Hind Zinc

Hindustan Zinc posted some very good numbers for Q4FY15, led mainly by good volume growth though metal prices remained low. The same scenario which we saw in Q3 – increasing volumes drive growth.

During the quarter the company showed a record mined metal production of 269kt - up 34% (YoY) and record integrated zinc and lead metal production, up 21% and 14%  respectively. EBITDA for the quarter was up 14% to Rs. 1,978 crore and it ended the quarter with a net profit at Rs.1997, up 6%. Revenues were up 13% from a year ago to Rs. 4,073 crore with the increase being driven by higher zinc sales & LME, partly offset by lower lead & silver prices and silver volumes.

The quarter saw an increase in Zinc royalty – up from 8.4% to 10% and lead royalty increased from 12.7% to 14.5%, w.e.f September 1, 2014. Royalty rates for zinc and lead in India are the highest in the world and much higher compared to other base metals. In addition, an amount equal to 35% of royalty was provided w.e.f January 12, 2015 for DMF (33%) and NMET (2%), even as notification for DMF contribution under the MMDRA Act is awaited.

In terms of prices, zinc price during the quarter was up 2% (YoY) at $2080/MT while lead was down 14% at $1806/MT and silver was down 18% at $16.7/oz. And in terms of production, total refined zinc was up 19%, lead was up 14% and silver was down 11%. Even its wind power production was down 4%.

The company has issued caution over the new Mines and Minerals Development and Regulation) Amendment Act, 2015 (MMDRA Act). Though a good move for ushering in transparency, for existing miners, the contribution to District Mineral Foundation (DMF), exact rate of which is not yet known, can potentially impact mining of low grade and deep ore bodies which will not be conducive to growth of mining in the country.

The Company’s cash and cash equivalents increased by 6% from the end of Q3 FY 2015 and 21% from a year ago. As on March 31, 2015, cash and cash equivalents were Rs. 30,785 crore, out of which Rs.23,333 crore was invested in mutual funds, Rs. 3,921 crore in bonds and Rs. 3,502 crore in fixed deposits.