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Cover Story
 

“We’re Good at Cost Optimisation & Growth’’
Akhilesh Joshi, COO, HZL, talks to Virat Bahri on The Company’s Expansions & The Market for zinc, Lead & Silver
Issue Date - 21/07/2011
 
B&E: What have been the highlights of this year’s performance for Hindustan Zinc Ltd. (HZL)? How have the expansions undertaken over the year helped the company?
AJ: We ended the year with the highest ever PAT of Rs.49 billion. We commissioned our 210,000 state-of-the-art zinc smelter and 160 MW thermal power plant at Dariba in Rajasthan. Our metal production capacity today stands at about one million tonnes and we are proud to position Hindustan Zinc as the world’s largest integrated producer of zinc. Out thermal power production capacity has also increased to 475 MW. The year saw a record production in zinc-lead mined metal and refined zinc and silver. We also expanded in our mining capacities to 9.75 million tonnes, with Rampura Agucha, which is the world largest zinc producing mine, producing about 6.15 million tonne ore per annum. We are quite keen to close the year with 500 tonnes of silver production and be counted amongst the top global silver producers. HZL governs more than 80% of the growing zinc market in India. The prices are all LME governed and what we are good at is maintaining the momentum in terms of cost optimization and volume growth.

B&E: To what extent has operational efficiency and speed contributed to your positive results?
What are your plans with respect to expansion in exploration in India and overseas? 
AJ: If you see our growth plan since Sterlite Industries took over HZL in 2002, we have grown five fold in our production levels. We successfully executed three phases of expansions, which include setting up smelting complexes at Chanderiya and Dariba, mine expansions at Rampura Agucha and Sindesar Khurd and setting up power plants to be power independent at all locations. We have also carried out de-bottlenecking at our smelters located at Chanderiya, Debari and Vizag to increase production volumes. Hindustan Zinc has always had a strong focus on exploration. We believe that we must replace every tonne of ore mined with equal reserves and resources. Today, we are proud to have 313 million tonnes of reserves and resources. As for our overseas expansions, Vedanta group has recently acquired Anglo Zinc assets at Ireland, South Africa and Namibia. The production capacities of these mines are about 400,000 tonnes. We are quite open and keep looking for good assets.

 
B&E: How do you view the respective potentials of silver, zinc and lead in the Indian market? 
AJ: Our silver segment is poised to almost treble from current levels driven by volume ramp up at Sindesar Khurd Mine and improvement in recovery at our other mines & smelters. We are aiming to exit FY 2012 with 500 tonnes of silver production capacity, at which we should be amongst one of the leading silver producers globally. As for zinc, we recently expanded through commissioning of 210,000 tonnes capacity zinc smelter at Dariba which has increased our zinc production capacity to about 880,000 tonnes. We are quite bullish on the lead demand in future, considering the growth of the consumption markets and segments. The growth in recycle market facilitates the balance in demand/supply of lead, as the demand for lead can’t be matched entirely by the limited primary deposits around the world. HZL current lead production capacity is 85,000 tonnes and this year we are commissioning another 100,000 tonnes capacity lead plant at Dariba to take the capacity to 185,000 tonnes. This should suffice a large deficit in the market. But in the current scenario, the deficit has lead to domination of secondary or recycle market.

B&E: What are the price trends that you are seeing in these commodities? Is there any risk of a downturn in the business cycle for any of these commodities, according to you?
AJ: A slight fluctuation in LME prices is a common phenomenon but overall LME is strong. Developed economies have seen stupendous growth in the last few years and we expect the momentum to continue. European nations too have recovered and are showing tremendous potential for growth. Seeing the past and present trend, developing economies like China and India have always been leading the growth and all these factors are expected to generate a strong demand for the metal. With increase in demand, zinc surplus is also expected to come down significantly.

B&E: Input prices have affected commodity businesses globally. To what extent are they affecting your financial performance?
AJ: There is always a challenge to address issue of input prices and they do have their negative impact on the COP. So far we have been partly able to address this issue effectively through our operational efficiency.

B&E: To what extent do transparency and ethics play a role in your business? Please elaborate.
AJ: HZL is amongst the leading companies in India and has a strong global positioning. When you have a large company like HZL, you are also responsible to set bench-marks for others to follow. We are very proud to be amongst the most respected companies with highest regard to business ethics and corporate governance.
Virat Bahri           

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