Spending on mining expansion may rise to $320 mn: Hindustan Zinc

The second half of the current fiscal is going to be stronger for Hindustan Zinc, says its chief Executive Officer Sunil Duggal. The company's mined metal production is going to be more than FY16's figure of 8.9 lakh tonnes, he adds.Duggal also says the costs for the company will remain flat or may be less than FY16 numbers.Normally, the company spends USD 200-225 million on mining expansion every year. But according to Duggal, the spending may rise to USD 300-320 million. Below is the verbatim transcript of Sunil Duggal’s interview to Reema Tendulkar and Nigel D'Souza on CNBC-TV18. Nigel: You all continue to maintain your higher mined production guidance that is at around 9 lakh tonnes. Are you confident about that? A: Yes, we have confirmed that our mined metal production will be more than last year which was around 890 KT. So, you have seen that in quarter two our volume has gone up by 50 percent from quarter one. This is in line with the guidance we had given in the last quarter and in this quarter also we are giving the guidance that H2 will be substantially higher than H1. So, overall guidance of having metal more than last year still we are maintaining. Reema: So, your mined metal production will have to be 80 percent plus in the second half of the year versus first half. So, will the costing go down and the coal cost, fuel costs will they be higher, give us some guidance on the margins as well? A: Quarter two the costs has gone down by around 15 percent which is a result of the volume. Some of the internal efficiency improvement has set off the commodity prices which have gone up, that means the coal cost, other commodity prices and diesel. Going forward also as we have given you the guidance that H2 volume will be substantially higher than the H1 volume. So, the cost will also go down because the volume will substantially go higher. On an overall basis I want to confirm and give a guidance that overall cost for the year will be either stable or less than last year. Nigel: Your mined metal mix is changing from open cast to around underground. Tell us what is the estimated implied cost. What is the capital spending, what has it been and what is it like going ahead? A: This year it will be around USD 300-325 million compared to USD 200-225 million last year. The capex cost if going up this year because the new mills which are coming up at a couple of our mines the concentrated plant that both these mines you will get commissioned in the last quarter and because of which the higher capex. Along with that both the Rampura Agucha and Sindeshwar Khurd mines are getting equipped. So, the supply of the equipments, the parts are coming up which are being installed and because of that the capex cost has gone up this year. Going forward in the next 2-3 years the capex cost will be around USD 250 million and overall we have maintained that the total capex cost on our underground mines expansion will be past Rs 8,000 crore. Reema: Reports also suggested that the company will consider a buy back to the tune of 20 percent of your paid up capital which is Rs 7,500 crore. Could you confirm that some clarity on buy back as well as your dividend policy going forward? A: There is no discussion which is going on currently on the buy back.