Hindustan Zinc Ltd (HINDZINC) Q4 2022 Earnings Concall Transcript

Hindustan Zinc Ltd  (NSE: HINDZINC) Q4 2022 earnings concall dated Apr. 22, 2022

Corporate Participants:

Shweta Arora — Head of Investor Relations

Arun Misra — Chief Executive Officer

Sandeep Modi — Interim Chief Financial Officer

Analysts:

Amit Dixit — Edelweiss — Analyst

Anuj Singla — Bank of America Merrill Lynch — Analyst

Abhiram Iyer — Deutsche CIB Centre — Analyst

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Vikas Singh — PhillipCapital — Analyst

Ritesh Shah — Investec — Analyst

Abhijit Mitra — ICICI Securities — Analyst

Pallav Agarwal — Antique Stock Broking Limited — Analyst

Rahul Jain — Systematix — Analyst

Saket Reddy — Polsani Enterprises — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Hindustan Zinc Fourth Quarter and Full Year FY ’22 Earnings Conference Call. [Operator Instructions].

I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations. Thank you, and over to you, ma’am.

Shweta Arora — Head of Investor Relations

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 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.

Arun Misra — Chief Executive Officer

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 colleague in an unfortunate accident that happened at our Rajpura Dariba Mine on the 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 standby the family in this hour of distress. And in this incident, investigation is conducted through an independent investigation committee. The learning 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 three global mining safety experts and safety officials for different mining locations. In addition, we have appointed a DGMS official to handle 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 the 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 outcome, which challenges traditional mental blocks and helps to — helps transcend boundaries in terms of performance.

We also have a dedicated program running for talent identification and development, particularly focusing on younger talent 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 a 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 megawatt. 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 next three 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 staffs, passenger EVs at locations and specialized smart underground series EV for mines. We have also initiated task force on climate related financial disclosure 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 target in line with Science-Based Target Initiative requirement for our commitment to reduce the greenhouse gas emission to zero by 2050. I am also elated to inform you that Hindustan Zinc has featured in the Sustainability Yearbook for the 5th 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 this — during these trying times. 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 centralized financial ecosystems for the communities, women empowerment, health and sports. I am happy to inform that our Zinc Kaushal Kendra received Indira Mahila Shakti Protsahan Avam Samman by honorable Chief Minister Shri. Ashok Gehlot in the field of women empowerment.

Turning to the 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 had little impact on prices with battery demand generally soft and moving into season, quiet period after winter.

Additional output from Chinese smelters only to led to rising efficiently warehouse stocks. We do not foresee any significant change on this count in the short-term. Coming to silver, investment demand remain 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 end and war-led situation leading to supply chain and 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 million ton mark in — up to 1,017 ton. This was possible only through higher ore production from all locations driven by concerted efforts and grit of all our team. Hindustan Zinc also produced its highest ever annual refined metal production and witnessed record high mine development during the year, all of this while maintaining our mine life at 25 years.

During the quarter, mined metal production was at 295,000 tons, 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 Mine, supported by better mining grades. Integrated metal production was 260,000 tons for the quarter, up 2% year-on-year and remained almost flat sequentially. This was supported by better plant and mine metal availability and improved operating parameters.

Integrated zinc production was 211,000 tons, up 8% year-on-year and was 1% lower sequentially. Integrated lead production for the quarter was 49,000 tons, 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 tons, up 4% year-on-year on account of better plant and concentrate availability. Integrated silver production was 162 tons, down 20% year-on-year and 6% sequentially, in line with WIP buildup in quarter four and change in mix of lead concentrate.

For the full year, silver production was 8% lower year-on-year to 647 tons, 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’m elated to inform that our alloys project under Hindustan Zinc Alloys Private Limited has progressed ahead and has received consent to establish for a 30,000 tons 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 one of this year, post which we can expect output stepping up in a phase manner. I’m also happy to update you on the progress of our mill revamping at Rajpura Dariba mill for 1.1 million tons per annum capacity. Construction is ongoing and we expect commissioning to be completed by quarter three 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 tons and refined metal production for the year to be in the range of 1 million ton to 1,025,000 tons, while FY ’23 saleable silver production is expected to be between 700 tons to 725 tons.

With this, I hand over to Sandeep to give an update on the financial performance.

Sandeep Modi — Interim Chief Financial Officer

Thank you, Mr. Misra, and good afternoon, everyone. It was a record fiscal year where we turned significant milestones and continued positive momentum of our financial performance. We delivered 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 quarter global cost curve, our margins actually was resilience even in input commodity inflationary environment as positive correlation to LME prices created favorable trade-off for us.

Coming to an update on financial performance for the fourth quarter and full year ended March ’22. Revenue from operation during the quarter was at record INR8,797 crore, 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 were partly offset by low 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 INR29,450 [Phonetic] crore led by higher zinc volumes and silver, 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 ton, 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 tone, 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 INR16,289 crore, up 39% from a year ago, primarily on account of higher volume, 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 INR5,007 crore, 29% higher versus last year same quarter and is up 14% sequentially on account of higher prices, better premium and well managed operating cost. 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 INR9,629 crore, up 21%, where in 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 INR2,928 crores, 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 the 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 ton for upcoming fiscal year, which is the inclusive of higher mine development expenditure to support future volume growth. You would appreciate this 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 [Phonetic] million to $125 million. We will continue to have a focused approach to invest in strategic projects with higher IRR and towards sustainability aspect of the business.

With this, I open the floor for your questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question from the line of Amit Dixit from Edelweiss, please go ahead.

Amit Dixit — Edelweiss — Analyst

Yes. Hi. So good evening. Thanks for the opportunity. I had two questions. The first one is essentially on the guidance. The guidance for FY ’23 as far as mined metal production and refined metal is concerned, it seems to me a little bit soft when compared with the initial guidance for FY ’23. And with the fumer boiling expected to come in and we are already operating at 1.2mtpa. So this seems to be a little bit soft. I just want to know what we’re missing here. That is my first question.

Arun Misra — Chief Executive Officer

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 ton threshold as far as metal in concentrate is concerned. And the focus shifts to smelting, which always had the capacity to produce 1 million ton metal, but we have never been tested on that ground. This year is the testing on for smelter to be tested to produce 1 million ton metal in a way that maximizes revenue from the quality of metal that it produces. Along with that different value added product, along with our ratio of domestic 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 of the MIC 1 million tons plus we will be producing at any case and that guidance is not — will not be for us necessary guidance going forward. Going forward, the guidance will be more on the metal, where we are focusing on 1 million ton plus production is the focus. But however, our commitment remains to deliver 1.2 million ton metal as quickly as possible.

Amit Dixit — Edelweiss — Analyst

Okay. The second one is the 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 you have hedged?

Arun Misra — Chief Executive Officer

So we have hedged 15% of volume of our zinc. No hedging has been done for the lead and the prices are above the $4,000.

Amit Dixit — Edelweiss — Analyst

Okay. And there is no currency hedging?

Arun Misra — Chief Executive Officer

No currency hedge for this specific hedging.

Amit Dixit — Edelweiss — Analyst

Okay, great. Thanks a lot. I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Anuj Singla from Bank of America. Please go ahead.

Anuj Singla — Bank of America Merrill Lynch — Analyst

Yes, thank you for the opportunity. 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?

Arun Misra — Chief Executive Officer

So during the coal linkage metalization, 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.

Anuj Singla — Bank of America Merrill Lynch — Analyst

Okay, got it. And secondly, so we — I think 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 timeline, when do we start — when do we start investing for this 1.2 million to 1.5 million ton 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.

Arun Misra — Chief Executive Officer

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’ll perhaps come back with our project proposal. What’s in hand right now is, as I said earlier, to cross 1 million ton plus in the smelting capacities and to put up some balance facilities that the smelting itself is not only tested for 1 million ton, also is able to produce slightly over and above 1.2 million ton. So that sets the pace for going to 1.5 million. All practicality speaking, we should see the design work for 1.5 million being over by another two quarters. And then for us, we will be able to let you know what would be the project plan and when we would be commissioning that those — when we would be embarking on those projects.

Anuj Singla — Bank of America Merrill Lynch — Analyst

Okay. Understood. Thank you very much.

Operator

Thank you. The next question is from the line of Abhiram Iyer from Deutsche CIB Centre. Please go ahead.

Abhiram Iyer — Deutsche CIB Centre — Analyst

Hi, thanks for the opportunity. 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, Hindustan — sorry, 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?

Arun Misra — Chief Executive Officer

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 will be able to let you know very happily. On the other hand, the inorganic growth, yes, it’s a part of our overall vision to be number one lead and zinc producer in the world. We are including the target that you are picking up Zinc International, if add that to Hindustan Zinc, we are already number one in the world. But if we add these two, then one plus one 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 board and wherever we do get the approvals, we will surely let you know.

Abhiram Iyer — Deutsche CIB Centre — Analyst

So as of now, it’s not imminent on the horizon. It’s still going to take some more work. Is that understanding correct?

Arun Misra — Chief Executive Officer

So such kind of discussions cannot be timebound. The tipping point can arrive sooner or later. However, I would not speculate on the time when the tipping point arrives.

Abhiram Iyer — Deutsche CIB Centre — Analyst

Got it, sir. Thank you very much.

Operator

Thank you. The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services. Please go ahead.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Yes. Sir, my first question was with regard to the 1.2 million to 1.35 million ton expansion. So you mentioned, but you’ve mentioned that your first target would be achieving a 1 million ton of metal sales. So when do we plan to hit 1.2 million ton of metal sales?

Arun Misra — Chief Executive Officer

So first task, as I said, our smelting already has 1 million ton 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 tons. However, there would be certain balance facilities that we will require, so that we can produce the product off the grid, 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 ton to 8 million ton ore mining capacity, our Rajpura Dariba Mine, which is currently 1 million ton to be taken to 4 million tons, 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 tons to 8 million tons, 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 complete hydrogeological study for the best way to enter the — this float [Phonetic] 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 ton and these are the timelines. Of course, 1.35 million intermediate milestone, and that will also be equally clear at that point of time.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

That’s nice sir. Thank you for the elaborate response. 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 cost?

Arun Misra — Chief Executive Officer

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 near meager and we are getting only 3% to 4%. So obviously, large chunk is coming from the imported coal.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

I see. And sir, finally, if I may squeeze in just one more. You just mentioned that we have now started the process of hedging forward sales and 15% has been done at $4,000-plus. So does that give you confidence that the $4,000-plus may not remain at the current levels, and are you expecting a correction? Or you see that — or is there any other thought process for hedging?

Arun Misra — Chief Executive Officer

There are concerns on a global growth and expected hit on the supply constraint in the quarter two calendar ’22. Situation remains quite dynamic. So we believe that it was the right timing to enter hedges, and we locked in 15% of the volume. And 85%, you can assume it’s still open. So we are keeping the wait-and-watch and see what can be the best in the interest of the business.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Thank you very much, sir.

Operator

Thank you. The next question is from the line of Vikas Singh from PhillipCapital. Please go ahead.

Vikas Singh — PhillipCapital — Analyst

Good afternoon, sir.

Arun Misra — Chief Executive Officer

Good afternoon.

Vikas Singh — PhillipCapital — Analyst

Sir, just wanted to understand our capex on the balancing facility to make the smelter to 1.2 million ton. What could be the capex or the capex has already been happened for that? If you could shed some thought process on that?

Arun Misra — Chief Executive Officer

We — just now, I said, we have already had a capex approved by the Board for forming a subsidiary company and had 30 kt of value-added product addition. So that will take a little more above 1,123,000 ton 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 ton finished good metals through the existing facilities.

Whatever little 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 cross intermediately while we start launching program for 1.35 million and then 1.5 million.

Vikas Singh — PhillipCapital — Analyst

No, so basically, I just wanted to know the capex, if you have already firmed up for this incremental volumes?

Arun Misra — Chief Executive Officer

No, it is already approved. So there is nothing, no new capex is considered for that.

Vikas Singh — PhillipCapital — Analyst

Amount actually, so how much we are going to spend in FY ’23, if I may ask differently, FY ’23 capex runs?

Sandeep Modi — Interim Chief Financial Officer

This is Sandeep here. So in the smelter, there is no capex to be done for achieving the capacity which Mr. Misra has said.

Vikas Singh — PhillipCapital — Analyst

And overall FY ’23 capex would be mostly maintenance capex now then?

Sandeep Modi — Interim Chief Financial Officer

So project capex are $120 million to $150 million, that is the capex guidance which we have given, that will be largely pertaining to our RD mill’s revamping, our alloy facility setup and the new solar renewable energy power project, which we have announced. These will be the three projects and remaining that will be the sustaining capex or maintenance capex, whatever you say.

Vikas Singh — PhillipCapital — Analyst

Understood, sir. Sir, just one last question. Any thought process up to what percentage you would like to hedge? Currently, 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 in nature?

Sandeep Modi — Interim Chief Financial Officer

So as I said, it will — 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 — take the decision which is in the best interest of the business.

Vikas Singh — PhillipCapital — Analyst

Okay, sir. Thank you.

Operator

Thank you. Next question is from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Yes, hi, sir. Thanks for the opportunity. Sir, a couple of questions. First is, can you provide some details on what’s the zinc TC/RC trends and the physical market premium? That’s the first question, sir.

Arun Misra — Chief Executive Officer

So — but we are an integrated producer, which is not applicable to us. So I don’t think I’ll be commenting on TC/RC trends in the market.

Ritesh Shah — Investec — Analyst

Sure, sir. Physical market premiums, if you can help, please?

Sandeep Modi — Interim Chief Financial Officer

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.

Ritesh Shah — Investec — Analyst

Sir, would it be possible to quantify how it has gone on a sequential basis?

Sandeep Modi — Interim Chief Financial Officer

Sequentially, it will be up with a good amount.

Ritesh Shah — Investec — Analyst

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?

Sandeep Modi — Interim Chief Financial Officer

The quantum was around INR10,000 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.

Ritesh Shah — Investec — Analyst

Okay. And sir, how should one understand the rationale for the INR10,000 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?

Sandeep Modi — Interim Chief Financial Officer

So this was done in the last quarter when we announced about this scheme. It takes around a year to get it 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.

Ritesh Shah — Investec — Analyst

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?

Arun Misra — Chief Executive Officer

I didn’t get you. Hindustan Zinc, you’re asking about disinvestment?

Ritesh Shah — Investec — Analyst

Yes sir.

Arun Misra — Chief Executive Officer

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 would 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.

Ritesh Shah — Investec — Analyst

So this is something which is entirely with DIPAM right now and there is no legal hurdle which are there, right? Would that understanding be correct, sir?

Arun Misra — Chief Executive Officer

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?

Ritesh Shah — Investec — Analyst

Okay. And sir, is there any timeline over here?

Arun Misra — Chief Executive Officer

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.

Ritesh Shah — Investec — Analyst

Sure sir. This is very helpful. Thank you so much. Appreciate it.

Operator

Thank you. The next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead.

Abhijit Mitra — ICICI Securities — Analyst

Yes, thanks for taking my question. I have two 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 seen for the fiscal as well as the feed grade that you have seen for the fiscal? That’s the first question.

Arun Misra — Chief Executive Officer

So you want the full table of ore production, ore grade, treatment, mill grade.

Abhijit Mitra — ICICI Securities — Analyst

Ore milled and feed grade.

Arun Misra — Chief Executive Officer

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 tons. The breakup of mine-wise, it will be time consuming and will take away 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 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 mix that was the grade and the total ore production, what else?

Abhijit Mitra — ICICI Securities — Analyst

No. So the idea was to understand the drop in lead and silver production. So is there a drop in —

Arun Misra — Chief Executive Officer

No, that is not the reason for drop in production. Drop in lead production and silver production is because we were producing huge amount of zinc concentrate and our Pyro facility can be run in two modes. One, when it runs with both zinc and lead concentrate to produce some PW zinc and SAG zinc as well as some lead or it can be run 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 ton and zinc LME being more than $4,000 per ton, we wanted to take advantage of that, and we operated Pyro mostly in 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 is staying with us as a stock. So this year, we are planning that we will convert even 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 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.

Abhijit Mitra — ICICI Securities — Analyst

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?

Arun Misra — Chief Executive Officer

Yes. Only in the lead circuit, I need some amount of debottlenecking.

Abhijit Mitra — ICICI Securities — Analyst

Okay. Got it. And generally, this debottlenecking will sort of take place through FY ’23 or you see it sort of spilling over to FY ’24 as well?

Arun Misra — Chief Executive Officer

See, 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 on by quarter two, I think we should be able to push up our lead processing facility.

Abhijit Mitra — ICICI Securities — Analyst

Okay, got it. That’s all from my side. Thank you.

Operator

Thank you. The next question is from the line of Pallav Agarwal from Antique Stock Broking Limited. Please go ahead.

Pallav Agarwal — Antique Stock Broking Limited — Analyst

Yes, good evening, sir. Sir, I had a question on the supply side. So we’ve seen such elevated energy prices, which is probably leading to some smelter cost in aluminum, et cetera. So have we started seeing something similar in zinc as well?

Arun Misra — Chief Executive Officer

I think zinc, the gas prices being high and Europe being badly affected because of the gas prices, so supply side, there is still constrain. 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 amount of mined metal we have produced last year and the zinc production, the way last quarter, we finished at 260,000 tons, 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 two continents, which provide lucrative business, but the shipping freight costs are quite high. So that is another debottleneck we have to perform to find a solution how to cater to those markets while paying lesser freight cost and get maximum earnings because those are the continents where there will be high demand, but the supplies are constrained.

Pallav Agarwal — Antique Stock Broking Limited — Analyst

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 anyway 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?

Arun Misra — Chief Executive Officer

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 Issues] China’s economy so to say. So their production levels are not an issue. Issue is mostly the European production level because their energy prices are too much. China already had a huge amount of coal production by themselves.

Pallav Agarwal — Antique Stock Broking Limited — Analyst

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?

Arun Misra — Chief Executive Officer

So roughly about 60% to 62% of our productions are domestic, and that quantity itself is 83% of our domestic market.

Pallav Agarwal — Antique Stock Broking Limited — Analyst

Sure. Yes, thank you so much.

Arun Misra — Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Rahul Jain from Systematix. Please go ahead.

Rahul Jain — Systematix — Analyst

Yes, hi, sir. Thanks for taking my question. One thing again on your — coming to your guidance, sir, we’re consistently using our guidance quite sharply, and especially on silver, how confident are we with the fumer commissioning and other things separately, even the Dariba expansion that we have been more closer to our guidance for ’22 — ’23?

Arun Misra — Chief Executive Officer

So this time the guidance that talks about 700 tons, 725 tons of silver includes quarter three and quarter four production of silver through the fumer route. The fumer experts where we were 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 seven or eight experts have already gone there — got their visa, rest of the workmen are getting the visa.

As 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 three, quarter four, we should see full volume coming from there. So that should add another 16 tons, 17 tons of silver from there. The rest of the silver will come from our current operations the way we have designed this year.

Rahul Jain — Systematix — Analyst

Right, sir. Thanks, sir. And sir, also on the government slowly probably exiting, say, next two, three quarters, so do we see any kind of a change in our management approach and then 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 even in today’s market. Is there — would that be a possibility in the future?

Arun Misra — Chief Executive Officer

Possibility of, you’re meaning merger and acquisition on smelters?

Rahul Jain — Systematix — Analyst

Or yes, some kind of — because it’s like we’ve had this government hand in our company, and with that getting away, would there be a change in approach?

Arun Misra — Chief Executive Officer

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. Government still remaining in the Board, we have expanded from 100,000 tons to about 1 million ton, which is 1,000,000 [Phonetic] tons, right, we can do that. So I don’t see that as the bottom line. 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 cash-ridden can grow both organically, inorganically with a much speedier decision-making perhaps and also the — there are certain particles of shareholders agreement and limitations that puts in, but those will be the issues we talked about. But I would not put that our current growth in anyways impeded by government being on the Board, rather they have been very supportive.

Rahul Jain — Systematix — Analyst

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?

Arun Misra — Chief Executive Officer

So new mine, if you see 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 lease. So whenever they are open, we are in touch with the state government of Rajasthan. Whenever they are open, Hindustan Zinc will be the first participant at least to on the nearby blocks wherever we can mine.

Rahul Jain — Systematix — Analyst

Right. Thank you so much. Thank you.

Operator

Thank you. The next question is from the line of Mr. Dixit from Edelweiss. Please go ahead.

Amit Dixit — Edelweiss — Analyst

Yes, hi. Thanks for taking my questions again. I have couple of questions. The first one is on the capital mine development in the quarter, roughly if you can give the number?

Sandeep Modi — Interim Chief Financial Officer

13 kilometer of the capital mine development during this quarter.

Amit Dixit — Edelweiss — Analyst

Okay. And the second question is on the pension tax guidance. So you mentioned in your opening remarks that the tax rate was 13.7% due to tax holiday ending. Now what would be the tax guidance for FY ’23?

Sandeep Modi — Interim Chief Financial Officer

This continue to be remain largely at the same level for the FY ’23.

Amit Dixit — Edelweiss — Analyst

That is 32% or there about?

Sandeep Modi — Interim Chief Financial Officer

Yes.

Amit Dixit — Edelweiss — Analyst

Okay, cool. Thanks and all the best.

Operator

Thank you. The next question is from the line of Saket Reddy from Polsani Enterprises. Please go ahead.

Saket Reddy — Polsani Enterprises — Analyst

Yes. Good evening, sir. The FY ’23, the 15% of projected sales that you sold through zinc forward, so sort of the committed, what is the pricing for that, Zinc forward pricing?

Sandeep Modi — Interim Chief Financial Officer

So the hedging price has been above the $4,000 per ton.

Saket Reddy — Polsani Enterprises — Analyst

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 these — 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?

Arun Misra — Chief Executive Officer

So you are talking about on the ESG vision, what we do with the power plants in the long run?

Saket Reddy — Polsani Enterprises — Analyst

No. The ESG vision for the power plant is fine, the trainable power plant, but will it be cost accretive for us over a longer run?

Arun Misra — Chief Executive Officer

No — yes, 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 RE power, as of now, whatever options we have looked at, it is economically lucrative as well.

Saket Reddy — Polsani Enterprises — Analyst

Okay. And last question, sir. What is the — 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?

Sandeep Modi — Interim Chief Financial Officer

If you see our net debt level, we are already debt-free. We have NCD of INR2,800 crore, which will be paid as per the schedule in maturity, so INR700 crore will be paid in September ’23 and remaining INR2,100 in the September ’24. There is no plan of taking any new loans.

Saket Reddy — Polsani Enterprises — Analyst

Okay, thank you.

Operator

Thank you. Ladies and gentlemen, we will take the last question from the line of Vishal Chandak from Motilal Oswal Financial Services. Please go ahead.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Sir, my question was with regards to the merger with Zinc International again. You mentioned that there are a lot of possible synergies in these two entities merge. 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 synergy?

Arun Misra — Chief Executive Officer

So as far as what is happening now is, we have done our homework and understanding the property, 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 the first disinvestment. So how do we bring it up to speed the way Hindustan Zinc is now, that would be one 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 ton, we should start our project thinking for 1.35 million ton. And once we go past 1.2 million tons, we should start project work of 1.5 million ton in India. In the meantime, work on at least 0.5 million ton to 1 million ton capacity abroad, which will be may be Zinc International, provided everything goes through.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

That’s quite helpful, sir. Sir, my last question, 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?

Arun Misra — Chief Executive Officer

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 tons in the year. If I get two quarters, then it will be about 15 tons.

Vishal Chandak — Motilal Oswal Financial Services — Analyst

Okay. Got it. Thank you very much, sir.

Arun Misra — Chief Executive Officer

Thank you.

Operator

Thank you. 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.

Shweta Arora — Head of Investor Relations

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.

Arun Misra — Chief Executive Officer

Thank you.

Sandeep Modi — Interim Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]