Volume guidance for MIC, finished metal at 900-950 kT: HZL

Hindustan Zinc Limited is on track to achieve volume guidance that it had outlined last year, which is 900-950 kiloton, CEO Sunil Duggal told CNBC-TV18.In an interview with CNBC-TV18, Duggal said the global zinc demand was seeing growth of 3 percent but added that zinc cost had come down by about 15 percent in US dollar terms. He expects prices to bounce back from early 2016.Hindustan Zinc had been spending about USD 200-250 million on capital expenditure every year, he added.Below is the verbatim transcript of Sunil Duggal's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: The results continue to surprise the street because of the very strong volume growth that you have seen, have you internally increased your volume estimates for the next couple of years?A: Our volume estimates will be in line with what guidance we have given. This is somewhere between 900 and 950 kt and 350-400 tonne of silver. This is broadly the guidance of the volume. However, if you see how we have behaved in the last six months when the commodity prices are volatile and speculative also, we have focused on our internal efficiencies and we have challenged our efficiencies looking at the benchmarking manpower productivity. You must have seen that the result or the margins which are visible from the last quarter, which has broadly come from what we have internally done and the cost also has come down by around 15 percent year-on-year (Y-o-Y) in dollar terms.Latha: Can you repeat the total volume guidance again, will that be higher of 950,000 tonne in FY16, the earlier guidance was 930,000 tonnes for FY16, right?A: No, I said broadly the guidance is more than the volume of last year. That means the metal in concentrate (MIC) volume and the finished metal, we have always said that this will be significantly higher than last year but if I broadly talk of the numbers, it will be somewhere between 900 kT to 950 kT of MIC and 900 kT to 950 kT of finished metal and 350-400 tonne of silver.Sonia: Can you give us the outlook on zinc prices going ahead?A: If you see how the last six-eight months have behaved, the London Metal Exchange (LME) was quite good and China smelters increased their production looking at the healthy trend of the LME and they produced the numbers and pushed the material into the market.Apart from that, some of the traders also pushed the stocks into the market. There has also been a slow growth of the global zinc market, which is around 3 percent against the expectation of around more than 5 percent and slowdown of China. So all these factors in balance the supply/demand scenario and that is how the LME fell and the premiums also fell, there was a huge pressure on the premiums.Latha: What will be the impact of that Glencore production cut by 500,000 tonnes?A: Glencore announcing the cut in the production and some of the marginal mines in the China also announcing the cut in the production and the Lisheen mine and Century mine closing down this year which are high profile mines, it will take away about a million tonne of the raw material that is the MIC from the market and this will tilt the balance in terms of the concentrate shortage. Depending on that, I am expecting the zinc prices will rebound by the yearend and then the zinc prices will look up.Sonia: When you say, look up, can you quantify that for us, are you expecting 5-10 percent hike in zinc prices by the end of the year?A: It is hard to say the number but looking at the one million tonne mine supply coming off and this will tilt the balance and we are feeling that both the zinc prices and the premiums will look up by the year-end.Latha: So you have any expansion plans?A: We have a plan that we are expanding all our mines together. All our underground mines are expanding together, which is a unique position in the world that nobody might have done the simultaneous expansion in all the mines. So basically what will happen is that we traditionally have been open-cast miner where the 80 percent of the volume has come from the open-cast.Going forward, we are ramping down the open-cast and we are going underground. So simultaneous production increase from all the mines together, this will replace the open-cast mine and by the year 2021, all our production will come from the underground mines.That means along with replacement of the open-cast mines with the underground mines and the expansion plan, our mine metal production will go up from a million tonne to 1.2 million tonne capacity. That means, we will be producing additional quantity of MIC and we will be debottlenecking our smelters and producing the additional metals from our current smelters by debottlenecking them.Latha: What are the capex plans?A: We have spoken about our capex and we are spending around USD 225 billion of flow capex every year both on our expansion and the sustenance together. So this is in line with what plan we have in the next three-five years to take over production up from one million tonne to 1.2 million tonne.