y-o-y to 11.3 km during the quarter.

At Sindesar Khurd, shaft is fully commissioned and integrated with mine. The second paste fill plant was commissioned in June, liberating the mine to operate at full production capacity.

At Rampura Agucha, shaft project is in advanced stage and expected to be completed in Q3 FY2020.

At Zawar, India's first ever dry tail stacking plant will be commissioned in the current quarter, significantly reducing water consumption & land requirement and addressing tailing dam risk. Additionally, the two paste fill plants are on track to be commissioned in Q3 FY2020, enabling mining of left out high grade ore in old pillars.

At Rajpura Dariba, the existing production shaft capacity is being upgraded from 0.7 to 1.3 mtpa to debottleneck the mine and is expected to be completed in Q4 FY2020.  Further, a pre-feasibility study has been conducted to pump ore from underground to the mill to boost ore raising capacity.

Smelter debottlenecking to 1.2 mtpa is in progress, of which expansion to 1.13 mtpa will be completed in the current quarter. The commissioning of Fumer has already commenced.

Next phase of mine expansion from 1.20 to 1.35 mtpa

Detailed exercise to evaluate growth potential in grade improvement, increased tonnage, improved recoveries and increased reserves has commenced. This study will be followed by detailed scoping and feasibility by the Project Management Office (PMO) partner. We expect to have these studies and scoping to complete by Q4 FY2020.

In the meantime, following activities have commenced and are expected to be completed in the current quarter:

• Feasibility study on Bamnia Kalan
• Engineering for Rampura Agucha Galena zone and Sindesar Khurd Deep development and exploration
• Finalisation of PMO

In addition, engineering for water sustainability projects for Dariba and Zawar operations is under progress.

Liquidity and investment

As on June 30, 2019, the Company's cash and cash equivalents was Rs. 18,258 as compared to Rs. 16,952 Crore (net) at the end of FY 2019 and was invested in high quality debt instruments. The portfolio continues to be rated "Tier –1" implying Highest Safety by CRISIL. During Q1 FY2020, the Company repaid Rs. 2,000 Crore of short term commercial paper and there is no borrowing outstanding as on June 30, 2019.

Earnings Call on Friday, July 19, 2019 at 4:00 pm (IST)

The Company will hold an earnings conference call on Friday, July 19, 2019 at 4:00 pm IST, where senior management will discuss the Company's results and performance.

Conference Dial In Information:

Universal Access                                     +91-22-6280-1340 / +91-22-7115-8241

Local Access (Available all over India)      +91-70456-71221

Playback Dial In Numbers                        +91-22-71945757

July 19 – July 26, 2019                             Playback Code: 60684

For further information, please contact:
Preeti Dubey, CFA
Investor Relations
hzl.ir@vedanta.co.in
Tel: +91-98339-97517

About Hindustan Zinc

Hindustan Zinc (NSE & BSE: HINDZINC) is the one of the largest integrated producers of zinc-lead in the world with a capacity of over 1.0 million MT per annum and the 9^th largest global producer of silver. The Company is headquartered in Udaipur, Rajasthan in India and has zinc-lead mines at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Zawar and Kayad; primary smelter operations at Chanderiya, Dariba and Debari, all in the state of Rajasthan; and finished product facilities in the state of Uttarakhand.

Hindustan Zinc has a world-class resource base with a mine life of over 25 years.

The Company is self-sufficient in power with an installed base of 474 MW coal-based captive power plants. Additionally, it has green power capacity of 347 MW including 274 MW of wind power, 39 MW of solar power and 34 MW of waste heat power. The Company has an operating workforce of over 21,000 including contract workforce.

Hindustan Zinc is a subsidiary of the BSE and NSE listed Vedanta Limited (formerly known as Sesa Sterlite Limited; ADRs listed on the NYSE), a part of Vedanta Resources Ltd, a global diversified natural resources company.

Disclaimer

This press release contains "forward-looking statements" – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward–looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

About Vedanta Limited

Vedanta Limited, a subsidiary of Vedanta Resources Limited, is one of the world's leading diversified natural resource companies with business operations in India, South Africa, Namibia and Australia. Vedanta is a leading producer of Oil & Gas, Zinc, Lead, Silver, Copper, Iron Ore, Aluminium, Steel and Commercial Power.

Governance and Sustainable Development are at the core of Vedanta's strategy, with a strong focus on health, safety and environment and on enhancing the lives of local communities. The company is conferred with the Confederation of Indian Industry (CII) 'Sustainable Plus Platinum label', ranking among the top 10 most sustainable companies in India.

Vedanta Limited is listed on the Bombay Stock Exchange and the National Stock Exchange in India and has ADRs listed on the New York Stock Exchange.

For more information please visit www.vedantalimited.com

Vedanta Limited
Vedanta, 75, Nehru Road,
Vile Parle (East), Mumbai - 400 099
www.vedantalimited.com

Registered Office:
Regd. Office: 1st Floor, 'C' wing, Unit 103,
Corporate Avenue, Atul Projects,
Chakala, Andheri (East),
Mumbai – 400 093

CIN: L13209MH1965PLC291394

Disclaimer

This press release contains "forward-looking statements" – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward–looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different that those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

For further information, please contact:
Communications
Arun Arora
Head Corporate Communications
Tel: +91-124-459-3039
arun.arora@vedanta.co.in; gc@vedanta.co.in

Investor Relations
Rashmi Mohanty
Director – Investor Relations
Tel: +91-22-6646-1531
vedantaltd.ir@vedanta.co.in

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