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 Hindustan Zinc Fourth Quarter and Full Year FY '22 Earnings Conference Call. [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.
Thank you. Good afternoon, everyone. I welcome you all to Hindustan Zinc's Fourth Quarter and Full Year '22 Results briefing. Today on the call, we'll have with us our CEO, Mr. Arun Misra, and our Interim CFO, Mr. Sandeep Modi. Mr. Misra will begin with an update on business performance, while Mr. Modi will walk you through financial performance. After which, we will open the floor for questions. I now request Mr. Misra to begin today's call. Over to you, Mr. Misra.
Thank you, Shweta. Good afternoon, everyone. Thank you for joining us today for the fourth quarter and FY '22 results briefing. I hope you and your loved ones are doing well and have taken the booster doses as per government protocols. I'm happy to inform that we are progressing well on our administration of the booster dose for our employees and business partners as well as their families to curb the positivity rate and keep it under control.
Before I begin today's results presentation, I regret to inform you all that we have lost one of our business partner colleagues in an unfortunate accident that happened at our Rajpura Dariba mine on 11th March this year. I would like to offer my deepest condolences to the bereaved family and friends of the deceased. One life lost is one too many. We commit to stand by the family in this hour of distress. An in-depth incident investigation is conducted through an independent investigation committee. The learnings from the incident have been reviewed and are being implemented across all our operating assets.
Further, we have deployed additional safety measures to mitigate any such incidents in the future. We have also initiated the appointment process for 3 global mining safety experts and safety officials for different mining locations.
In addition, we have appointed 6 DGMS officials to enhance safety practices via rigorous training program, and we have also initiated automation and mechanization plans in high-risk activities to the extent possible. In these trying times, our people have made us proud and have come together as one Hindustan Zinc family against all odds.
Well-being of our people is a key priority for us and where we don't leave any stone unturned and invest both time and necessary resources to nurture them. From employee mental health and assistance programs to upskilling workshops and trainings, our people are at the heart of everything that we do. At Hindustan Zinc, we strongly believe that change is the only constant, and it is to be driven from the top to effectively percolate down into every facet of our organization. Towards this, we have conducted world-class training with external trainers on global concepts likes of theory of constraints, TQM to drive the change agenda and with a sharp focus on outcomes which challenges traditional mental blocks and helps transcend boundaries in terms of performance.
We also have a dedicated program running for talent identification and development, particularly focusing on younger talents and diversity mentoring. It gives me immense satisfaction to see that Hindustan Zinc has also broken many stereotypes from employing women in mining to providing equal opportunities to members of the LGBTQ community. We continue to nurture and protect the diverse and inclusive fabric of the company. I am delighted to share that company has received the Leadership in HR Excellence Award from CII for best-in-class HR practices.
Coming to an update on the ESG front. It gives me immense satisfaction to witness that we are marching ahead on our ESG initiatives and working hard towards our commitment of net zero by 2050. I'm happy to share that we have received Board approval to undertake a long-term captive renewable power delivery plan up to a capacity of 200 megawatts. This is in line with our unwavering focus to reduce dependence on thermal power and bring the share of renewable energy to cover 50% in the next 3 years. Hindustan Zinc has also put into operation its first batch of passenger electric vehicles for employees. The recent addition to the EV fleet are electric scooters for security staff, passenger EVs at locations and specialized smart underground service EV for mines.
We have also initiated task force on climate-related financial disclosures, qualitative and quantitative study across Hindustan Zinc to identify the climate-related risks and opportunities and the financial implications of the same on our business.
We have signed an MOU with CDP science-based incubator program for setting the targets in line with science-based targets initiative requirement for our commitment to reduce the greenhouse gas emissions to 0 by 2050. I'm also elated to inform you that Hindustan Zinc has featured in the sustainability yearbook for the fifth year in a row. We are also ranked in the top 100 global companies by the Global Sustainability magazine. This is extremely encouraging and gives us confidence to progress ahead and deliver on our ESG vision.
Coming to an update on CSR activities. As a group, our core value and priority is to give back to the society, and our CSR team has doubled on that efforts on ground training even during this trying time. They have carefully balanced both the ongoing long-term core initiatives along with health and COVID-related support to the villages and communities surrounding our operations.
The team has put in well-rounded efforts towards education, sustainable livelihood via skill development and the establishment of self-reliant financial ecosystems for the communities, women empowerment, health and sports. I'm happy to inform that our Zinc Kaushal Kendra received the Indira Mahila Shakti Protsahan Avam Samman by Honorable Chief Minister, Shri. Ashok Gehlot, in the field of women empowerment.
Turning to a market update. On the global supply side equation, we don't see any major new development in the short term, which will impact price significantly. Inflationary pressures have continued to pile on globally. As for zinc metal inventory stocks are slowly and steadily moving from Europe to Asia, the zinc market did witness backwardation during the quarter.
On demand side, we haven't witnessed much impact despite Europe being most exposed to Russia-Ukraine unrest, we see manufacturing PMI hovering around 55.
Touching this year lead, lower lead LME stocks have a little impact on prices, with battery demand generally soft and moving into season's quiet period after winter, additional output from Chinese smelters only led to rising definitely warehouse stocks. We do not foresee any significant change on this count in the short term.
Coming to silver. Investment demand remained healthy, while industrial demand for silver is expected to grow by 5% in 2022 according to Silver Institute. With expectations of an increase in interest rates by the Fed at one hand and war-like situation leading to supply chain uncertainties on the other, precious metal prices will at best remain in a delicate balance.
Talking about the domestic market, demand remains healthy, and we were getting good realizations for our products, and I'm happy to report that we reached our highest ever market share in primary zinc segment reaching 83% by FY '22.
Coming to an update on operational performance. We have continued to set new operational benchmarks and delivered a year filled with new milestones. It was a stellar year with mined metal production crossing 1,000,000 tonne mark and upto 1,017,000 tonnes. This was possible only through higher ore production from all locations, driven by concerted efforts and grit of all our teams.
Hindustan Zinc also produced its highest ever annual refined metal production and witnessed a record high mine development during the year. All of this while maintaining our mine lives at 25 years. During the quarter, mined metal production was at 295,000 tonnes, up 3% year-on-year. This was on account of higher ore production at Rajpura Dariba, Sindesar Khurd and Rampura Agucha mines.
Sequentially, mined metal production grew by 17%, with higher ore production from Rajpura Dariba, Rampura Agucha, Sindesar Khurd and Zawar mines, supported by better mining grades. Integrated metal production was 260,000 tonnes for the quarter, up 2% year-on-year and remained almost flat sequentially. This was supported by better plant and mined metal availability and improved operating parameters.
Integrated zinc production was 211,000 tonnes, up 8% year-on-year and was 1% lower sequentially. Integrated lead production for the quarter was 49,000 tonnes, up 5% sequentially, but was down 19% year-on-year on account of our Pyro plant facility running on zinc and lead modes compared to last year of lead-only mode operation.
For the full year, refined metal production was 967,000 tonnes, up 4% year-on-year on account of better plant and concentrate availability. Integrated silver production was 162 tonnes, down 20% year-on-year and 6% sequentially, in line WIP buildup in quarter 4 and change in mix of lead concentrate for the full year, silver production was 8% lower year-on-year to 647 tonnes, in line with lower lead metal production and reduction of silver WIP.
At the current run rate production, we are confident to deliver another stellar performance in the fiscal year 2023. Coming to project update, I am elated to inform that our alloys project under Hindustan Zinc Alloys Private Limited has progressed ahead and have received consent to establish for a 30,000 tonnes plant.
We look forward to meeting the demand for zinc alloys in the Indian market. On the fumer commissioning, we see the long wait coming to an end, the visa process for technical experts is in advanced stages, and we expect the commissioning to be completed by end of quarter 1 of this year, post which we can expect output stepping up in a phased manner. I am also happy to update you on the progress of our mill revamping at Rajpura Dariba mill for 1.1 million tonnes per annum capacity. Construction is ongoing, and we expect commissioning to be completed by quarter 3 of this year.
Before I hand over the call to Sandeep for an update on financial performance, I would like to present our production guidance for the fiscal year 2023. We expect mined metal for the year to be in the range of 1,050,000 to 1,075,000 tonnes and refined metal production for the year to be in the range of 1,000,000 tonnes to 1,025,000 tonnes. While FY '23 saleable silver production is expected to be between 700 to 725 tonnes.
With this, I hand over to Sandeep to give an update on the financial performance.
Thank you, Mr. Misra, and good afternoon, everyone. It was a record fiscal year where we've done significant milestones and continued positive momentum of our financial performance. we delivered high -- historic high annual revenue, EBITDA and net profit. This winning streak is supported by our consistent efforts on operational efficiencies, volume delivery, cost rationalization as well as favorable LME environment.
Being in the first quadrant global cost curve, our margins exhibit resilience even in an input commodity inflationary environment, as positive correlation to LME prices create a favorable trade-off for us.
Coming to an update on financial performance for the fourth quarter and full year ended March '22. Revenue from operations during the quarter was at record INR 8,797 crores, an increase of 27% Y-o-Y, led by higher zinc volume and better premium as well as higher zinc and lead LME prices, which was partly offset by lower lead and silver volumes. Zinc silver volume -- zinc sales volume increased 8% Y-o-Y, in line with higher production and robust demand.
Over the year, zinc and lead LME prices were up 37% and 16%, respectively. Sequentially, revenue was up 10%, primarily driven by higher zinc prices and lead volume, partly offset by lower silver volumes. Zinc LME prices were sequentially up 12%, while lead volume was up 5%.
For the full year, revenue was higher by 30% to a record INR 29,440 crores, led by higher zinc volumes and stellar zinc and lead LME prices as well as higher silver prices from a year ago.
Zinc COP before royalty during the quarter was $1,136 per tonne, lower 1% sequentially, though it was up by 24% Y-o-Y in INR terms and up 21% in USD terms. For the full year, zinc COP, excluding royalty, was $1,122 per tonne higher by 18% Y-o-Y.
Overall, COP has been adversely affected by higher coal prices and higher use of imported coal owing to lower linkage coal availability. This was partially offset by operational efficiencies, higher volume and better recoveries. EBITDA for the full year was a record INR 16,289 crore, up 39% from a year ago primarily on account of higher volumes, rising LME prices, partially offset by higher imported coal prices, lower domestic linkage coal availability as well as rising HSD and met coke prices.
EBITDA for the fourth quarter was at INR 5,007 crore, 29% higher versus last year's same quarter and is up 14% sequentially, on account of higher prices, better premium and well-managed operating costs.
Tax rate for the year was at an average of approximately 31.7%. The higher level versus previous year was mainly due to the end of certain tax holidays and change in proportion of total business profit versus the total taxable profit. Our cash tax rate would still be around 17% as we have met credit available.
For the full year, consolidated net profit was INR 9,629 crores, up 21%, wherein the impact of higher EBITDA was partially offset by lower investment income due to declining interest rate regime and higher ETR. Consolidated net profit for the quarter was INR 2,928 crore, up 18% Y-o-Y and 8% sequentially due to lower interest income and higher taxes.
Another key update this quarter is on locking in future zinc prices. During the quarter, the company sold zinc forward for nearly 15% of FY '23 projected zinc volume. Given fast-evolving business situation, we have embarked on strategic hedges and will remain flexible and dynamic to harness right opportunities.
Coming to our cost and CapEx guidance for the fiscal year 2023, we expect zinc COP in the range of $1,125 to $1,175 per tonne for upcoming fiscal year, which is the inclusive of higher mine development expenditure to support future volume growth.
We would appreciate the guidance comes in an extremely uncertain environment with rising imported coal prices, lower domestic coal availability and geopolitical tensions which is impacting supply chain globally. Given the fact that we have maintained our leadership position in the global cost curve, we remain confident to protect and improve our margins.
Project CapEx for this year is expected to be in the range of $125 million to $125 million (sic) [ $150 million ]. We will continue to have a focused approach to invest in strategic projects with higher IRRs and towards sustainability aspect of the business.
With this, I open the floor for your questions.
[Operator Instructions] First question is from the line of Amit Dixit from Edelweiss.
Yes. I have 2 questions. The first one is essentially on the guidance. So guidance for FY '23 as far as mined metal production and refined metal is concerned, it seems to be a little bit soft when compared with the initial guidance for FY '22. And with the fumer volumes expected to come in and we are already operating at 1.2 mtpa. So this seems to be little bit soft. I just want to know what we are missing here. That is my first question.
Okay. So thank you for your question. And so look at it -- how do we look at it? Last year, we crossed the 1 million tonne threshold as far as metal and concentrate is concerned, and the focus shifts to smelting, which always have the capacity to produce 1 million tonne metal, but we have never been tested on that ground.
This year is the testing ground for smelters to be tested to produce 1 million tonne metal in a way that maximizes revenue from the quality of metal that it produces along with the different value-added products along with our ratio of domestic is to exports. So that's why if you look at the guidance, the focus has shifted more towards the metal than from the mining because on the MIC 1 million tonne-plus, we will be producing in any case and that guidance is not -- will not be perhaps necessary guidance going forward.
Going forward, the guidance will be more on the metal where we are focusing on 1 million tonne-plus production as the focus. But however, our commitment remains to deliver 1.2 million tonne metal as quickly as possible.
Okay. The second one is essentially on the zinc forward, you mentioned that we have the forward contract for 15% of volume for zinc. Have you done anything for lead also? And is there some currency hedging and at what price we have hedged?
So we have hedged the 15% of volume of our zinc. No hedging has been done for the lead, and the prices are above the $4,000.
Okay. And there is no currency hedging.
No currency hedge for this specific [ hedging ].
The next question is from the line of Anuj Singla from Bank of America.
Yes. My first question relates to the cost of production. There is a decline of around 1% Q-o-Q. Can you talk about the key drivers? And also what was the coal linkage materialization in this quarter?
So during the coal linkage materialization, situation did not improve. We received near -- around 3% of the linkage coal in our overall coal basket. So the better COP or the well-managed COP was attributable on account of the higher volume, operational efficiencies and various operational parameters recovery and our recovery kind of things, which have been helping us to improve the cost.
Okay. Okay. Got it. And secondly, so we -- I think a couple of years back, we were looking at 1.2 million to 1.5 million expansion for the mining capacity, and we are still a long way away or maybe a couple of years away from achieving 1.2 million. Can you give us some kind of time line? When do we start investing for this 1.2 million to 1.5 million tonne expansion? And is there some amount of CapEx already included in the CapEx guidance for FY '23? And also an update on the custom smelter, which we were contemplating in Gujarat?
So I will start from the last. Custom smelters are still a way off because the public hearing has not been held. And once the public hearing is held, then we will perhaps come back with our farm project proposal. What's in hand right now is, as I said earlier, to cross 1 million tonnes-plus in the smelting capacities and to put up some balance facilities that the smelting itself is not only tested for 1 million tonnes also is able to produce slightly over and above 1.2 million tonnes.
So that sets the stage for going to 1.5 million. All practically speaking, we should see the design work for 1.5 million being over by another 2 quarters. And then for us, we'll be able to let you know what would be the project plan and when we would be commissioning those -- when we'll be embarking on those projects.
The next question is from the line of Abhiram Iyer from Deutsche CIB Centre.
Sir, could you give us any guidance on the sort of an inorganic expansion plans that you were looking for in the last couple of quarters, particularly with say, Zinc International and other companies that you were looking for an expansion? That's the first question.
And the second question is, could you give any guidance on any dividend payout that the company is thinking about or the management is thinking about?
Okay. So again, let me -- Arun Misra here. Let me do it in the reverse order. As far as dividends are concerned, it's a matter for the Board to consider and approve. Whenever they do so, surely we'll be able to let you know very happily. On the other hand, as the inorganic growth, yes, it's a part of our overall vision to be #1 lead and zinc producer in the world. And we are, including the target that you are thinking of, Zinc International, if we add that to Hindustan Zinc, we are already #1 in the world.
But what if we add these 2, then 1 plus 1 would make 11, that's our belief. However, if it were to happen, it will happen with due regulatory approvals from all fronts. So we are still on the drawing boards and whenever we do get the approvals, we'll surely let you know.
So as of now, it's not imminent on the horizon? It's still going to take some more work? Is that understanding correct?
So such kind of discussions cannot be time-bound. The tipping point can arrive sooner or later. However, I would not speculate on the time when the tipping point arrives.
The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services.
Sir, my first question was in regard to the 1.2 million to 1.35 million tonne expansion. So you mentioned but you've mentioned that your first target would be achieving a million tonne of metal sales. So when do we plan to hit 1.2 million tonnes of metal sales?
So first task, as I said, our smelting already has 1 million tonne-plus capacity. The guidance that has been given is on the 100% confidence factor on achieving those numbers. And on that, the guidance is given so that itself puts us closer to 1.2 million tonnes.
However, there would be certain balance facilities that we will require so that we can produce the product of the grade -- all that can be sellable with the maximum return. So those design work we are already in, and we should be able to commission certain projects, like we are doing the melting-casting project in Hindustan Zinc through a subsidiary that would see addition of about 30 kt of value-added products in our product portfolio that we already have. 1.35 million includes some of expansions like Zawar mine has to go from 4 million tonnes to 8 million tonnes ore mining capacity. Our Rajpura Dariba mine, which is currently 1 million tonne to be taken to 4 million tonnes. While we have launched the work through sustenance CapEx of the seeding work for expanding these mines.
Just to give you few examples. Suppose Zawar mine has to go to 4 million tonnes to 8 million tonnes, a couple of new portals to be made, some of the underground tunnels to be widened. So without launching another growth CapEx through the sustenance CapEx route, we have already started addressing a few of that work which provides us a base.
Similarly, Rajpura Dariba mine completes hydrogeological study for the best way to enter the [indiscernible] of the mine, that is being done now. So that's why I said another couple of quarters, we should be able to come back with a firm plan that this is the route to 1.5 million tonnes and these are the timelines. Of course, 1.35 million tonnes is intermediate milestone, and that will also be equally clear at that point of time.
That's nice. Sir, my second question was with regards to the coal cost and coal sourcing. If you could please help us with what kind of coal sourcing are we currently doing and what are the costs?
So if you see my total coal cost -- total cost bucket, coal used to be 25% to 28%. So I can give you the ballpark number. It's currently around 35% in my total cost. And coal sources are mostly from the South Africa, Indonesia and Australia. And largely, as I said earlier, domestic coal availability is meager and we are getting only 3% to 4%. So obviously, my large chunk is coming from the imported coal.
I see. And sir, finally, if I may just squeeze in just 1 more. You just mentioned that we have now started the process of hedging forward sale and 15% has been done at $4,000-plus. So does that give you a confidence that the $4,000-plus may not remain at the current levels, and are you expecting a correction? Or do you see that -- or is there any other thought process for hedging?
There are concepts on the global growth and expected yields on the supply cost in the quarter 2 calendar '22. Situation remains quite dynamic. So we believe that it was the right timing to enter hedges, and we obtained the 15% of the volume and 85%, you can assume, it is still open. So we are keeping the wait-and-watch and see what can be the best in the interest of the business.
The next question is from the line of Vikash Singh from PhillipCapital.
Sir, just wanted to understand our CapEx on the balancing facility to make this smelter to 1.2 million tonne. What could be the CapEx or the CapEx has already been happened for that? So if you could shed some thought process on that?
See, we -- just now, I said, we have already had a CapEx approved by the Board for forming a subsidiary company and add 30 kt of value-added product addition. So that will take a little more above 1,123,000 tonnes capacity that the smelter has had.
We also have a CapEx already approved for debottlenecking of current smelters to push up their capacity. So as of now, I see no reason why we should not be producing close to 1.2 million tonnes finished good metals through the existing facilities. Whatever little known balancing facilities requests for to -- come to 1.2 million, we will do that.
But as I said, my -- the way I would be working is first assure the mines produce equivalent amount of metal in concentrate. Last year, we have demonstrated 1 million-plus. This year, we have to go even further than that. And at the same time, test the current smelting capacities. So that's why I said 1.2 million will just be crossed intermediately while we start launching program for 1.35 million and then 1.5 million.
No, so basically, I just wanted to know the CapEx. If you have already firmed up for this incremental volumes?
No, it is already approved. So there is nothing, no new CapEx is considered for that.
Amount actually. So how much we are going to spend in FY '23, if I may ask differently. FY '23 CapEx runs...
This is Sandeep here. So in the smelter, there is no CapEx to be done for achieving the capacity which Mr. Misra has said.
And overall FY '23 CapEx would be mostly maintenance CapEx now then?
So project CapEx at $120 million to $150 million, that is the CapEx guidance which we have given, that will be largely pertaining to our RD mill revamping, our alloy facility setup and our new solar renewable energy power project which we have announced. These will be 3 projects and remaining that will be the sustaining CapEx or maintenance CapEx, whatever you say.
Understood, sir. Sir, just one last question. Any thought process up to what percentage we would like to hedge? Apparently, we have 15%, but any threshold which you have decided that up to this percent we want to go to hedge or it could be dynamic hedging?
So as I stated, if the situations remain dynamic, so as we see the prices move forward and how the geopolitical situation improves, and we will continue to be the wait-and-watch and see what is the decision which is in the best interest of the business.
The next question is from the line of Ritesh Shah from Investec.
Sir, a couple of questions. First is, can you provide some details on what's the zinc PCRC trends at and the physical market premiums? That's the first question, sir.
So -- but we are an integrated producer, it is not applicable to us. So I don't think I'll be commenting on PCRC trends in the market.
Sure, sir. Physical market premiums, if you can help me?
So on the zinc and lead, the premiums while we can't disclose the full numbers, but I can say it's an increasing trend.
Sir, would it be possible to quantify how it has moved on a sequential basis?
Sequentially, it will be up with a good amount.
Sure. Sir, my second question is, I think the company had taken approvals regarding shifting capital from general reserves to retained earnings. Would it be possible for you to qualify what this quantum was?
The quantum was around INR 10,000 crore, and we have received the NOC from the National Stock Exchange. And as of now, we are awaiting the SEBI clearance, and they have asked the question which we have submitted the reply.
Okay. And sir, how should we understand the rationale for the INR 10,000 crores of movement? Is it -- should one assume the more flexibility of funds, which could eventually translate to dividend payout? Or how should one read into this? .
So this was done in the last quarter when we announced about this scheme. It takes around a year to get that completely done. Obviously, it gives the flexibility. However, it is an enabling provision and at this point of time, I would like to comment -- limit my comments to that extent.
Okay. Sure. And my third question is on Hindustan Zinc stake sale. Has there been any progress from the government front or is the company trying to move forward? Where exactly is that right now?
I didn't get you. Hindustan Zinc, you're asking about disinvestment?
Yes, sir.
Okay. No, so disinvestment, it was approved by Supreme Court. And after that, there were certain procedural issues that had to be cleared and as far as my information is concerned, government is ready for that. Only government is working out what should be the modality, should it be done in one go or should it be done in many tranches. So that's what they are working out and whatever suits to them, they will do that.
So this is something which is entirely with [ the term ] now and there is no legal hurdles which are there, right? Would that understanding be correct, sir?
I didn't get you. There was some not clarity in the voice. You are asking about, this is with the government. Government has to do that, right?
Okay. Okay. And sir, is there any timeline over here?
No. There's no timeline. I think the sooner the better. And as a citizen, I can say all of us expect that government has no business being in business. So the sooner they do it, the better it is.
The next question is from the line of Abhijit Mitra from ICICI Securities.
Yes. I have 2 questions. First question is if you can highlight the ore production from some of your key mines for the year, for the fiscal 2022 and the total mill door that you have screened for the fiscal as well as the feed grade that you have screened for the fiscal? That's the first question.
So you want the full table of ore production, ore grades, treatment, mill grade.
Ore milled and feed grades...
I will tell you the large number, okay? It's -- year-on-year about 5.7% increase in the ore production, okay? It's about -- this year, we finished at 16.34 million tonnes. The breakup of mine-wise, it will be time consuming and will take up the questions from others. I will request our -- Shweta Arora to get in touch and give you the mine-wise details.
And ore grade was 7.08 in this year. This was slightly lower than our business plan that we had and it was lower than FY -- the last year also because we are going deep in the underground. However, this year, the areas in the mines we have reached, we see the possibility of a better grade coming in. And what was the next, that was the grade and the total ore production, what else?
No. So the idea was to understand the drop in lead and silver production. So if there is a drop in...
No, no, no. That is not the reason for drop in production. Drop in lead production and silver production is because we were producing a huge amount of zinc concentrate and our Pyro facility can be run in 2 modes.
One, when it runs with both zinc and lead concentrates to produce some PW zinc and [indiscernible] zinc as well as some lead or which can be done only 100% lead mode. Last year, we operated this facility on 100% lead mode because our mined metal production was low.
This time, mined metal production has crossed 1 million tonne and zinc LME being more than $4,000 per tonne, we wanted to take advantage of that, and we operated Pyro mostly in -- or all the time in zinc plus lead mode to produce more and more zinc. So to that account, consumption of lead concentrate has been less and lead concentrate has been with us as a stock.
So this year, we are planning that we will convert region with more zinc plus lead, but we are trying to create that balancing strategy that I was talking about to see that how can I increase with a little bit of tweaking in the process or some balancing facility in the process, consume more and more lead and produce the silver, which is locked inside lead. So that is the reason. There is no reason that the ore production has been less or mills have not operated.
Okay. Got it. So essentially, what we have seen as a total production is the peak production unless there is some debottlenecking, which comes through probably over the course of the next year? Is that the right understanding?
Yes. Only in the lead circuit, I need some amount of debottlenecking.
Okay. Okay. Okay. Got it. Got it. And generally, this debottlenecking will sort of take place through FY '23 or you will see it sort of spilling over to FY '24 as well?
We are already on the job. And in this first quarter, maybe we'll be still running on zinc and lead mode, and we are suitably evaluating both on the LME, depending upon how it goes and on the mined metal production wise, whether we run on zinc plus lead mode or only zinc or only lead mode or we are also parallelly debottlenecking what is gone. By quarter 2, I think we should be able to push up our lead processing facility.
The next question is from the line of Pallav Agarwal from Antique Stockbroking Limited.
Sir, I had a question on the supply side. So we've seen such elevated energy prices, which is probably leading to some smelter cast in aluminum, et cetera. So have we started seeing something similar in zinc as well?
I think zinc, the gas prices being high and Europe being badly affected because of the gas prices, so supply side, there is still constraint. I mean smelter capacities are still not the full capacity that they were earlier. So that's what is supply constraint in the market, and we see that the prices up there.
And this input side of the pressure is not easing any sooner. And our prediction is maybe another quarter or so, this will remain, and that is the opportunity we are looking at. And in fact we, with the current amount of mined metal we have produced last year and the zinc production, the way -- last quarter, we finished at 260,000 tonnes, and we continue like that, we will have to have more -- a good amount of export of zinc as well.
And Europe and America are the 2 continents which provide lucrative business, but the shipping freight costs are quite high. So that is another debottleneck we have to perform to find the solution how to cater to those markets while paying lesser freight cost and get maximum earnings because those are the contingents where there will be high demand, but the supplies are constrained.
Sure, sir. Sir, also on the situation in China with again, corona cases going up over there. So are we actually seeing the utilization levels over there also for zinc smelters declining and probably some -- they never used to export too much, but probably there some sort of -- we can actually start importing some amount of zinc and lead? Is that a possibility?
So in China, mostly the news that we get to is the city-based population, urban population, are affected as of now. As of now, it is not showing any impact on the industry as such. However, the question is, although the Russia-China trade remains all-time high last quarter also, the trade between Russia-China was all-time high, and that means their internal trade volumes [Technical Difficulty] China's economy is so to say.
So their production levels are not an issue. Issue is with mostly the European production level because their energy prices are too much. China already had a huge amount of coal production back by themselves.
Sure, sir. Sir, lastly, if you could just give us a broad percentage of our zinc volumes, how much is domestic and how much are we exporting, let's say, in FY '22?
So roughly about 62% of our productions are domestic, and that quantity itself is 83% of our domestic market.
The next question is from the line of Rahul Jain from Systematix.
One thing again on your -- coming to your guidance. Sir, we're consistently missing our guidance quite sharply and especially on silver; how confident are we with the fumer commissioning and other things [Technical Difficulty] expansion that we have been more closer to our guidance for '22 -- '23?
So this time the guidance that talks about 700, 725 tonnes of silver includes quarter 3 and quarter 4 production of silver through the fumer route. The fumer experts where we are stuck with the visa not being approved or they were not able to travel because of various COVID restrictions as well as Indo-China relation, but now most -- about 7 or 8 experts have already gone there -- got their visa, rest of the workmen are getting the visa, and I say, our team is working with the project of getting their visas done.
And then we are expecting that this quarter end most of the repair work is already over. It's only their coming and commissioning, which should be anytime between -- towards this quarter end, the commissioning should be over. And then slowly, it will ramp up. So quarter 3, quarter 4, we should see full volume coming from there. So that should add another 16, 17 tonnes of silver from there. The rest of the silver will come from our current operations that we have designed this year.
Right, sir. And sir, also on the government slowly probably exiting in say next 2, 3 quarter. So do we see any kind of a change in our management approach, in sense we will be more willing to take up more projects or doing more acquisitions? I'm sure there would be a lot of smelters which would be available cheap than today's market. Is there -- would that be a possibility in the future?
Possibility of your meaning merger and acquisition on smelters?
Or yes, some kind of -- because it's like we've had this government hand in our company. And with that getting away, would that, there be a change in approach and...?
So it's -- let me put it the other way. Government being in the Board restricting our ability to expand, perhaps that's not true. Governments still remaining in the Board, we have expanded from 100,000 tonnes to about 1 million tonne, which is 1000,000 tonne. [Technical Difficulty]
So I don't see that as the bottleneck. What is at stake is private participation in management brings in more innovation and creativity -- so disinvestment happens, it throws up more opportunities, very difficult to fathom just now. But one thing for sure, the company which is [indiscernible]can grow both organically, inorganically with a much speedier decision-making perhaps and also the -- there are certain articles of shareholders agreement and limitations that puts in; perhaps those will be the issues to be talked about. But I would not quote that our current growth in anyways is impeded by government being on the Board, rather they have been very supportive.
And sir, the last mine we opened was Kayar. After that, we really haven't done much in terms of new mine exploration. Any possibility on that also?
So, in new mine, which is the exploration, we have already waiting for -- we had some earlier prospecting licenses on which we are talking to government. At the same time, we are waiting for this sector to be thrown open like what has happened in the bulk mineral category and expecting more and more blocks to be offered to companies like ours for participation in both prospecting as well as mining leads. So whenever they are open -- we are in the touch with the state government of Rajasthan, whenever they are open, Hindustan Zinc will be the first participant at least to all the nearby blocks wherever we can mine.
The next question is from the line of Mr. Dixit from Edelweiss. .
I have a couple of questions. The first one is on the capital mine development in this quarter, if you can give the number?
13 kilometer of the capital mine development during this quarter.
Okay. And the second question is on essentially tax guidance. So you mentioned in your opening remarks that the tax rate was 13.7%, the tax holiday ended. Now what would be the tax guidance for FY '23?
This continue to remain largely at the same level for the FY '23.
That is 32% or there about?
Yes.
The next question is from the line of [ Saket Reddy from Paulson Enterprises ].
The FY '23, the 15% of projected sales that you sold through zinc forward, so sort of recommitted, what is the pricing for that? Zinc forward pricing.
So the hedging price has been above the $4,000 per tonne.
Okay. And the second question is, we've been doing a lot on the ESG front, be it EVs, be it the captive power plant. So I just wanted to know over the longer run, say, over 5 to 10 years post effect, post commission, will these be cost accretive for us, the power plant or use of -- usage of EVs in the mines and surrounding places?
So you are talking about on the ESG vision, what we will do with the power plants in the long run?
No. The ESG vision for the power plant is fine, the drainable power plant, but will it be cost accretive for us over a longer time period?
No, no, it will be looking at the geographical location of our facilities where we are not surrounded by huge coal mining blocks or nearest domestic coal suppliers. And as you can see, our cost pressure also, over the years, our domestic coal supply has not been up to the percentage that we require.
We require about 30% in our mix as domestic coal, which keeps our cost down, but we have not been getting more than 2% or 3%, some quarters, absolutely nothing. So when we look at our current purchase price cost with the [ earning ] power, as of now, whatever options we have looked at, it is economically lucrative as well.
Okay. Okay. And last question, sir. What is your guidance on debt? We've reduced it by more than 50%. I think we've taken it in FY '21. Any plans to be debt-free again? Or do you plan to raise some more debt?
If you see a net debt level, we are already debt-free. We have NCD of INR 2,800 crore which will be paid as per the schedule of maturity, so INR 700 crore will be paid in September '23 and remaining INR 2,100 in the September '24. There is no plan of taking any new loans.
Ladies and gentlemen, we will take the last question from the line of Vishal Chandak from Motilal Oswal Financial Services.
Sir, my question was with regards to the merger with Zinc International again. You mentioned that there are a lot of possible synergies if these 2 entities merged. But what I was trying to understand that is there really a talk going on? Is there a possibility in the current year, next year for the merger? Or we are just envisaging that if this happens, then there would be a lot of synergies?
So as far as what is happening now is, we have done our homework and understanding the properties, resources, how to upgrade them, what would be the project plan because current status of Zinc International is somewhat like what Hindustan Zinc was at the time of its first disinvestment. So how do we bring it up to speed the way Hindustan Zinc is now, that would be on value addition, number one. And with our experience, we feel that we can do that a bit better. And second is when and how it will happen? Of course, this takes a lot of approvals, which are in progress. And whenever it happens, we could let you know, but also that does not stop us from thinking growing our numbers here in India as well. Our entire game plan was once we cross 1 million tonne, we should start our project thinking for 1.35 million tonnes. And once we go past 1.2 million tonnes, we should start project worth of 1.5 million tonnes in India. In the meantime, work on at least 0.5 to 1 million tonne capacity abroad, which is with may be Zinc International provided everything goes through.
That's quite helpful, sir. Sir, my last question was with regard to your guidance. The guidance that you have given for FY '23 in terms of volumes, how much of that takes into consideration that the fumer would get commissioned by the end of Q1? And what is the fumer contribution in that volume?
Fumer contribution as far as this number is concerned, important contribution is in terms of silver. If you look at zinc contribution, this is marginal. The silver contribution would be about 30 tonnes in the year. If I get 2 quarters, then it will be about 15 tonnes.
Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Shweta Arora for closing remarks. Thank you, and over to you, ma'am. .
Thank you. With this, we close today's earnings call. For any follow-up questions or clarifications from the results, please feel free to reach out Investor Relations team. Thanks for joining.
Thank you. .
Thank you.
Ladies and gentlemen, on behalf of Hindustan Zinc, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.