Hindustan Zinc Ltd
NSE:HINDZINC
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Hindustan Zinc Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '23 Earnings Conference Call of Hindustan Zinc Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Shweta Arora , Head of Investor Relations. Thank you, and over to you, ma'am.
Good afternoon, everyone. I welcome each of you to Hindustan Zinc's second quarter and half year ended FY '23 results briefing. Today on the call, we have with us our CEO, Mr. Arun Misra; and our Deputy and Interim CFO, Mr. Sandeep Modi. Mr. Misra will throw light on our business performance, while Mr. Modi will walk you through financial performance, after which we will open the floor for questions. As many of you requested this time to have an early call owing to multiple results in Diwali weekend, we are starting 15 minutes earlier than usual schedule and we'll also try to wrap up in next 45 minutes.
Also, I would like to request you all to please open both the press release and the presentation for quick reference during the session. I now request Mr. Misra to begin today's call. Over to you, sir.
Good afternoon and a very happy Deepavali to everyone. Thank you for joining us today for the second quarter and half year FY '23 results briefing.
Before I begin today's results presentation, I regret to inform you all that we are in extremely unfortunate incident at Chanderiya on 12th of August, where there was a sudden rupture and subsequent breakdown of an acid storage tank. This incident, which led to acid gushing out of the tank costed us valuable lives, including our own employees and business partner, colleagues, who were standing in the vicinity.
I would like to offer my deepest condolence to the bereaved family and friends of the deceased. We commit to stand by the families in this hour of justice. In-depth investigation has been carried out and the findings have been reviewed, and we will be implementing all the findings across all operating assets. We have also continued our proactive safety and health initiatives during the quarter.
At Hindustan Zinc, it is our sincere belief that people are our most valued asset, and we nurture our talent with best-in-class people practices. This is also reflected in external recognitions that we received. And on this count, I am happy to share that Hindustan Zinc has won the prestigious PeopleFirst HR Excellence Award for Leading Practices in Diversity & Inclusion initiatives and Talent Management. After being recognized as great place to work, we are now also recognized as happiest workplace in light of our best-in-class people practices.
An update on the ESG front. In line with our commitment to net zero by 2050, we have entered a power delivery agreement with Serentica Renewables India for 4 Private Limited. PDA is signed for renewable power aggregating up to 200-megawatt and under the group captive scheme, INR 105 crores has been invested in the second quarter.
I'm also happy to inform that our Pantnagar plant in Uttarakhand is sourcing 100% of its power requirement from renewable hydropower now. This makes Pantnagar the first unit of Vedanta, which is using 100% green power. This is only a first step towards many more milestones in our ESG journey and commitment to net zero.
I am also elated to inform you that Hindustan Zinc was awarded at the 3rd Edition of the CII Climate Action Programme 2.0 under the Oriented category. In addition, our smelters were also awarded GreenCo Summit 2022. Dariba Smelting Complex and Chanderiya Lead Zinc Smelter received Gold rating, while Dariba (sic) [ Debari ] Zinc Smelter backed silver. All of these collectively play an important role when it comes to marching ahead in our ESG journey.
You may also look at Slide 8 to 11 in the presentation for further details. Coming to an update on our on-ground CSR activities. Our CSR team continues to make a positive impact across area of fields and are delivering on initiatives and activities across the areas of education, sustainable livelihood, women empowerment, health, water, community asset creation, sports and culture and volunteering through their well-rounded on grounded efforts.
It gives me immense pride to inform that Hindustan Zinc has been felicitated with 7 awards at the 26th Bhamashah Awards for our initiatives and projected projects in the education sector. These awards are a recognition of our continued commitment towards education.
In the last 3 years, around INR 50 crores were spent by the units of Hindustan Zinc in Rajasthan towards education-related initiatives benefiting more than 2 lakh children every year. I would also like to share that Sahil Poonia, our star Goalkeeper at Zinc Football Academy has been inducted into India under 17 team and has won the best Goalkeeper award and Championship on his debut at the SAFF Under-17 tournament held in Colombo.
Key highlights of our CSR initiative is also covered on Slide 12 of the presentation.
Quickly an update on the market. Supply and demand forces remain largely in balance. However, macro uncertainty has put LME under pressure. On the supply side, rising energy prices across Europe has brought news of smelters being put into care and maintenance, leading to concerns around the supply of metal.
At the end of September, LME stocks stood 54,000 tonnes as compared to 140,000 tonnes at the start of April 2022, whereas stocks in [ Shanghai ] warehouse stood at the end of September stood at 38,000 tonnes as compared to 176,000 tonnes at the start of April 2022.
On demand side, global uncertainties are casting dark clouds on metal demand with rising interest rates, energy prices and other inflationary pressure continues. The S&P Global Eurozone Construction PMI fell to 48.5% in September from 56.5% in April. And the construction PMI for August 2022 fell to 44.2 points (sic) [ 44.2% ] from 50.4% in April on account of higher cost and supply chain constraints, which affected output as well as demand. The supply chain issues, including component shortages in automotive sector in Europe is continuing and is evident at the data from European Automobile Manufacturing Association that the new passenger vehicle registrations have declined by 13.7% year-on-year.
Touching briefly on lead. Lead prices witnessed a significant amount of volatility during H1 and closed out the half of USD 1,889 per tonne approximately, a 22% decline from 1st April 2022. Some of the reasons attributed to this drop were the strengthening of U.S. dollar, the increase in energy costs supported by global interest rates, the deepening crisis due to the Russian war on Ukraine and the resulting overall pessimism for base metal demand. Lead prices are expected to remain subdued for the rest of the year as the automobile sector globally is facing constraints in production.
Coming to silver, we have witnessed an uptick in silver demand in light of upcoming festive season. and lowering of prices, which witnessed their share of ups and downs and closed out the half of $19.02 per dry ounce, a drop of approximately 23% from the start of financial year.
On the domestic front, the economic environment in India remained buoyant. The same was reflected in the S&P Global Manufacturing PMI in August 2022, which was at 56.2% indicative of the expansion in manufacturing activities. The Indian domestic zinc demand has been stable during H1, half of this year on the back of robust growth in infrastructure, pipe and alloy segment, which resulted in resumption of project orders that were stalled in 2021.
We also witnessed strong demand for lead domestically, largely on the back of excellent automotive demand ahead of festive season. The demand of lead in the industrial battery segment has also been robust as battery replacements in data centers, banks, ATMs and other critical applications gathered base.
Additionally, the Indian secondary lead market continues to remain tight due to poor availability and limited imports. You can also refer to Slide #7 of the presentation for details.
Coming to an update on operational performance without delving too much into the details, which are already available in press release and presentation, I'm happy to inform that Hindustan Zinc has delivered a record first half with highest-ever mined metal, refined metal and silver production. With consistent MIC flow from the mines better plant availability and with better grades and improved recoveries, our volume delivery is on the up curve with increasing uniformity. And to an extent, also negating the effect of traditional seasonality with proactive planning and effective removal of any roadblocks.
Here, I would also like to bring to your attention that it looks at least -- if I look at for the last 12 months, even after factoring in some of the one-offs, with operational challenges and unforeseen events, we are comfortably sustaining over 1 million tonne run rate on both mined metal and refined metal. With our valuable learnings and some of the key structural changes that we have discussed over the last few quarters, alongside increased use of technology as well as learnings deployed, we are confident to deliver the projected volumes for FY '23 and with increasing uniformity in the quarters to come.
With this, I hand over the call to Sandeep for an update on financial performance.
Thank you, Mr. Misra, and good afternoon, everyone. I'm happy to present to you another good set of results amid macro headwinds, input commodity inflation and softening LME. It was a record first half where with a significant milestones and continued positive momentum of our financial performance. We delivered a historic high first half in terms of revenue, EBITDA as well as net profit. The success can be largely attributed to our agile decision-making to cash in the favorable LME by embarking on strategic hedging on the right time. This, along with the deal to leave most on, when it comes to operational efficiency initiatives. .
Cost rationalization as well as volume delivery is keeping us ahead in these uncertain times and helping us stay in the first quarter of global cost curve. All of this has enabled us to protect our margins despite grappling with the increasing energy prices and input commodity inflation.
Refer to Slide 17 for an update on our financial performance for the second quarter and first half year ended September 2022. For the first half of FY '23, our revenue from operations stood at INR 17,723 crores, an improvement of 40% from the same period last year. This was supported by improved zinc LME prices and volumes, gains from strategic hedging, favorable exchange rates and better lead and silver volume, which were partially offset by lower lead and silver LME prices.
Similarly, revenue from operation during the quarter was INR 8,336 crores, which is an increase of 36% Y-o-Y, led by higher refined metal and silver volume and LME prices gained from strategic hedging and the favorable exchange rate, partly offset by lower lead and silver LME prices.
Sequentially, revenue decreased 11% primarily due to lower zinc prices and volume, a low lead and silver prices, partially offset by our gain from strategic hedging, favorable exchange rates and improved lead and silver volume. For H1 '23, the COP stood at USD 1,260 per tonne -- metric tonnes, 15% higher Y-o-Y in USD terms and 22% in INR terms. The COP was affected largely on account of higher coal prices, lower domestic coal linkage ability, input commodity inflation being partially offset by higher volume and improved operational efficiency.
Zinc cost of production before royalty during the quarter was USD 1,259 per metric tonne higher by 12% Y-o-Y and almost flat sequentially. In INR terms, though, it was 21% Y-o-Y and 3% sequentially higher. This resulting EBITDA for H1 FY '23 was at INR 9,665 crores, an increase of 40% Y-o-Y, driven by improved metal and silver volume, zinc prices gained from strategic hedging and favorable exchange rate partially offset by higher cost and lower lead and silver prices.
EBITDA for the quarter was INR 4,387 crores, up 32% Y-o-Y, though down 17% sequentially . This movement was primarily driven by the higher revenue being offset by increased cost on account of the prevailing input commodity inflationary environment. Please refer to EBITDA base given on the Slide 18 to 20 for the various periods for the detail.
Net profit for the H1 was INR 5,772 crores, a strong growth of 44% Y-o-Y led by higher EBITDA, partially offset by increase in tax and depreciation and amortization. For the quarter, net profit was INR 2,680 crores, a Y-o-Y growth of 33%, led by higher zinc volumes and prices. And favorable exchange rate, while being partially offset by the rising input commodity prices and lower lead and silver prices.
On a sequential basis, net profits were 13% lower due to lower metal production and lower zinc and silver prices being partially offset by strategic hedging gains and favorable exchange rates.
Effective tax rate for the second quarter was close to 32%. And if we see H1, it will be approximately 33%. That said, our cash tax is much lower due to available net credit. Plus, once we move to new regime from next financial year, our tax rate will be around 25%.
As far as our ETR guidance is considered, I would leave it unseen at 32% for the full year.
Kindly turn to Slide 22 of the presentation for our cost and CapEx guidance for the fiscal year 2023. In the previous quarter, I had mentioned that across the industry, there is an upward pressure on input commodity inflation, which we are also facing. While we have been doing our best to convert it through levers available to us in form of delivering higher volume, operational efficiency, a special focus on improving and maintaining metal recoveries and exporting all possible avenues to reduce our coal procurement costs, the input commodity inflation continues to weigh on us. As no process improvement can combat such a steep increase in coal cost in near term.
Hence management has taken the considerate call to revise the cost guidance and expect zinc COP in the raise of $1,225 to $1,275 per MT for the FY '23, which is inclusive of higher mine development expenditure to support future volume growth. As you would understand and appreciate that this revision comes in the light of an extremely uncertain environment with rising imported coal prices, lower domestic coal availability and geopolitical tension, which is impacting supply chain globally.
That said, we remain confident to maintain our leadership position in the global zinc cost curve and will continue to protect and improve our margin. Project CapEx guidance for the year remains unseen and is expected to be in the range of USD 125 million to USD 150 million.
With this, I open the floor for your questions. Thank you.
[Operator Instructions] The first question is from the line of Amit Dixit from ICICI Securities.
Congratulations for a good set of numbers and otherwise a very challenging quarter. I have just a couple of questions. The first one is if you can quantify the gain from hedging and is there a portion of hedging is still left? And if so, at what price? So that is the first question.
The second one is on your production guidance. This seems to be slightly conservative given that -- I expect that the acid tank storage at Chanderiya would have been repaired and contribution from fumer is also expected. So I mean what drives this rather conservative guidance? So these are the two questions I have.
I will answer the first question. The quarter 2 strategic hedging gain was around INR 500 crore taken into the quarter 2. And to answer your question, nothing much significant strategic hedging open position now stands.
And Amit, thanks for the question. On the volume portion, we are -- as you can look at last 4 quarters, if you add up, we are already more than 1 million tonne plus and H1 itself is 0.5 million tonne and above. Yes, we all hope that we cross 1 million tonne mark by a good margin. But I think let's do quarter 3 right. And then we would better know how much more we can add in quarter 4, and we are all very eager to cross that mark of 1 million tonne by a good margin as far as the hedges are concerned. But I would not like to be unnecessarily optimistic. But whether I would say that we will -- we are all committed to do better. .
The next question is from the line of Pallav Agarwal from Antique Stockbroking.
I have a question on the coal availability and linkages. So after the monsoons, are we seeing any improved availability of coal? And so do you expect that coal cost could moderate in Q3 or Q4?
So Pallav, I will address the question. The coal -- linkage coal availability has bit improved in the quarter 1 is of 10%. In the quarter 2, it has been around 14%. We believe that we have been meeting and representing everywhere. And we expect that after the monsoon, the linkage coal availability should improve. But what can be the quantum 20% or 25%, we don't know. But at this point of time, we remain optimistic as the Coal India has also been stating that their production is going to improve and especially the faces with the mines which we have. And coal procurement cost is the driver.
Second, I think the imported coal prices are also going down in the market, especially if you see the Mozambique or South Africa and Indonesia. That should also help us to reduce the coal cost.
Sure, sir, but the INR is also depreciating. So considering that, we'll still probably expect cost to go down?
So INR is depreciating as far as my EBITDA margin is considered, I'm naturally aced there. So the INR depreciation is also giving a much, much benefit in case of my exports. And if you see then the U.S. dollar terms cost, the denominator will be remained higher USD INR. So my cost per tonne should not be that much of resulting into the negative.
Yes, fair enough, sir. Sir, just also a question of, I think if I got the number right, the strategic hedging gain you mentioned was about INR 500 crores for this quarter. Is that correct?
Yes.
So this is actually, sir, is that helping the zinc, if I just compute the zinc premium, physical premium over LME, so that has again improved over the last quarter. So is this also being driven by this strategic hedging gains?
Strategic hedging gain is completely different. It is not having any premium. So it's only a delta between what is the market price of the -- in the LME and what has been actually we have sold forward. So you will see this delta in the revenue from operations.
Yes, sir. So yes -- so indirectly it is coming into the zinc realization.
Yes, it is a zinc realization as part of the revenue from operations.
Yes. So that's why I'm saying the derived premium seems to be on the higher side. Okay. So this may probably normalize once -- yes. Okay. Those are my questions.
The next question is from the line of Vishal Chandak from Motilal Oswal.
So my question was with respect to this group captive scheme. So if you could just elaborate on what kind of investments are there, what kind of ROEs are expected, and what is the cost of production? And also a bit more on this group company, Serentica, who are the owners, et cetera?
So group captive scheme is standard scheme in case of a power production and transmission, if we're not trying to own 100% company power plant that you put up and you want somebody else to put up a power plant, but you want to get the benefit of being a captive producer in terms of other duties and taxes that are applicable to a power producer, they will go for the group captive scheme, mandated by government. Be it thermal, be it power plant. So that requires that one has to make a 26% equity investment in a power producing company.
So that is clear and simple as per the law, of law that one has to do and that's what we have done. Serentica is in part floated by our group. It's a group company, which is into RE power production. And we see that this -- considering all the businesses of the group, RE power requirement is very high. And also all our operations will be totally banking on continuity of supply of RE power. So more -- while one can try to ensure the full contract, but having own investment at the same time, being a listed entity, having a 26% group captive scheme investment helps us to ensure the continuity of business with all risks factored in with the RE power, which is going to replace about 40%, 45% of my total power generation capacity.
Just say a couple of points which I wanted to understand. Number one, Serentica is only for promoter entity or is that Vedanta Limited Group company? That's number one. Number two, I understand group captive, where you have to invest at least about 26% of the equity to be eligible for that. But so far, your investment is about INR 105 crores. Does that mean that is your 26% equity contribution. If so -- If not, then how much extra we need to then put in?
And thirdly, by what time do we expand this 200 megawatts power to start flowing into [indiscernible] ?
So, Pallav (sic) [ Vishal ] , I will answer that. The total investment, which Board has approved for 26% equity is INR 350 crores, which we have announced in the market. And we have invested as of now 30%. And this entity is expected to commission its operation in the next 2 years. So by FY '25 or early -- quarter 1 of '26, we should be have the start of the operation. Yes, this is not a part of the Vedanta Limited.
[Operator Instructions] The next question is from the line of [ Saketh Reddy from Palazzani Enterprises. ]
So I have see that you've done an NCD payment of INR 700 crores this quarter. So when is the next one due?
Remaining is INR 2,100 crores. That is the due on September '23.
September '23, okay. And one more thing. Your saleable silver guidance, isn't it too conservative like you've done 371, I think, in H1, 371 MT. You guided for 700 MT to 725 MT for the whole year. So H2 will see some let down? Or is it [ accountable ] with guidance?
No, it is in line with the metal guidance that we have given. There is always a certain proportion that gets maintained with the metal production. And as of now, unless I'm sending the metal guidance, I will not be able to change the silver guidance as well. But as I said, committed earlier, the H1 being already crossed 0.5 million tonnes and silver at 340 million tonnes or so. So H2, we are all hoping it will be much better. And let's see by how much margin we cross the guidance that we have given.
Okay. Okay. And so we are already, I think, around 3 weeks into Q3. So you still maintain the fumer at Chanderiya to get commissioned by end of Q3?
Yes, because the only thing that was tough was the visa issue. And as we speak yesterday itself, clearances have been given for visa approval from Beijing Embassy. So I'm sure in a matter of a week or so, we would have the experts here, and then we should be able to complete the work. Everything is done. It's only the commissioning, which is a matter of 10, 15 days work, but we need the experts to be here. That's the only issue.
Okay. And last question, sir. The Chanderiya back on track, like post the issue?
Plant is back on operations. So we have taken some -- preponed some of the shutdown work which we generally -- as we had planned to do later, but -- at the latter part or the early part of this quarter. So we have preponed that, completed those shutdowns and we restarted all operations. So everything is normal as far as operations are concerned.
The next question is from the line of Ritesh from Investec.
Sir, just two questions. First, we have really solid cash flows. We have a lot of cash on the books, and we have limited CapEx. So sir, how should one look at the dividend payouts going forward?
So as I keep saying, dividend is a matter for the Board to consider. As far as my job is concerned to ensure EBITDA and we generate cash flows and I'm sure the Board in their best interest would take their decision in the right time. But we are also putting up two good projects which have informed earlier, both as a new roster, which will add to our calcine making capability and also on fertilizer plant. And I'm sure this year, when we do the business planning, we will come up with some more projects to make better utilization of the cash that we have.
Right. Sir, as I start to take a step back, when you look at the particular payout ratio, just want to understand how you think about it, like we have added cash on the books, but still, if I look at like last two annual reports and if I just dig into a bit of regulatory filings, we do understand that the company is also looking to move capital from GR to RE. So what is the need for us to actually execute that specifically given there is adequate cash, which is already there on the books?
So if you see it generally, return earnings, it's a long run process. So we initiated this process almost 8, 9 months back. And currently, the CBS approved as unfairly. So this is just an enabling provision, which will be -- allow us the flexibility for using it. It may not be immediate, but it will be in the interest of the shareholders. So it will go through the process. So that's why we've taken to enable us [indiscernible] anything we want to reward the shareholders.
Sir, my question is, what is the trigger that to do something of this sort right now? Probably why not like, say, 3 years back or 4 years back? I'm just trying to understand the thought process trying to understand the concept.
So if you see any time it's -- what is the right time, nobody can comment, but we have also taken as a part of various other companies who took differently in the past startup or let's say, they have also taken. We also took around a year back. And as I said earlier, it's a long run process. It doesn't require like just 1 week or 1 month job. So it has been almost a year job. So we too thought that it will take time. So we triggered this thing in the -- around 8, 9 months back.
Sure, sir. And sir, you said you already have approvals from both by SEBI as well as NCLT. Did I hear it right?
No. SEBI has approved it. NCLT is yet to approve.
Okay. And sir, do we need [ creditor ] approval over here when we do GR to RE?
It will be through NCLT process and then after the shareholder approval will be required.
Okay. And sir, when we actually give a payout from the GR to RE, does it also call for a shareholders' approval or a creditor approval?
No. Once the NCLT approve, then after the shareholder approval would be required and for automatic density it to go to the retail earnings and after that, it becomes a part of the fee reserve.
Okay. So if there is an incremental payout we do not require any separate creditor approval, right? Is that understanding, right?
No.
That helps. Perfect. And sir, can you highlight the update or progress on the fertilizer expansion given, I think, the scenario that the country is in, I think if we pass that something of the sort, it will -- I think, not good.
You're absolutely correct. So we have got the board approval. And after that, our project team has completed the design prefeasibility. And then now we are [ Vivigen ] negotiation for appointment of an EPC contractor. I guess by the end of this month, the business the contractor will be on both. And I can see we'll be hitting the ground anywhere between second or third week of November to start construction.
The next question is from the line of Amit Dixit from ICICI Securities.
I have a couple of data questions actually. The first one is what was the grade in Q2 FY '23? While you have mentioned that it has improved. So just wanted to understand how much it has improved? That is question number one.
The question number two is on the revenue, the capital development and the revenue development and just to highlight it.
So grade for this quarter has improved to 7.4% and capital mine development for this quarter was around 13 kilometers.
And revenues, sir?
Revenue was 25%. Sorry, remaining 50% or almost 13 kilometers.
So 13 kilometers each?
Yes.
The next question is from the line of Vikash Singh from Phillip Capital.
Sir, I just want to understand on the market side. So there was a view that this couple of smelters has also closed down in the European region. So looking at the current cost kind of the scenario, if you have some idea about what percentage of the capacity would be now in the cash losses or what kind of the market balance you are expecting in the next 5 to 6 months? If you could just give us some your thought purchase on that.
So if you look at 1 or 2 smelters, which are supposed to have been closed down or in care and maintenance, anywhere between 300,000 tonnes to 400,000 tonnes will be out of circuit. But Europe also is facing a demand issue, it's just not the production issue. Also, there is a demand issue. Whereas even the auto productions are also under straight because of the cost of energy.
So as far as we are concerned, we are currently looking at the reduction in the lowering of trend of shipping costs across the globe, we are now looking at, of course, Europe and U.S.A. has a better margin paying destinations. But nevertheless, our first priority complete continues to remain serving domestic customers, where we are already at 79% of the market.
And any augmentation, I would prefer first in domestic and gain European market. As far as prices are concerned, there are two sides to it. As I've spoken in my talk track is -- the stocks are at one of the lowest levels, if we look at the LME stock. But on the other side, there are two schools of series. One says it will keep on fluctuating between [ $2,900 to $3,100 ] for another 3, 4 months. But I see a current report of government sets, which also claims that in 4 to 5 months' time it can touch anywhere between $3,700 to maybe $3,900 per tonne.
So anyway, price is not something which is in our hand, we can only speculate. As far as we are concerned, we should be producing around guidance and that should comfort us.
Understood, sir. And sir, sorry, if I missed on the hedging part. So if I'm repeating the same question. I just wanted to understand, since the LME is pretty lower and we won't like to hedge at those points. Are they looking to hedge the dollar or fixing the U.S. dollar because in that way, in case is tomorrow, the LME gives some pleasing -- we would get a benefit on the at least the dollar side is for rupee appreciates for the hedge. So it looks a very good range. So just wanted your thought process on that.
So as we are pillars of policy has been continued to keep the dollar side open and both are import because next only hedge is there. As of now, we are not comfortable on this update and we continue to remain the same in line with the policy, but it's surely we can look at.
Understood, sir. Sir, just one last question. Since our fumer is almost completed, what is the ramp-up period it would take if we have that kind of understanding?
So if we commission, we should be anywhere between, say, February, January, we should be starting up. And then by February, we should be ramped up to the capacity. And I'm expecting it to add 30 tonnes of silver in a year. So roughly about 7 tonnes, 8 tonnes of silver in a quarter. So anywhere between another 3 tonnes to 6 tonnes extra in quarter 4, if we add up the numbers like that.
Okay, sir. So that seems that our silver guidance was also being a lower. So, would that -- you can expect a crisis there?
I have already communicated. I have already told that both silver is tied to FG. And I have all -- like you, I'm also equally optimistic. We'll be doing better in H2, cross the 1 million tonne mark by a good margin, I hope. And apparently silver should follow. And I'm sure we'll do that. But as far as guidance is concerned, it is only the minimum milestone that we set for ourselves. I don't think that I work for the guidance. We will see better the guidance while we make margins.
[Operator Instructions] The next question is from the line of Rahul Jain from Systematics. Rahul Jain, your line is on off mode. Kindly go ahead with your question, please.
On the volumes, sir, you've done a pretty good run rate in this quarter and also the previous one. So how should we look 2 years out? Or do we -- is this the peak that we have achieved or we should keep looking at some 5% to 10% kind of incremental output given the de-bottlenecking initiatives and things like that, because for very long time, don't have any major CapEx ongoing. So how should we see volumes to be above?
No, no way. I can tell you that this is the peak we have achieved, and it will continue like this. There's absolutely no way, because then I don't need to be here. If I am here, then we need to have 10% more production every quarter, if not every year. So we not go -- we need to go up like that. And my vision that I painted in some time back that Hindustan Zinc in India must produce 1.2 million tonnes in its goods.
Currently, it is just for the first time, we'll cross 1 million tonnes this year. I hope I have good margin. So I should say that another 1 year -- another 1.5 years, if I commission another roaster, then maybe I'll come out to a project of some more hydro circuit. I'm sure 1.2 million tonne metal is not a difficult target for Hindustan Zinc and I should be able to deliver that.
Got it. So we should see incrementally moving in that direction. Obviously, it will not be consistent every quarter, but whereas...
No. I can assure you that my -- one of the my first target in my job is make it consistent in every quarter. I have delivered in quarter 1 equivalent to quarter 4. Quarter 2 would have been quarter 1 had there been not unknown breakdown in Chanderiya. Quarter 3, quarter 4, you are going to see all 4 quarters almost equal production summing up to, say, 1.1 million tonnes and then 1.2 million tonnes. But quarter-wise variation, we will remove, and that's the best way to run a business.
And secondly, on the cost front, we have seen mobility costs are high. So ideally part on the incremental form here on do you expect cost to be trending higher because you also mentioned coal prices are coming down. So I mean, are we reaching the peak or how should we look at it?
So I think the cost has to be seen more in a dynamic situation. If you see what we are seeing the inflationary pressure has actually forced us to revise our guidance. And I can tell you the quantum would have been much higher if we would not have taken the best of the efforts to reduce the cost through various internal measures. We are taking the best of the internal method, and Mr. Misra ji has said, as of quarter 3, quarter 4, we should be seeking more volume, and that should reduce the cost because last part is also the fixed cost.
And secondly, yes, you are right, since the cost has increased on account of largely the input commodity inflation, and as the same in the anvil, we expect that the linkage coal availability should be improved and imported coal cost should also be lower. I expect that from the December onwards, so maybe the Q3 end and going to the Q4, we should have seen a good amount of reduction in the cost.
And sir, on the government stake sale front, any update, anything you've heard, anything you want to share?
No. So government has appointed the bankers, and we are in discussion with the government to help them in this process. So very soon, you would see our team along with government on the roadshow. So things are moving very fast here, in the last about 15 to 20 days' time.
Sir, would the Vedanta management be keen to participate in that? Or it is just for the public, I mean, and obviously, it's a different angle. But obviously you can share something.
Right now we won't give -- share things. I would not dare to comment on intention of Vedanta. When I'm on Vedanta seat, I will do that.
The next question is from the line of Vishal Chandak from Motilal Oswal.
I know you just mentioned about hitting the 1.2 million target in terms of coal and mine production. But do they be looking at it -- how Q1 was definitely very good, Q2 looks pretty good. But given your guidance, how should we look at it? Because your guidance are close to 1 million tonne only, that's far below what you are actually doing in terms of your refined metal production or mined metal production. These number itself point to slightly higher than just 1 million tonne number. How should we look at the guidance?
As I told you, two things there. 1.2 million tonnes is not immediate. As I said, another 1.5 year from FY '23 end, then we would see 1.2 million tonnes would be achievable, somewhere around 2024 end or so. That is one.
Second is, yes, guidance is just something that we set out for, but we will surely outnumber the guidance by a good margin. If we can continue the same rate, but there is no reason for me to unnecessarily becoming too optimistic or too ecstatic about it. So we will do that. So our numbers are there behind us at a plus 4 quarters. We have more than 1 million tonnes, 2 quarters. H1 itself is 0.5 million tonnes. So nothing, I don't see any headwinds as far as our volumes are concerned.
I hope I'm not repeating the question, only in advance. I just wanted to understand what is the scenario with respect to the coastal project where we were working for some time? Is it still on the back burner or some problems there -- actually there would be?
No. We are not actively working on it as of now. So we are concentrating our whole operations. So we will bring a roster here in our operations and increase our calcine making capacity and move one step closer to realizing 1.2 million tonnes. And we will also put out the fertilizer plant to bring more value from the acids that we have, and we are concentrating on those two kinds of projects just now.
As there are no further questions, I now hand the conference over to Ms. Shweta Arora for closing comments. Over to you, ma'am.
Thank you, everyone, for joining us today on the call. On behalf of Hindustan Zinc, I wish you and your family a very happy and safe Diwali. For any follow-up questions or clarifications, please feel free to reach out to the Investor Relations team. With this, I close today's call. Thank you.
Thank you. Ladies and gentlemen, on behalf of Hindustan Zinc Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.