Hindustan Zinc Limited (500188) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Hindustan Zinc Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations, Hindustan Zinc. Thank you, and over to you, ma'am.

Good afternoon, everyone. I welcome you all to Hindustan Zinc's Fourth Quarter and Fiscal Year 2021 Earnings Call where the management will discuss the results. Today on the call, we have with us Mr. Arun Misra, our CEO; and Mr. Vinaya Jain who has joined us as Senior Vice President and Head of Finance; along with other senior members of the management team. Mr. Misra will begin with an update on our business performance, while Mr. Jain will walk you through the 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.

Thank you, Shweta. Good afternoon and a very warm welcome to all of you. I trust that you, your families and friends are staying safe and following all necessary precautions against the spread of COVID-19 pandemic in the country. At the outset, I'm pleased to announce that Mr. Vinaya Jain has joined us as Senior Vice President and Head Finance Hindustan Zinc earlier this month. He has a rich and diverse experience of 25 years, spanning across General motors, Infosys and Bira 91 heading various finance functions and held CFO role at General Motors and Bira 91. We are excited to have him and wish him good luck for success in his new role. I would also like to thank Mr. Swayam Saurabh, our ex-CFO, for his immense contribution in the growth of the company and setting the stage right for next phase of structural initiatives. It gives me immense pleasure to share that the culture of holistic, inclusive and sustainable growth that we set as a leadership team for the company is starting to yield results and is evident in some of the external recognitions we have received during the quarter on various fronts, including sustainability, people practices, innovation and CSR activities. I'm happy to share that Hindustan Zinc has featured in the sustainability yearbook for the fourth consecutive year and also in CDP annual report for being amongst the first Indian companies to be rated A in climate chain CDP 2020. Additionally, Hindustan Zinc is also part of CII working group to drive accelerated climate action by Indian businesses and is actively engaged for promoting the climate actions in India. On the environmental front, our zinc smelter at Debari has received ICC Environmental Excellence award. I'm delighted to inform you that our Chanderiya Lead-Zinc Smelter is the first in the world to reach current efficiency of 93% in CLZS and was bestowed with a gold medal national award for manufacturing competitiveness. This truly raises our confidence and spirit to work towards many such new fitters in our innovations. There was no better time to be appreciative about the spirit and resilience of our people. I'm elated to share that our people practices were recognized in the form of people first HR excellence award and we will continue to strive to make Hindustan Zinc Family stronger every passing day. At Hindustan Zinc, our ethos is to give back to society and make a difference. It gives me enormous happiness to see our flagship CSR project Nand Ghar being identified as the best CSR initiative in the country. Safety of our people and operations is our first priority. It gives me deep satisfaction as a leader to report that Hindustan Zinc recorded 22 months of fatality-free operations, and we will strive to do everything necessary to sustain this achievement. I am also happy to share that we have signed an MOU with Epiroc for battery electric vehicles and this makes us India's first mining company to use battery electric vehicles in underground mining. I would also like to take this opportunity to highlight that culture of continuous improvement across verticals. For instance, to talk about our people practices, we have dedicated programs running for talent identification and development, especially focusing on young talent and diversity mentoring. We are aware of the importance of diversity at levels and it is reflected in our actions. To quote an example, our management commitment and executive committee, both have gender diversity, about 40%. I am also elated to share that we have appointed India's first woman underground mine manager. And also, one of our women employees is India's first government with first-class certificate in both restricted and unrestricted category of mining. On learning and development side, we have tied up with IIM-Udaipur [indiscernible] and around 118 executives were enrolled through Hindustan Zinc Work Integrated Learning platform. Talking about the culture of innovation and focus on digitization, our teams are fully dedicated and focused on areas including process improvement, development work for future growth, minor metal recovery and waste to wealth initiatives. This is reflected in various projects, ranging from improvement in recovery process through well detailed process audits and individual ore type characterizations, ongoing geometallurgical study at SK and RA mine on advanced drill core and metallurgical characterization. In addition, conducting feasibility study for 3% lead, zinc -- lead and silver recovery improvement by lead regrinding at Rampura Agucha Mine. On digitalization front, real-time manpower and equipment tracking has resulted in 50% reduction in RAM -- jam durations and 10% reduction in cycle time for haulage. Predictive maintenance models for critical components of loaders and trucks has improved reliability of fleet by 2%. Other things like mill automation, tele-remote operation of loaders and trials and also making use of technology for effective dewatering, ventilation and power reliability has made our operations more efficient and safer. Through all of this, we have improved mine overall equipment effectiveness by 15% with 0 harm. I truly believe that our constant endeavor to better ourselves every day on all fronts and proactive approach towards adapting global best practices to run our businesses and the culture of continuous improvement as well as out of the box thinking in everything that we do will help us stay ahead of the curve as a business and deliver through the good and tough cycles as well. Turning to market update. Investor interest in base metals remain buoyant with the rollout of fast paced progression of vaccination programs globally, Wood Mackenzie estimates zinc LME prices to average around $2,800 per tonne in 2021. Rising manufacturing activity is providing a positive underlying narrative for investors. On the other hand, the recovery in international trade has not been uniform. In comparison to December 2020, the bulk of the growth can be attributed to the growth of imports and exports in China and developed Asian nations. There was little growth from the European Union in the rest of this year and a modest decline for the United States and U.K. Last year, the largest supply changes were attributable to Chinese mines. This reflects the poor performance of the small mine sector where several mines in these provinces failed to restart post environmental crackdowns and exacerbated by the COVID impact. LME-SHFE arbitrage grew with SHFE price spiking in January to March quarter due to supply tightness of zinc concentrate as spot treatment costs fell to $70 per tonne in March. As per ILZSG, the world zinc mine production fell by 5.9% in 2020, which has led to concentrate deficit of 500 kt in the market. As for the zinc premium in Southeast Asia, the combination of improved demand and smelters, directing shipment to China have tightened the market, helping premiums to shift to the upper end of $90 to $110 range in the January to March period. Global zinc stocks ended at 389 kilotons in March, marginally higher than in February, but remained at 10 days in terms of days of global consumption since December. Coming to domestic market, even though India witnessed a sharp rise in infections in March 2021, economy and its manufacturing sector, particularly appears to have seen off much of the impact of the severe lock down last year. After hitting a low of 27.4% in April 2020, the manufacturing PMI hit 54.6% in September. And since then, it has averaged 57% in the 4 months throughout February 2021 pointing to a robust pace of expansion for the country's manufacturing sector. The strength of the rebound activity has driven a rapid recovery in Indian steel production with crude steel production hitting 9.7 million tonne in December and its highest since the record high of just over 10 million tonnes in March 2019. With India's economy getting off to a robust start in 2020, the strong performance of India steel sector seen in the latter part of 2020 should be sustained into 2021, which is likely to drive domestic consumption of zinc. Silver price has risen strongly, achieving an intra-year gain of 32% as the pandemic led to a surge of [indiscernible] investment demand because of COVID-related lockdowns by several major producers especially in Mexico, Peru and China silver mines production is expected to fall by over 5% in year 2021. Demand is expected to increase dramatically as the heavy manufacturing activity picks up. Turning to update on operational performance. I'm happy to share that we have continued our winning streak from last quarter and touched a few milestones, both at quarterly and annual level. Feather on the cap was the highest ever annual silver production of 706 metric tons, which also included recovered WIP, which was stuck in the circuit during COVID shutdown. We also saw an ever highest annual ore and mined metal production supported by our proactive mine planning driven by increased use of technology and better targeting. Even for the quarter, we had highest ever ore and refined metal production. It is also noteworthy that we met and exceeded our promised volume and cost of production guidance for the fiscal year. This was a result of detailed planning and forecasting as well as out of the box solutions offered on various operational challenges posed by the pandemic. Our foresightedness on market demand recovery scenario, pricing environment and adaptive approach to selling that is striking a delicate balance between domestic and international sales has helped us to deliver in these uncertain times. All these while also successfully managing our costs at lower levels. Our annual cost of production is at the lowest level since we transitioned into underground mining operations in March 2018. During this time, we also upgraded our mines in terms of safety practices, automation, connectivity and productivity as well as made our operations more sustainable through use of waste and water, improved metal recovery and ensure our R&R remains a life of 25 years throughout this growth journey. During the quarter, our mine metal production was up 15% year-on-year to 288 kilotonnes on account of higher ore production, partly offset by lower overall grade. Sequentially, MIC production was up 18% on account of higher ore production and better overall grades. For the full year, MIC production was up 6% year-on-year to 972 kt, primarily on account of higher ore production, with overall grade almost maintained at the same level. This was despite losing 18 days equivalent of production in the fiscal year 2021 due to lockdown and other workforce related restrictions to combat COVID-19. Integrated metal production was 256 kilotons for the quarter up 16% year-on-year and up 9% sequentially, in line with the higher mined metal availability and higher closing MIC inventory. Integrated zinc production was 195 kilotons, up 14% year-on-year and 7% sequentially. Integrated lead production was 61 kilotons up 24% year-on-year and 16% sequentially, in line with higher mined metal availability. Integrated silver production was 203 tonnes, up 21% from a year ago, in line with higher lead production partly offset by lower grades at Sindesar Khurd mine, while it was up 11% sequentially on account of higher lead production and better grades at the same mine. For the full year, metal production was up 7% to 930 kt and silver production was higher by 16% to a record 706 tonnes, in line with higher lead production and better silver grades at SK. Most important of all, at the current run rate of 1.2 million tonne per annum, we are well positioned to deliver our future growth with confidence and higher preparations to handle any road blocks on the way. Coming to an update on our projects, I'm happy to share that shaft integration at Rampura Agucha mine is complete. This has improved the accessibility of the shaft section, alternate emergency evacuation, ease in mine equipment deployment at lower levels, face changing -- face charging with emulsion explosives, face drilling with long feed jumbo. During the quarter, RKD circuit of Fumer was also commissioned, and it is now in operation. Delay is primarily on final commissioning of complete plant. This is on account of restrictions around travel outside of China, which is something we are trying to resolve. However, given the first evolving situation with COVID-19 infections in the country, we expect to commission the complete Fumer plant by second quarter of the year. Turning to reserve and resources. I'm happy to share that at current run rate of production, we have extended the reserve's life closer to 9.5 years, almost 10 years from 8 years earlier, while maintaining total mine life basis, reserve and resources at 25 years. Before I hand over the call to Vinaya for an update on financial performance, I would like to present our production guidance for the fiscal year 2020. We expect mine metal and refined metal production for the year to be in the range of 1,025 kilotons to 1,050 kilotons each, while sellable silver production is expected to be approximately 720 tonnes. With this, I hand over to Vinaya to update on the financial performance.

Thank you, Arun, for the kind introduction, and good afternoon, everyone. It gives me immense pleasure to begin my journey at Hindustan Zinc at a time when the company's all set for its next phase of growth and taking leaps towards new age mining practices. We will continue our endeavor to improve business efficiencies and reduce costs through enhanced use of technology, digitalization efforts, data-driven decision making, and most importantly, investment in people capabilities. Most of the cost optimization initiatives deployed across our operation units are already visible in our financial performance and yielding desired results. We will continue to strengthen the foundation of our operations with unwavering focus to deliver on financial excellence and generate value for all stakeholders in these uncertain times. Coming to an update on financial performance for the fourth quarter and fiscal year 2021. Revenue from operations during the quarter was at record INR 6,725 crores, an increase of 56% year-on-year, led by higher metal and silver volumes as well as higher zinc, lead and silver prices. Zinc sales volume increased 15% year-on-year and lead by 29% year-on-year, in line with higher production and robust demand. Sequentially, revenue was up 14%, primarily driven by higher metal and silver volume and higher zinc, lead and silver prices, higher metal premium, partly offset by rupee depreciation. Zinc LME prices were sequentially up 5%, while lead prices were up 6%, with lead and silver sales volume improved sequentially as well as from a year ago. For the full year, revenue was up 20% to a record INR 22,071 crores, led by higher metal and silver volume and higher silver prices, further aided by rupee depreciation. Zinc cost of production before royalty, COP during the year was $945 per metric ton lower by 5% year-on-year, both in INR and USD terms and flat sequentially, down 1% in INR terms -- but down 1% INR terms. The year-on-year decline in COP is primarily due to higher volume, lower power costs, higher sulfuric acid credits and lower cement costs, partly offset by higher met coke and diesel costs. For the full year, zinc COP, excluding royalty, was $954, lower by 9% year-on-year. This was the lowest recorded COP since we transitioned to underground mining operations. The full year COP decrease reflects higher production volume, lower met coke and power costs, lower cement costs, partly offset by higher diesel costs and onetime COVID-related expenses and donations. Overall, the COP for the quarter and FY benefited from ongoing structural cost reduction initiatives, partly offset by increase in mine development. As outlined by Arun earlier, we are proud to share that for the fiscal year, we are at the lowest cost in dollar terms since we transitioned to a fully underground mine operation. I would like to reiterate that focused cost-saving measures on all fronts, including operational, contractual, procurement and fixed cost has resulted in sustained reduction of costs. Resulting record EBITDA for the quarter was INR 3,875 crore, nearly doubling versus last year's same quarter and up 17% sequentially on account of higher prices, volume and well-managed operating costs. EBITDA for the full year was INR 11,739 crores, up 33% from a year ago, primarily on account of higher volume, rise in LME prices, rupee depreciation and lower power cost and met coke costs. Net profit for the quarter was INR 2,481 crores, up 85% year-on-year and 13% sequentially due to lower interest income and higher taxes because of income exchange. For the full year, net profit was INR 7,980 crores, up 17% where the impact of higher EBITDA was partly offset by lower investment income due to declining interest rate environment. Tax rate for the year was at an average of approximately 24.5%. The higher level versus previous year was mainly due to onetime reversal of deferred tax liability in previous fiscal year and also due to change in income mix this fiscal year in light of lower interest rate environment. Turning to our cost and CapEx guidance for the fiscal year 2022, we expect zinc COP below $1,000 per tonne for the fiscal year, which is inclusive of higher mine development expenditure to support future volume growth. We are keeping guidance unchanged given the uncertain environment on COVID-19 pandemic and expectations of upward pressure on input commodity prices. CapEx for the year is expected to be around $100 million. We will continue to be -- have a focused approach to spending and exercise prudence in all uncertain business environment. With this, I open the floor for questions.

[Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss.

Congratulations for a good set of numbers. So I have 2 questions. The first one is on the guidance part. So if I look at your guidance of mine metal and finished metal production, which is between 1.025 and 1.050 million tonnes, so if I look at the run rate, which is running at almost 288 kt, the mine metal production rate. So I think the guidance is a little bit conservative over there, both in terms of mined metal as well as silver production. In terms of cost of production also, there have been 3 consecutive quarters when cost of production has been below $950, and the guidance is that it would be below $1,000. So can we assume that cost of production would be below $950 for the year as a whole? That is the first question.

Okay. So should I answer the first question?

Yes.

Okay. So as far as on the volume numbers are concerned on the metal and silver both, yes, we exited at a very good rate in Q4. And as we entered into April, we were forced to kind of correct our expectations more in view of the current circumstances. However, that doesn't rule out of us correcting the guidance as we experience this Q1 fully. We are aware of the situation that we are facing on the ground, the vastness of the pandemic that is around us and the kind of fatalities we are seeing all around our society. So taking that into account, we have tried to limit our expectations for the year. However, I'm hoping that once the quarter is finished, if we really -- and the situation improves, we should be able to correct.

Okay. And on cost of production?

And the cost of production will continue with the same guidance of remaining below $1,000. Yes, our emission remains doing better than last year as ever.

Okay. The second question is on the grade essentially. So what was the grade in this quarter? And how does it compare with the last one?

Just give me a second. Sandeep, would you take that?

Can you repeat your question?

Yes. So let me repeat that. Sorry, I was asking about the grade of -- what was the grade of material in this quarter? And how does it compare with the last one?

So this quarter, the grade was 7.41. And the quarter -- on the last quarter, year-on-year, it was last Q3 of 7.06.

7.06 last year?

It was in the Q3 7.06, Q4 7.41.

Next question is from the line of Pinakin Parekh from JPMorgan.

Yes. The project CapEx stands at roughly $100 million. Now there were plans earlier to increase the capacity from 1.2 million tonnes to 1.35 million tonnes and eventually to 1.5 million tonnes. But the -- we don't seem to see any progress in F '21 and even the project guidance for F '20 to suggest that these projects seem to be stalled, what is the latest update, sir, on these expansion projects?

No. So if I may clarify, none of the projects are stalled. 1.35 million tonnes is very much on the drawing board. It requires to increase your reserve and resource. So FY '21, we spent time and money on increasing our reserve and resource through our exploration, and we have come to about roughly about 10 years kind of reserves, which gives us confidence because to increase the mine capacity, you have to get the mine plan approved. And to get the mine plan approved, one is to have 6 years from the proposed mining quantity as a reserve. So that is the task we are finishing. Also, it requires a lot of environment clearances. So we are in the process of environment clearances for some of the mines. Design and drawing for the expansion to 1.35 million tonnes is nearing completion. And anytime between quarter 2 or quarter 3, we will approach Board and post-approval will come -- we will make it public.

So sir, just to clarify, to go from 1.2 million run rate to 1.35 million tonne run rate, there is not material CapEx required at the smelting level? Is this that the mine legal approvals is more of a regulatory overhang?

No, both mine and smelter, both are required. Smelters currently -- both are required, including legal, environment clearance as well as debottlenecking and expansion projects.

So the actual spending, it looks will be more in F '23 and '24, sir?

It will come in next year, yes.

It will come in next year. Understood. And sir, just to clarify, the -- from the project guidance of 1.05 million for FY '22 versus the run rate of 1.2 million tonnes, the only issue essentially is the COVID environment, right? And if that were to settle -- that were not the case, then you will have a 1.2 million tonne guidance for F'22?

We would have surely.

The next question is from the line of Pallav Agarwal from Antique Stockbroking.

Sir, I have a question on the net debt. If I look at the reduction in debt sequentially, you almost had close to about INR 5,000 crore of reduction. But if I just add the PAT and depreciation, it comes to lower later, have you had some working capital released in this quarter?

Vinaya, would you like to take that?

Yes. So yes, we've had working capital release during the quarter, and our -- this is a constant endeavor by us to make the operations more streamlined and that's towards that. So we've streamlined our inventories and as well as the debtors.

Sure. The other question was on -- if I just compute the physical premiums for zinc, has there been a sequential decline in premiums for zinc because lead seems to be okay, but I think that in zinc, if -- there seems to be a reduction in physical premiums.

Can you repeat that question? It's not clear.

Sir, I'm talking about the physical premiums. The LME plus physical premium, the realization that we have this quarter. There seems to be a reduction from Q3 in the physical premium. So is that a correct thing or I'm missing something overall?

Not really. It's been in the same range. And yes, it's been in the same range as to the previous quarter. Yes.

The next question is from the line of Kirtan Mehta from BOB Capital.

I just had a couple of questions arising from the current strong market environment. What is the guidance as you continue the existing production upwards, are there any opportunities being internally evaluated to accelerate mine production in the interim to utilize the current strong environment? And the second question is about the current market environment, as it gives rise to sort of a very significant cash flow. So are the -- main plan would be the return of this cash flow to the shareholders? Or are there any other growth plan under consideration?

Okay. So the first part is, yes, the market was very strong as our existing quarter 4 in fact, one of the highest numbers that you produced in quarter 4 also supported by the market. However, going into April, for the first 15 days, we are seeing a kind of a little bit of a slowdown in the domestic market. And we are seeing logistical disruptions because of various localized lockdowns controls also people being too afraid, specially drivers, logistics, we are seeing some of that impact. But yes, if it turns around, I hope it turns around by May. If it turns around, we are perfectly geared up to produce and service the market. In fact, this particular month also, I will not be surprised if we have a little bit of extra stock at the end of the month because we are not -- the market is not able to absorb. The logistics are not permitting. Whole country and the society's focus being primarily towards COVID and that's what everybody is fighting for. And the second part, on the cash flow, Vinaya, would you like to take?

Yes. Let me take that. So just to reiterate, the second question was on dividend payments, what we intend to do with that?

Yes. Question is about how will you plan to utilize the cash flow, which is coming in, would it be primarily returned to the shareholders? Or are there any other growth plan under consideration as well?

Sure. So historically, you can see that we have both invested back into the business, and we have returned money to the shareholders, and nothing is going to change going forward. So this is exactly what we intend to do going forward as well.

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

I had one question. Has your mix between domestic and export sales changed quarter-over-quarter? And what is the kind of price differential or realization differential between domestic and exports?

Okay. So to answer the first part of the question, yes, it has changed. Well, the quarter 1, if you can recall, we were primarily forced to export because of the lack of progress of opening up of the industries in the domestic sector. As the quarter moved, we changed the -- especially zinc, domestic versus export, it favored towards more domestic. And I'm happy to report that overall, we have achieved 80% of domestic market in the zinc by our own supplies. So that's one plus point. In spite of the high exports in the beginning, we still finished at 80% of the domestic market. It also says -- shows that domestic market did not expand to the extent it should have. So we have been able to capture a bigger part of that. As far as differential and earnings are concerned, I wouldn't be putting a number just to that. But yes, higher proportion of domestic helps us to increase our margins better if we -- otherwise, if we had exported everything.

In the first couple of weeks of April, have you seen, again, exports increasing with domestic markets being reached because of the pandemic?

No. We are still primarily on the domestic market in April. However, that absorption rate in the domestic market is lower than what it was in Quarter 4.

The next question is from the line of Sumangal Nevatia from Kotak Securities.

Just one question. Is it possible to share any update with respect to the Supreme Court hearing which was going on, I know we are not directly a related party, but given that we will have good information on that subject.

On which subject?

The Supreme Court hearing, which were going on, sir, with respect to divestment of government stake.

Okay. Okay. Okay. No, so fine, since it is in the sub judice, so as and when we -- it comes to a conclusion, then for us, it will be better to discuss about it.

But, sir, is it possible to share at what stage is it? Is the hearings concluded is the final verdict pending or the hearings are going on? Any update we can share?

I would refrain from commenting on that. So let's leave it at that. It's under Supreme Court. And moreover, it is more with the shareholders. So let it come out first from there, and then we'll share.

No worries. Just one small clarification. Sir, in the past, in a very strong commodity environment, we have hedged some bit of volume. Zinc and lead. I think it was in 2017 or '18 last, so any thought of doing something similar? Or a principle that commodity exposure will be kept with the shareholders? Is that something which will continue?

Would you please repeat that question? I didn't get you.

Sir, I wanted to know whether we would be looking to hedge any part of our volume, zinc and lead, like we had done, I think, in 2018 in the past.

I think we are not yet reached that point of decision making as of now. With the -- the trend that we see in the domestic market. See, the world over, if you look at currently, the western part of the world is undergoing vaccination at a very fast rate, and the return of the market will be much faster than the eastern part of the world. Southeast Asian market is still protected. India has a bit of a thing because of the last one month events that are unfolding. I hope that after government has opened up the vaccination from May 2 onwards till 18 years of age. And if we can really do a good job on vaccination throughout the month of May, I don't find any reason why we will not be able to bounce -- well not bounce back and especially Indian industry can export to the western world, which, by that time, would have come back to normal. So I see good prospects in Q1 itself. I don't see that we have a situation where we have to hedge our metals as of now. Anything additionally, Sandeep or Vinaya want to add?

Yes, let me add to this. So as a policy, we don't hedge. We retain the commodity exposure. Although we do hedge at the average of the LME prices. That's all. Otherwise, we don't really hedge our sales. Does that answer the question?

Yes. So we have a policy of not hedging. So it's not a dynamic decision or decision -- something which is subject to market outlook but our policy. Got it.

The next question is from the line of Ritesh Shah from Investec Capital.

A couple of questions. One is we have indicated project CapEx of $100 million. Sir, what is the maintenance CapEx that we should look at for modeling purpose? Would it be around $200 million, roundabout of?

So Vinaya, would you like to take that?

Yes. The maintenance CapEx, roughly in the range of $150 million to $200 million.

Okay. That is fine. Sir, secondly, there is no comments on the Gujarat greenfield smelter and the fertilizer plant that the company was exploring. Sir, any thoughts on those 2 particular valuables on capital allocation? Or...

Correct. So we have, in the last Board betting, we had this $100 million that maintenance CapEx has some provision for seeding expenditure for these 2 projects as well. We are aggressively working on the drawing board to finalize one, the scope of the project. Second, the business skills, third the engineering design and cost estimation for both the soda plant, which is in Gujarat, on a stand-alone smelter. And second fertilizer plant at Chanderiya; and third is overall mine volume expansion from 1.2 million tonne to 1.35 million tonnes. I expect from the 3 projects, the first 2 that is Gujarat and fertilizer, their projects should be over in next another 3 to 4 months. And then the moment that estimations are all ready and engineering design is ready, we are in a position to place order will come to both tech approval and then go public on the numbers.

Okay. That's quite helpful. Sir, my second question pertains to R&R. You have indicated an increase to 448 million. I checked in the annual report, it was around 400 million tonnes last year. So a commendable job over here. Sir, the question over here is, recently, there was an MMDR amendment pertaining to save leases. I'm assuming this number doesn't get impacted because of the MMDR amendment. But there are a lot of leases like SK North, SK South. So what is the legal standpoint of the company over here?

So these leases, these numbers are purely bound by the mine lasers, where we have the full right to access, and then we can explore. So this no way comes across the leases, which are under dispute or which are under the legal cases or under 10a2b cases. So if I say that way, then these numbers are all protected, and these are all summed up in a mining lease. And balance some of the leases where we had prospective licenses the MMDR Act underwent changes. We are in the legal recourse. And we -- in our opinion, we are fully protected by the court decisions that have been taken till date.

That's useful. Sir, lastly, let me just try my luck. Just a specific question to what Sumangal had asked. Sir, can you give clarity on exactly what is being heard in the Supreme Court right now? Basically, what is it that has been contested, if you can give a broad idea about that, I don't want the case specifics, but particular 2 variables, that is something which has been talked about?

No. The hearing, if you all know that we should follow Supreme court hearing. Hearing is not on argument over whether A is right or B is right. Arguments as they continue newer things come up, which can be the very basic that premise of this investment to whether further disinvestment is in the rights of government, not in the rights of the government. And there are other stakeholders as well. So I would not like to get into specifics of that. But I believe that the Supreme Court will close that matter and government is also in an urgency to further disinvest all the successful disinvestment cases. Also at the cases, which are sick units, and they want to disinvest. I see government had approached Supreme Court that they need a quick judgment on the need for disinvestment. So I'll leave it at that and hope that Supreme Court closes the matter soon.

The next question is from the line of Rahul Jain from Systematix.

Sir, if I see your guidance on silver, it appears to be a bit modest, given that we had a disruption in the first half of last year. So -- and this Fumer commissioning. So I mean, what could be your run rate, say, 6 months down the line?

So if I -- 720 tonnes, and if I compare last year about 706 tonnes, out of that 706 tonnes, if you look back that year before last, we closed abruptly all the silver plants and lead plants, everything closed abruptly because of COVID. So a lot of silver was stuck up in the circuit. And some of -- most of it got recovered. And in fact, a lot of WIP material we could recover in the process, which also added to that 706 tonnes number. If I look at the realistic level, then the jump we are taking at 720 tonnes is perhaps about 60 to 70 tonnes, which should be good enough commensurate with the metal numbers I'm talking about?

No, so the Fumer plant commissioning...

Fumer, yes. No Fumer, we are hoping that Fumer, currently, the part which we have commissioned, is adding more zinc. So the zinc oxide, which is produced during our furnace operations in Dariba, that zinc oxide goes into this part of the Fumer, and we recover zinc out of it, which has been an innovation in the way we operate. Second part is the silver production and lead-silver cake production from Fumer. That part of the Fumer will be commissioned, I expect that if these current problems are all over, then somewhere by H2, this in the balance part of the Fumer would be commissioned and some metals have been factored -- will be factored in our guidance going forward. So that's why I said I'm keeping my options open by next quarter, when I have a chance to revise the guidance, I will surely do looking at the progress.

Right. And sir, how deep have we gone in the mine? And given the mine topography that you've encountered and the -- because I'm sure you would be -- so the cost structure, say, 2 years down the line also are likely to be in a similar range?

So if most of the development work as we go deep into the mine, the principal focus is at least 3 to 4 levels must be opened up in one mine, and that has been targeted. That's why last year, we did a fantastic highest ever development, about 98 kilometers of development in the mines. And this year, we want to do more than that, about 40 to 50 kilometers more than that development we would like to do. That's why it's adding to the bit of the cost. But once these developments are over mines are mature, going forward, that need of development will be less, and it will be more of an extraction and retreating mine. And in that case, the cost will further likely to come down by FY '23 onwards.

Right, right. And sir, first, structurally, we also would maintain our policy on smelting all the ore we produce or we are also open to tolling outside given the high running prices?

Tolling, I don't know whether we can get a facility for zinc/lead tolling, we have -- that's why our coastal smelter is basically fixed on because a lot of concentrate is floating around in the world and to tap that. But on the other part, we are committed to smelting all the concentrate that we produce. So that is where our entire expansion work of 1.35 million tonnes that goes around is only around that. That entire concentrate has to be smelted. There is no chance of selling any concentrate or sending any concentrate to any stand-alone smelter outside.

But there is nothing which stops you from doing that, right? If I'm not mistaken.

No, nothing stops. Nothing stops, but we don't want to do that. We want to smelt all the concentrate that we want to do.

In the interest of time. We'll take that as the last question. I would now like to hand the conference back to Ms. Shweta Arora for closing comments.

Thank you, everyone, for joining us on the call today. For any follow-up questions or clarifications. Please feel free to reach out to the Investor Relations team. Thank you.

Thank you.

Thank you.

Thank you very much. On behalf of Hindustan Zinc Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.