Hindustan Zinc Limited (500188) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Hindustan Zinc Q4 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Preeti Dubey from the Investor Relations team. Thank you, and over to you, ma'am.

Thank you, Aman. Good evening, everyone, and thank you for joining us for Hindustan Zinc's Fourth Quarter and Fiscal Year 2020 Results Call. Today, we have with us Mr. Arun Misra, our Deputy CEO; and Mr. Swayam Saurabh, our CFO. Mr. Arun Misra joined our management team in November last year from Tata Steel and has been an integral part of our Executive Committee. He has a diverse experience of 31 years, and we are very excited to have him with us. Mr. Misra will begin today's call with an update on business performance and then Swayam will present financial performance, after which we'll be happy to take your questions. Over to you, Mr. Misra.

Good evening, and a warm welcome to all of you. I hope all of you and your families are safe and maintaining all precautions against spread of COVID-19. It is certainly a very difficult time for all of us. We are doing our best to steer through the unprecedented challenges set out by this pandemic. Our focus is on keeping our people and physical assets safe, operating mines and plants with minimum workforce to sustain metal supplies to our customers, and most importantly, supporting communities around us via our [ attractive ] outrage programs, aims at providing food, PPEs, sanitation and all other necessary support in order to help them overcome this crisis. Nothing is more important than the health and safety of our employees, including our contractors, and we have implemented extensive protocols to safeguard them at workplaces as well as residential colonies. Our CSR team has taken the lead to prepare and protect our communities through our extensive grassroot network and mapping of vulnerable communities with an emphasis on delivery of essentials like dry rations, ready-to-eat meals and safety masks, sanitation drives in villages and doorstep health care through mobile health vehicles. We have provided support to districts and administration with PPEs and hypochlorite solutions covering towns and villages we operate in. We are also proud to have contributed INR 101 crores to PM CARES fund and INR 5 crores to Rajasthan Chief Minister's COVID-19 Mitigation Fund. All our sites are currently operating and ramping up. We are back on our feet in a fairly short period of time post the suspension of operations in late March after COVID-19 lockdown was announced. We restarted a couple of our smelters and Zawar mine from April 8 and by mid-April, all our smelters and mines are operating except Rampura Agucha, which restarted from April 20 onwards. Initially, capacity inflation was low, less than 25%, and gradually ramped up. And by the end of April, mines were at 40% utilization, whereas smelters were at about 80%. As of today, I'm pleased to inform that we are operating our mines and smelters to 80% to 90% of capacity, even though we don't have full workforce. Despite COVID-19, we had a very good quarter and a strong finish to the year. All our mines achieved high production rate during the quarter and were headed for record production before the lockdown began. Due to fewer days of production in March, mine metal productions fell short of the targets. However, I'm pleased to say that we maintained the run rate of over 1.13 million tonnes throughout quarter 4. Hence, despite the lockdown and lower production impacting April and May performance, we are confident of delivering good performance during FY '21. We continue to share the wealth generated from our operations with our shareholders. Earlier this month, we declared an interim dividend of 825% or INR 16.5 per equity share, amounting to INR 6,972 crore, which has been paid out. This dividend implies a dividend yield of 7.6% based on average closing price during last financial year. I am delighted that all major projects in our mining with expansion to 1.2 million tonne per annum were completed during this quarter. The expansion, which started in 2013 quadrupled our underground mining capacity from about 300 kilotonnes to 1.2 million tonnes per annum. During this time, we not only increased capacity, but also upgraded our mines in terms of safety practices, automation, connectivity and productivity as well as made our operations more sustainable through reuse of waste and water, improved metal recoveries and ensured our R&R maintains the life of over 25 years throughout this growth journey. During the year, we focused on upgrading our resources to reserves through increased drilling activity, and I'm pleased to report that we have significantly improved our core reserves during the year, which have increased from 92.6 million tonnes to 114.7 million tonnes over the last 1 year. We replenished all the ore that we consumed and total reserve and resource has remained unchanged at 403 million tonnes with a metal content of about 32 million tonnes. We continue to maintain mine life of over 25 years. I would now like to speak about our minor metals initiative. Minor metal extraction from smelter residues offers an innovative opportunity for us to recycle our waste to generate wealth. We are creating our smelter residues to recover contained metals, namely copper, lead, zinc, silver. We expect cadmium recovery plant to be operational by quarter 3, followed by large zinc oxide treatment plant before the end of the year. The Fumer plant is set to be commissioned in quarter 1, which will be a game changer, not only in terms of high silver recovery but also in [indiscernible]. We have been successful in replicating Dariba's ancillary ecosystem at Chanderiya where a plant for copper sulfate production from our smelter residues was commissioned in April. We will be completing our [indiscernible] treatment plant at Chanderiya this quarter to recover zinc, copper and cadmium sponge. This project has enabled recovery improvement of 0.35% in zinc, lead and silver, while we are constantly looking for -- to evaluate newer technologies for other mineral extraction. Coming to market update, base metals, including zinc and lead, were impacted by COVID-19 at the outset of late January due to lockdowns and consequent slowdown in manufacturing activity in China, which accounts for about 50% of global demand and supply of base metals. Zinc prices declined sharply in quarter 4 to touch multiyear lows. The pandemic pushed zinc prices to below $1,800 per tonne, which then picked up in May on fundamental support. In our view, at the current prices of about $1,950 per tonne, about 15% of high-cost mines may not be able to maintain positive cash flows, which is likely to lead to translate in production cuts supporting future prices. Furthermore, more than 25% of global turnover rate of zinc supply has been impacted by lockdowns and workforce settlements due to COVID-19. In several countries across the globe, plans to restart mines or resume normal production have been pushed back due to restrictions and short-term actions. Therefore, global zinc mine production is expected to witness contraction in 2020. As per Wood Mackenzie, mine production is expected to contract by about 5% this year. However, we believe there is risk of further downside given the ongoing situation. On the smelting side, Chinese smelters resumed production towards the end of March, though smelters in rest of the world have been impacted by manpower issues. With the constraints in mine supply, it is expected that smelters will also cut output, which was reflected in spot prices tumbling in China from $300 to $150 per dmt at the end of April. The last few weeks have seen weak demand for metals and zinc is no exception. Steel companies are gradually increasing their production. And there are green shoots in demand uptick with manufacturing picking up in China, auto plants in Europe restarting production and U.S. auto plants expected to restart from first week of June. We believe that zinc metal supply will match up to demand over the next 2 quarters. And while warehouse stocks may have trended up recently, zinc prices will find support from lower mine and smelter productions expected this year. Now an update on operations. During the quarter, we had 10 fewer days to production due to lockdown related to COVID-19. Despite that, our mine metal production increased 2% year-on-year and 6% sequentially to 249 kilotonnes on account of higher ore production and better ore grades. For the year, our ore production was a record 14.5 million tonnes, while mine metal production was 917 kilotonnes, down by 2% year-on-year. This impact of operations shutdown due to lockdown on mine metal production in Q4 was an estimated 34 kilotonnes. Including this lost production, we would have met with our guidance of 950 kilotonnes for the year and delivered 2% year-on-year growth. Rampura Agucha operated at 4.5 million tonne per annum run rate for the quarter and produced 3.9 million tonnes of ore for the year, an increase of 18%. Zawar has also been an exceptional performer, producing 3.3 million tonnes of ore for the year, which is a year-on-year increase of 14%. Sindesar Khurd mine has done well, both in terms of grade and volume during second half of the year before exiting slightly below last year's level. RD and Kayad mines operated at close to their respective EC limits. We have now received environmental clearance to increase ore production at RD mine from 1.2 million to 2 million tonnes per annum and ore beneficiation from 1.2 million to 2.5 million tonnes per annum. This will also allow us to increase production from RD in the current year. Integrated metal production for the quarter was 221 kilotonnes, down 3% year-on-year and up 1% sequentially, with zinc production at 172 kilotonnes and lead production at 49 kilotonnes. For the year, integrated metal production was 870 kilotonnes, down 3% year-on-year. The impact of shutdown on metal production was an estimated 27 kilotonnes, which would have translated in sequential and year-on-year growth of 13% and 9%, respectively, for the quarter, while [indiscernible] production would have remained unchanged. Dariba lead smelter resumed normal operations after 2 quarters of lower production as temporary operational issues are resolved. Sequentially, lead production was, therefore, up 20%, but it was down 7% year-on-year due to fewer days of production. For the full year, lead production was lower by 8% to 181 kilotonnes on account of both these reasons. For the full year, zinc production was 688 kilotonnes, down marginally by 1%, in line with availability of mine metal. Silver production improved 12% sequentially to 168 tonnes, as lead production improved and also recoveries were better, though it was down 12% from a year ago due to fewer production days on account of lockdown as well as lower lead production. For the full year, silver production was lower by 10% to 610 tonnes due to lockdown, lower lead production and lower silver grade, partially offset by higher silver recoveries. The impact of shutdowns on silver production was an estimated 5 tonnes. Coming to our growth projects. We have reached the end of 1.2 million tonne expansion as all our major projects are complete. Rampura Agucha shaft is now fully commissioned and overhauling has started [ via the site ]. This will allow us to deliver over 5 million tonnes of ore from this mine as the shaft is ramped up in the current year. The 2 backfill plants at Zawar and the Fumer plant at Chanderiya are also complete, and we expect them to be commissioned in this month. We are in the process of upgrading the underground shaft at RD mine from 0.7 million to 1.3 million tonne per annum, which will be done over 2 phases. In the first phase, we will upgrade the shaft to 0.9 million tonnes per annum in the current year. And in second phase, it will be upgraded to 1.3 million tonne per annum in the next financial year. With an expanded EC, the upgradation of this shaft will lead to significant volume improvement and operational efficiencies. We are conceptualizing our next phase of growth to 1.35 million tonnes per annum and finally to 1.5 million tonnes per annum. For this, a detailed life of mine planning and feasibility strategy is currently being done by renowned global experts and we expect their report in the next 3 months. I'm quite excited about this new phase in our company, which will create substantial value for our stakeholders. Before I hand over to Swayam for an update on financial performance, I would like to comment on our annual production guidance. These are unprecedented times with a lot of uncertainty around lifting of restrictions on people and goods movement as well as demand recovery. We are, therefore, deferring guidance for FY 2021 to the end of Q1. Our focus is on sustaining our normal production level and active cost control to overcome the pandemic. Now our CFO, Swayam Saurabh, will provide some update on financial performance. Over to you, Swayam.

Thank you, Mr. Misra, and good afternoon, all of you. Revenue from operations during the quarter was INR 4,391 crores, a decrease of 6% sequentially and 20% year-over-year. Our financial performance was dented by decline in zinc, lead LME by an average 11% from prior quarter and an average 19% from a year ago, as COVID-19 outbreak spread across the globe. Silver prices were steady, declining only marginally sequentially and up 9% from a year ago. The turmoil in market due to COVID-19 pandemic also lowered premiums that we earn on our metal sales, while rupee depreciation aided our realizations. Zinc, lead sales volume improved sequentially, while they were slightly lower from a year ago, as lead volumes were lower. Silver sales were lower in line with the production. For the full year, revenue from operations was INR 18,561 crores, down 12% Y-o-Y on account of average 12% decline in LME prices and lower volume, partly offset by higher silver prices and rupee depreciation. Zinc cost of production before royalty for the quarter was $997 per tonne, improving by 7% sequentially and higher by 4% from a year ago. COP benefited from better grades, lower employee expenses, lower mine development expenses and lower input commodity costs, while repair and maintenance costs were higher. Power generation costs were flat sequentially and higher from a year ago despite lower coal cost price due to 50% increase in electricity duty, which was implemented from July 2019. Acid prices were lower during the quarter on account of weak demand, leading to lower acid credit. We came very close to meeting our COP guidance of $1,030 for H2 against which we have reported $1,037. COP for the year was $1,047 per tonne, higher by 4% from a year ago due to higher mine development expenses and repair and maintenance costs, lower grades and volume, lower acid credits, higher electricity duty, partly offset by lower coal costs. The resulting EBITDA for the quarter was INR 1,961 crores. And for the year, it was INR 8,849 crores. Both lower from last year's comparable period, primarily on account of lower LME and lower volume. Sequentially, EBITDA was lower mainly due to lower LME. Net profit for the quarter was INR 1,339 crores, a decline of 17% sequentially and 33% Y-o-Y. Besides lower EBITDA, net profit was lowered by higher tax rate. Investment income was higher sequentially on account of mark-to-market gains, but lower from a year ago due to lower rate of return despite larger corpus. For the full year, net profit was INR 6,805 crore, down 14%, wherein the impact of lower EBITDA and higher depreciation and amortization expense was partly offset by higher investment income due to higher rate of return and higher corpus and lower tax rate due to onetime reversal of deferred tax. Depreciation was higher due to capitalization of completed projects and amortization increased due to higher ore production versus last year. Our cash balance at the end of March 2020 was INR 21,615 crores. We have paid an interim dividend amounting to INR 6,972 crores this month, which will lower our cash balance. With this, I open the floor for questions.

[Operator Instructions] The first question is from the line of Anuj Singla from Bank of America.

Sir, one question regarding the guidance on the CapEx side, while you have deferred the guidance on the production group side. On the CapEx side, what kind of CapEx should we be expecting for FY '21 and maybe some color on FY '22 given the growth pipeline which you have?

The growth CapEx for FY '21 will be lower. Our focus is on conserving cash, and most of our growth projects have completed. So it would be significantly lower. I would not put a number to it because we have deferred guidance at the end of Q1, but we are looking to conserve cash.

Okay. And regarding our 1.2 million target. Now in this quarter as well, if I look -- if I annualize our run rate, this is seasonally the strongest quarter. Even if I annualize, it will still be around 1 million tonnes, obviously, but there was some loss of production on account of the last week. But when can we see that run rate factoring through any of the quarters, the 1.2 million tonnes run rate, which we have been targeting for quite some time?

Yes. So we have commissioned all the projects for 1.2 million. And as of now, we have been impacted by COVID, as you have correctly said, in the month of March going into April. And also, we are looking at a day-to-day situation in the month of May. But we are hopeful that we have the capacity to demonstrate and it's just a -- it's a matter of time that it will be demonstrated in any quarter's performance going forward.

Okay. And sir, lastly -- yes, sorry, go ahead, sir.

If you discount -- if you take out the 10 days of lost working in Q4, for the quarter, we have been hitting a run rate of 1.13.

Okay. And sir, lastly, on the cost side, now with the sharp surviving [ condition ], obviously, we should be expecting some cost savings going into the next year as shaft at Rampura Agucha ramps up fully. So is there some kind of color you provide on in terms of maybe dollars per tonne, what kind of number we could look at?

Yes, absolutely. Our cost because of shaft and otherwise as well is our key focus. We are looking to see -- we are targeting a cost reduction of at least 5% to 10% from current levels. Partly would come from operational efficiency, which is via shaft and others. But also, we will take advantage of weakening commodity prices globally.

And sir, so this 5% to 10% will be on a base of $997 or the $1,050 base, which we have done for the full year?

It would be on a full year base because some commodity savings are already in. So it would be better to reflect on a full year's base.

The next question is from the line of Amit Dixit from Edelweiss.

Sir, I have a couple of questions. The first one is again on cost. So out of your total cost of production, how much would be -- what percentage would be fixed cost and what percentage would be variable?

We have given an input earlier, about 35% of the total cost will be toward fixed.

So 35% will be fixed, right?

Yes.

Okay. And in this quarter, we saw manpower costs coming down significantly. I mean I joined call a little later, so maybe you would have given it in your opening remarks, but is it the trend that we'll see? Or was this quarter -- was there some one-off in this quarter?

The manpower cost deduction is largely due to one-off, which was essentially the provision reversal, which we did on account of performance base since we stopped operation towards end of the March. However, we also expect manpower cost trending lower, and we expect this to be between INR 190 crores to INR 200 crores a quarter going forward.

Okay. My last question is on essentially your CapEx -- your project. So if you look at Fumer, if you look at some of the other projects, the initial time line in the last quarter was given February, but now it has been give as May. So any specific reason for that? Are you kind of timing it with the market conditions? Or is it the general delay in the project that you encountered?

So if you recall, we would have commissioned Fumer in the month of March, beginning of March, but the COVID breakout happened in Wuhan from where most of the exports were to come. It happened only in the -- towards the end of February. And we took precautions around ourselves that how do we ensure that our cities don't get affected. Moreover, the first set of flight bans and people stopped coming, it also happened. So to that account, our expert visits were delayed. However, we have made up by online counseling of the facilities. And throughout the March, we've provided connectivity from China into the working systems of Fumer through this and with the local guidance -- with the guidance from there and with local help, we could commission the plant. And we have done some cold trials, and we are in a position of start-up of the Fumer towards the end of this month.

And what about the backfill plant at Zawar? The earlier guidance was February 2020, but now it has been extended to May?

So most of the cases -- the final commissioning was concerned towards the end of February, it was slightly delayed to beginning of March. And -- but then again, we could see people getting restricted, people not visiting our sites, and then finally lockdown. So now we expect that plant should be commissioned again by the end of this month, and I think after 25th, site restrictions will be lifted, and we will see people coming in.

Okay. So this May would be the kind of -- is the kind of deadline that we will -- we should expect? It is not likely that it could be moved further?

See normally, such projects would not be a [ 0-1 ] kind of a status. So if we say end of May, maybe in the first week of June.

The next question is from the line of Pinakin Parekh from JPMorgan.

Sir 3 questions. Sir, first, a quick clarification that when you mentioned that the mines and the smelters are operating at 80% to 90% utilization, is the underlying capacity at 1.2 million tonnes or 1 million tonne, which was earlier?

So the mines and capacities that we have planned on a daily production level with a number of people that are available there. At that current level, compared to last year, we are at about 80% to 90% capacity.

But if you were to annualize that, what would it work out to? Will it work out to the 0.92 million tonnes of production that we saw in FY '20 or the 1.2 million tonnes for which the expansion projects have been completed?

If you look at it, right now, our focus is on holding the production and stabilizing it. There are 2 risk factors. One, the people are late and that has an impact on certain aspects of production, which in normal condition would not have happened. Second part is, we are also struggling every day to ensure that during this operation, none of the workman who are on the ground are detected COVID positive and a huge amount of checks and value -- checks and procedures have been put around that. And through this, we are only now focusing on how do we come up to full utilization of the capacities that we have. And we will see the -- in the end of Q1, we would be in a better position to give a guidance as to what could be the annual number that we'll look at.

Sure, sir. Sir, my second question is one of the reasons that has been attributed for the higher mine metal production is better overall grade. Now grades have been cited as one of the big problems over the last few quarters. Now can you give us more color if the expense in the overall grades is behind us and this grade should sustain? Or it is too early to say what the grades look like for the next few quarters?

We reported a grade of 7.9% in quarter 4. And going forward, we expect the grade to be in the range of 7.5% plus/minus 0.5%.

Okay. Okay. Okay. So to that extent, this Q4 may not be sustainable going forward? I mean this is probably the best of the grade we can expect.

I think this grade will keep on -- the primary focus in the grade would be to get the maximum silver out of it, maximum zinc of it. And to that count, the mine planning is being done in a way that we sustain the good grades that we achieve year-on-year.

Sure, sir. Sir, moving on to lastly silver, right? Silver production has been down on a year-on-year basis because of the low grades at Sindesar Khurd and Kayad mine, in the low -- and the weak lead production. Now sir, what is the outlook for lead and silver, in particular, because silver is tied to lead and lead is not a Rampura Agucha product but more SK and Kayad product. So how should we look at it going forward in terms of lead and silver production outlook?

So overall, if you look at it in the SK production, primarily because of the lockdown, we had lesser lead production, which has contributed to lesser silver production. And as far as the grades are concerned, there is no inherent grade reduction of silver in SK. It is more of a sequential mining, which is determined primarily by the geotechnical conditions as we encounter in the stope that we open up. So [indiscernible] and there is nothing on an inherent degradation of ore or anything like that.

And just to add to that, our SK silver base improved to 128 ppm. And we also exited the year with quite significant WIP inventory. So we think silver production should pick up in coming quarters.

The next question is from the line of Indrajit Agarwal from CLSA.

Two questions. First on your costs ballpark, how much of your cost is dollar linked? And how much of your cost is rupee linked?

Approximately 40% to 45% of our cost is dollar linked, primarily driven by coal.

Primarily driven by coal. So when we talk about this 5% to 10% reduction, this is on dollar basis, right?

Correct.

Okay. And second question is on the CapEx, of the growth CapEx to arrive at [ 1.2 million ] tonne, how much of it is still pending?

So versus original plan, we are looking at about $100 million to $120 million additional cash flow to happen before we complete our current growth projects.

Sure. So -- and to arrive at 1.5, what would be the incremental CapEx for that?

So as Arun mentioned in his speech, that study is currently undergoing, which includes life of mine planning and redesign. We will have a better view of this in 2 quarters.

Okay. That is helpful. And in terms of inventory, what is the kind of inventory that we have of mined metal that we can send ready to the client? Any color on that? Or we are running back on this?

The mined metal inventory we exited on higher side, simply because operations stopped abruptly. So we exited this 35 kt of [ MIP ] while a normal [ MIP ] level would have been close to 20 kt.

The next question is from the line of Vishal Chandak from Emkay Global.

Sir, my first question is with respect to your manpower costs, you mentioned that you're at 80% to 95% utilization today at both mines and smelters, despite a sharp reduction in your manpower deployment. So somewhere down the line, is there a strategy to make this kind of a permanent reduction in your employee costs, employee workforce and increase automation?

So pursuing higher productivity is a constant function of any business performance, and we are no exception. So we will be handling the huge amount of mine digitation and equipment, which are much more automated, investment in automation in the fixed assets. We would pursue higher productivity. So that is a constant factor, but it has nothing to be taken as a follow-up of the current deployment. Current deployment is mostly towards deploying to have lesser footfall in the mines and factories to ensure social distancing and to ensure that the disease doesn't get into our factory areas and our health and safety of the employees are our primary concern.

Okay. Sir, my second question was slightly related to the same. Despite the challenges faced from the COVID front, we are back to about 90% of the capacity utilization. And we are still saying about that 15% of the global supply base can get impacted in this year, and we are seeing China already recovering. And a lot of other countries are also opening up. Probably don't we expect that some kind of productivity gain or some kind of a smart work culture will also come up given the way we have adapted? And the 15% supply impact may actually come down to just 5%, and we may end up with a surplus on the same year as well?

So as we look into the future, so there are various experts looking this on going in both directions. One opinion says supply will be limited. Other opinion says demand will be limited. Now fortunate part of this COVID outbreak has been, it has not happened all over the world at the same point of time in the similar manner. It has varied impacts in various geographies of the world for various reasons, which tells us experts are now trying to figure out what could be the reason of lower death rate or lower death success rate or lower infection rate in various countries. Now China went through it first and come out of it. And if I look at China today, they are targeting a higher growth rate with their steel plants are all coming up full steam in a month's time and that happens in China. And in U.S.A., the government is pushing for opening up faster than what it has anticipated earlier. And then there the economy is also bound to rebound by June with about the elections coming in. And Europe, the worst part of Italy and Central Europe are over. So their auto sector plants are supposed to look up. And in India, the fortunate part is steel plants continued through this crisis at about 40% to 45% production. And as we -- as India went through the longest kind of a lockdown period and our rates of infection are supposed to go down, I'm seeing a future where the steel plants will come up with a better market scenario. So we can be pessimistic or we can be optimistic. Ideally, Hindustan Zinc has preferred to be on the optimistic side and prepare itself to trust the customers in optimistic scenario.

And just to add to that, your question around whether there will be surplus, the fact that situation right now in India and also globally, from a demand as well as supply, is really fluid. Also the reason why we have decided to defer our guidance, so let some clarity emerge and we would adapt if needed.

The next question is from the line of Rajesh Lachhani from HSBC.

Sir, so my first question is basically, if you see, we are still saying that our issues is with demand per se. And also there is an issue with the transportation. So are we seeing a scenario where the plants are running at 80%, 90%, but the sales are not happening up to that extent, and we are building inventory? So that is my first question.

So when we restarted our operation in April, we clearly had that risk. But at this moment, we are much more confident. We did encounter problem not only on road transport but also our ability to move goods faster at ports. I think situation is getting better. And we are confident that by the time this quarter ends -- I mean by the time this month ends and quarter end, we will go back to normal closing stock levels. And we have a sight to this.

Yes. But are we currently seeing an increase in the finish goods inventory at our sites?

So we did exit higher, and our expectation is by end of this month, things should start to correct itself. By the time we are ending June, we should go back to normal levels. Of course, this becomes a prediction on an assumption that situation continues to improve like it has been for the last 2, 3 weeks. And that's what we are watching and banking on. But we do see a significant improvement versus a situation which was in mid-April from a supply chain perspective to where we stand right now, that gives us confidence.

Understood. And sir, has there been some change in the share of exports and domestic during this period? So I believe previously you were selling most of our products in the domestic market. But since the domestic market is under lockdown, has it significantly increased our export share?

Yes. So as of now, since practically domestic market in India is closed, export, obviously, has gone up. But as I mentioned, April -- in the May, as a month, is significantly better than April. And we are positive that once India completely opens up towards last week of May, situation should start to get normalized from June onwards.

Sir, can you please share the share of exports and domestic earlier pre COVID and currently?

So the domestic as a percentage would be about 74% in our pre-COVID scenario. Right now, this would have gone up to close to 70%, export would have gone up to 70%. But that's just the last 4 weeks. And as you know, India has practically been closed last 4 weeks. We also see this as positive because this also tells us that no matter how long the lockdown continues or industries who are buying zinc from us revise, we will not be settled with the situation where we are, let's say, we have significant closing stocks of zinc because we will have always ability to export.

Understood. And sir, lastly, on -- given -- sir mentioned 2 scenarios where the supply could be disrupted more than the demand, and in the second scenario, demand disrupted more than supply. So if we are to experience a scenario to where the demand significantly lags supply and there is a pressure on prices, will you plan of reducing your production to adjust to the lower prices and demand?

This is a speculative question. We are also watching very closely how post-COVID scenario emerges. Only thing which I would like you to remind yourself is the cost position [ resetting ]. So when demand slows down, prices start to get impacted. There would be supply stoppage from high-cost producer and that should start to correct itself. But right now, the question is speculation. We are watching as -- this as you are watching.

Ladies and gentlemen, due to time constraints, we'll take the last question from the line of Rahul Jain from Systematix.

I have 1 question on mining reserves. So we understand that our mines are captive. So we have [indiscernible]. Just want to know that if there is a change in the time line, so what is the typical expiry of our leases?

Expiry of our leases. So leases have gradually expiry date depending upon the lease that we have. It varies from 2030 to 2049.

Yes. So if there is a change in time line, would all of our leases get impacted? Or I mean [indiscernible].

So I would say it is still speculative. As of now, all the Ministry of Mines has changes Honorable Finance Minister announced, this does not find a place.

So we would -- we have to then rebid for that online? Or how will it work?

Sorry, your question was not clear. Can you speak a little louder?

So in a situation of [ premium ] date when the mines will come up for auction again, would we also be bidding again for them? Or how does it work? I'm just trying to understand.

So again, we are in a speculative zone. As of now, we are absolutely confident that this doesn't exist for our current mine leases.

Right, right. So -- but can you give the breakup between RD and others like when is the timing of leases?

Sorry, your question was again not clear. You will need to come closer to mic.

No. I'm just saying for Agucha, when is the time line?

Yes. What is the question?

Right now, for Agucha, what is the time line? [indiscernible] I think that is the largest mine you have, right?

No. So time line would emerge. But also, we also have right of first refusal for our existing mines. As I said, it goes into again speculative zone. Right now, we are confident that this does not find place in the risk that you mentioned.

Right, right, right. Again also on -- you said that you're looking to reduce costs. So do you think that the cost reduction more will be for the first half? Or is that spread throughout the year?

On a normalized operation, the cost reduction should happen gradually. And a lot of foundation has already been built within Q4 and Q3 of last year, whether it's on digitization, whether it's on equipment efficiency. The new ones, which we are working on, is more aggressive manpower optimization and manpower productivity. But also taking advantage of commodity prices softening, which we start to see more and more. You should start to see it in Q1 itself. However, it's a cold quarter. So we'll have to wait and see.

Right, right. And sir, also, in terms of your production, so you're not giving guidance, but as we can see that it will be called for -- you would already have seen in the first 2 months, would you have a number on utilization?

Number on?

Utilization.

This will continue at the current level and unless we are really very sure that we are out of this crisis.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Preeti Dubey for closing comments. Thank you, and over to you, Preeti.

Thank you, everyone, for joining today's call. I know some of you had difficulties joining. So in case you have more questions, you can contact me or Abhishek. Thank you.

Thank you very much.

Thank you.

Ladies and gentlemen, on behalf of Hindustan Zinc, that concludes today's conference. Thank you all for joining us, and you may now disconnect your lines.