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Key Takeaways
Timely commissioning of 100ktpa lead smelter to drive metal volumes
Hindustan Zinc's (HZ) 100ktpa Dariba lead smelter project is in an advanced stage of
completion and is expected to start commercial production by end of September 2011.
Silver being a co-production in lead smelting, the capacity of silver will also expand
from 150tpa to 500tpa.
Silver and Lead volumes to grow sharper
Sindesur Kurd (SK) mine is expected to ramp up to 1.5mt in FY12 and to 2mt in FY13.
Silver volumes are expected to grow at 77% CAGR to 460 tons over FY11-13. Lead
production will grow at 56% CAGR to 140k tons over FY11-13. Zinc sales volumes are
expected to be CAGR of 6% over FY11-13. In FY12, HZ expects to invest INR14b on a
lead smelter project, INR3b for sustainability Capex and INR5b for de-bottlenecking
projects.
Cost of production including royalties to range ~USD1,000/ton over the next
two years
The cost of production (CoP) is one of the lowest in world due to HZ's fully integrated
operations and large resource base. Including royalties, the cost of production of zinc
has been US$800-1,000/ton over the past five years. The cost structure is mainly driven
by coal, diesel and reagents. Going forward, costs are not expected to decline significantly
as the cost of underground mining at its Rampura Agucha mine will be higher. Mining
costs will be USD300-325 per ton of concentrate. The stripping ratio will taper down
over the next three years.
Higher dividend pay-out essential for re-rating; Maintain Buy
Cash and equivalents now stand at INR157b. High dividend payout is essential for rerating
of stock, in our view. Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Timely commissioning of 100ktpa lead smelter to drive metal volumes
Hindustan Zinc's (HZ) 100ktpa Dariba lead smelter project is in an advanced stage of
completion and is expected to start commercial production by end of September 2011.
Silver being a co-production in lead smelting, the capacity of silver will also expand
from 150tpa to 500tpa.
Silver and Lead volumes to grow sharper
Sindesur Kurd (SK) mine is expected to ramp up to 1.5mt in FY12 and to 2mt in FY13.
Silver volumes are expected to grow at 77% CAGR to 460 tons over FY11-13. Lead
production will grow at 56% CAGR to 140k tons over FY11-13. Zinc sales volumes are
expected to be CAGR of 6% over FY11-13. In FY12, HZ expects to invest INR14b on a
lead smelter project, INR3b for sustainability Capex and INR5b for de-bottlenecking
projects.
Cost of production including royalties to range ~USD1,000/ton over the next
two years
The cost of production (CoP) is one of the lowest in world due to HZ's fully integrated
operations and large resource base. Including royalties, the cost of production of zinc
has been US$800-1,000/ton over the past five years. The cost structure is mainly driven
by coal, diesel and reagents. Going forward, costs are not expected to decline significantly
as the cost of underground mining at its Rampura Agucha mine will be higher. Mining
costs will be USD300-325 per ton of concentrate. The stripping ratio will taper down
over the next three years.
Higher dividend pay-out essential for re-rating; Maintain Buy
Cash and equivalents now stand at INR157b. High dividend payout is essential for rerating
of stock, in our view. Maintain Buy.
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