Have to participate in mineral lease auctions despite lack of robust data: Hindustan Zinc CEO

At time when the likes of Glencore have cut zinc production due to price pressures, Hindustan Zinc Ltd managed to cut its cost of production while sustaining the output.

But, the company’s Chief Executive Officer and Managing Director Sunil Duggal remains cautious. “It is not exactly a very good time. The pricing pressure still exists. But our large resource base, long mine life and smelters locations have helped us through this tough phase,” he said. In an interaction with BusinessLine Duggal shares the company’s future plans. Excerpts:- 

What is your outlook on zinc prices? 

Over the last 6-8 months, oversupply had put a pressure on the London Metal Exchange (LME) prices. This has made the marginal players cut production. As a result, 1 million tonne of mineral output or roughly about 8 per cent of global supply will go out of the market. By the end of the year, I expect there will be some firming up of the premiums and the LME price. 

You want to shift to underground mining which is expensive. Given the current economies of scale how will you maintain the low cost structure?  

The share of underground production has gone up to 20 per cent. Despite the increase in underground production we had reduced costs by 15 per cent in dollar terms last quarter. Our strategy is to have a mix of mining from shallow depths and deeper depths. Also from the deeper depths, we are extracting the mineral through shafts which are cost effective. We remain committed to our aim that by 2021, all production will be from underground mining.

Will you participate in the government’s mine auctions?  

In the initial stages we are hearing about 70-80 blocks, of which some are base metal, will be available for auctions. We will have to participate although the robust confidence and data is not there. We are ready to do some more exploration through the prospecting license route because we do not want to leave any opportunity for base metal assets in the country. 

In coal auctions you did not succeed. Can you manage without any captive mine?  

We are located far away from the coal mines but close to ports. Today, the linkage coal costs more for us than the landed price of imported coal. We bring high grade coal from the ports in Gujarat and therefore, our cost of power is much cheaper than linkage coal based power. This advantage is going to be there for a while. Therefore, coal mine auction and linkage auction is not a game changer for us at this point of time. 

Where will the recently announced ₹ 8,400 crore of investments be utilised?  

A majority of it is for the ongoing mine expansion which will happen over the next 3-5 years. We are raising metal in concentrate production capacity to 1.2 million tonne. For this we would need a smelter. But instead of setting up a new one we have decided to debottleneck our existing smelters. Further, we are also looking at fertiliser production. For all these opportunities we have ongoing feasibility and technical studies. As and when it is ready, we will go to the board with the proposals. 

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