Hindustan Zinc Limited (500188) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '25 Earnings Call of Hindustan Zinc. [Operator Instructions] I now hand the conference over to Ms. Raksha Jain, Director of Investor Relations of Hindustan Zinc Limited. Thank you, and over to you, Ms. Jain.

Thank you, Sagar, and good evening, ladies and gentlemen. Thank you for joining us today to discuss the third quarter and 9 months results of FY '25. In this call, we will refer to our investor presentation available on our company's website. Please note that today's entire discussion will be covered by the safe harbor clause mentioned on Slide 2 of the presentation. Today, we have our CEO, Mr. Arun Misra; and CFO, Mr. Sandeep Modi. The management will be discussing the operational and financial updates for the quarter followed by a Q&A session. Now I would like to invite Mr. Arun Misra to present the results. Over to you, sir.

Thank you, Raksha. A very good afternoon to all of you. Thank you for joining us today for the third quarter and 9 months FY '25 results briefing. This quarter has been a historic third quarter in terms of financial performance, and we delivered highest-ever mined metal and refined metal production on a 9-month basis. Globally, zinc production was flat in the last 5 years. However, the growth of Indian demand was CAGR 5% and so was the production growth of HZL. We feel we are in the right place at the right time with a competitive cost advantage to unleash benefit from stable LME and silver prices. This exceptional performance was driven by our operational excellence with a strong focus on safety and continuous improvement across all areas. I'm proud to announce that once again, we have been recognized as a global leader in sustainability among 248 Metals & Mining Companies in the S&P Global's Corporate Sustainability Assessment 2024. Furthermore, with the release of our 4th Edition Climate Action Report, Hindustan Zinc has been the first company in the Metals & Mining Sector to achieve this distinction. We firmly believe that a strong safety culture is key to driving operational excellence. This quarter, we recorded zero fatalities. On sustainability front, against the target of 0.5 million tonnes CO2 emission reduction, we have achieved 0.4 million tonnes of CO2 emission. With the increased use of renewable energy and eco-friendly battery vehicles in our minds, we are on track to achieve the decarbonizing target by 2050. Both zinc and silver are important for the global transition to low-carbon future, be it energy storage solutions, renewable energy technologies, electric vehicles and infrastructure offering a sustainable alternative to large-scale storage and clean energy production. The global shift towards clean energy making zinc and silver indispensable and the demand for both zinc and silver is expected to rise significantly. Moving to the market update. While Indian economy is expected to register 6.4% GDP growth in FY 2025, we see healthy demand for zinc in domestic market, and our market share remained healthy at 77%. In 2025, global steel demand is expected to grow by 0.5% to 1.5%, whereas India is expected to lead the steel demand growth underpinned by expanding infrastructure and construction projects eventually increasing the demand for zinc and making India the third largest zinc consumer globally. During the quarter, the zinc and silver prices rose significantly by 16% and 27% year-on-year, respectively, with the silver price touching its highest of $34.51 per troy ounce during the quarter. The global refined zinc market is focused to remain in deficit in 2025 with a significant increase in demand, partly offset by increased production in Europe. This deficit is also expected in the refined silver market with growing industrial use cases benefiting especially from renewable energy initiatives and automotive, et cetera, thereby reflecting a bright outlook for silver in foreseeable future. During the third quarter, we produced 265,000 tonnes of mined metal, up 3% sequentially, in line with higher ore production and higher mine metal grades. We have enhanced the mine development by 14% sequentially to around 25 kilometers, preparing the mine to be future ready. We reported refined metal production of 259,000 tonnes, slightly down sequentially due to maintenance activities. Despite all these, on a 9-month basis, we have recorded our highest ever mined metal and refined metal production this year. The 9 months mine metal production stood at 784,000 tonnes and refined metal production stood at 783,000 tonnes, in line with better plant availability and operational parameters. With a given record 9-month performance and the proven run rate, we are confident on achieving the full year volume guidance for the mine metal and refined metal production. As silver remains a significant contributor to our profitability with over 20x growth in the past 2 decades, we continue to maintain a leading position being third largest silver producer globally. As you all know that we have indigenously commissioned Fumer facility to generate wealth from the waste leveraging a first of its kind technology in India. Since COVID, we have been facing challenges in getting Visa for our Chinese partners and we were facing some operational challenges as well; therefore, we took strategic maintenance shutdowns, which has been concluded in January and the plant operations have been resumed. On the other hand, we are also hopeful on issuance of Chinese Visas based on discussions with the government, given the strategic importance of silver in India. Post this, we are hopeful to achieve the silver production of around 32 tonnes from Fumer on annual basis. Considering the shutdown of the plant in quarter 3 and some changes in the mine sequencing in the SK Mine as per geotechnical situations, we will achieve a silver production between 700 to 710 tonnes during the current year. Our Zinc CoP for the quarter stood at USD 1,041 per tonne, lower by 5% year-on-year driven by improved metal grades, better domestic coal availability, increased renewable energy usage, higher asset realization, softened coal and input commodity prices and operational efficiencies. This demonstrates our efforts are on the right path of achieving our target of $1,000 per tonne for the cost of production. Through a focused approach to significantly reducing costs alongside operational excellence, we have achieved a strong financial performance, recording the highest ever third quarter revenue and EBITDA. Our profit after tax stood at INR 2,678 crore, reflecting an impressive growth of 32% compared to an 18% increase in total revenue, driven by cost reduction. In conclusion, we are dedicated to expanding our capabilities with a focus on growing our R&R base to strengthen our global positioning. Our efforts will remain focused on broadening our portfolio in the emerging areas such as minor metal recovery and value-added products, all through sustainable methods to drive greater value for our shareholders. With this, I now hand over to Sandeep for an update on the financial performance.

Thank you, Mr. Misra, and a very good evening, everyone. Despite facing high inflation and global uncertainties, the Indian economy demonstrated remarkable resilience in the year 2024, making it the world's fastest-growing major economy, characterized by strong GDP growth, substantial foreign exchange reserve and a record level of FDI inflows. With it being on the fast track to become the third largest economy in terms of real GDP by 2030, the World Bank recently projected that India's growth will remain robust in FY '26 and '27. The base metal sector experienced a volatile 2024, starting the year as a weak performing asset class. However, in the latter half of the year, it rebounded driven by global demand for the metal used in the artificial intelligence and a green energy transition. Gold and silver stood out by reaching record high levels. Overall, both base metals and precious metals ended the year in positive territory, reflecting optimism about their long-term demand outlook. Considering the demand growth we have witnessed in 2024, reflecting in the commodity prices and economic growth, the year till date has been our best ever performance in terms of mined metal and refined metal production. With the continued focus on the stringent cost control and surge in the commodity prices in double digits, we achieved highest ever third quarter revenue and EBITDA with 10-quarter best EBITDA margin of around 53%, up 400 bps over last year. Our market share in India has also increased to 77%. During the third quarter, our total revenue from operations stood at 10-quarter best figure of INR 8,614 crores, which is also ever highest third quarter revenue, up 18% Y-o-Y, in line with better zinc and silver prices. Further supported by a strong dollar and marginally offset by lower lead and silver volume and lead prices. For the year till date, the total revenue from operations stood at INR 24,996 crore, up 17% Y-o-Y, driven by record metal production, higher zinc and silver prices, a stronger dollar was partly offset by lower silver and lead prices. We achieved highest ever third quarter EBITDA of INR 4,539 crore, up 28% Y-o-Y, in line with strong volume, higher realization and lower cost of production. This quarter, our Hindustan Zinc Alloy Private Limited, a 100% subsidiary of Hindustan Zinc, has also achieved an annualized run rate of generating EBITDA of INR 150 crore, against the overall investment of around INR 200 crore, delivering on track payback of less than 2 years. For the 9 months, the EBITDA stood at INR 12,649 crore, up 26% Y-o-Y through record metal production volume, higher realization and lower cost of production, though partly offset lower silver volume, as already highlighted by Mr. Misra. The Zinc CoP excluding royalties stood at 15 quarter lowest figure of $1,041 per tonne during the quarter with 4-year best cost of production of $1,073 per tonne for the 9 months. This indicates our progress towards recording a fourth year lowest cost for the full year and confident enough on achieving the full year cost guidance towards its lower band. Our growth projects, Debari roaster, 160 KTPA and fertilizer is going well. We spent INR 1,024 crores in growth as well as in sustaining CapEx during the quarter. We have delivered healthy free cash flow pre-CapEx of INR 2,628 crore in third quarter and INR 9,664 crore on a 9-month basis. We reported our 9 quarter best profit after tax of INR 2,678 crore, up 32% Y-o-Y in line with higher EBITDA. For the 9 months, profit after tax stood at INR 7,350 crore, up 28% Y-o-Y. The effective tax rate for the quarter is 24%. Supporting the government's effort to empower the MSME sector, we have prioritized payments to MSME vendors, achieving an average cycle of 18 days, which is 60% faster than the statutory requirement. This underscores our commitment to ESG principle and strengthens trust in our supply chain, though enhanced social responsibility. This year, again, we have continued our legacy of ensuring highest level of corporate governance and transparency and reporting practices, I am proud to share that Hindustan Zinc's integrated annual report for the financial year '24 was recognized as one of the top integrated annual report in India and won Gold Award with a Top 50 rank worldwide at the LACP USA Spotlight Awards. Overall, we achieved strong performance for the quarter and the 9 months. Our focus on operational excellence and cost reduction is driving improved financial results. Our large-scale, low-cost operations consistently delivering industry-leading EBITDA margins and generating strong cash flow from operations. With the further increment in the share of renewable power in the overall power requirement, increased production volume and other recovery enhancement initiative, we are confident of achieving the design cost of $1,000 per tonne. With the solid foundation for continued success, we position ourselves for future growth and maximizing value for all our shareholders. Before I hand over to operator, I'm also happy to share that the company delivered superior total shareholder return of around 62% that is INR 181 per share in comparison to 10x of NIFTY50 and 13x of NIFTY Metal Index. Our market cap also increased by INR 64,000 crores during this financial year. With this, I now hand over to operator for Q&A. Thank you.

[Operator Instructions] Our first question comes from the line of Amit Dikshit from ICICI Securities.

Congratulations for a good set of numbers this quarter. I have a couple of questions, sir. Is it possible to quantify the hedging gain in this quarter, the residual hedging quantity we have and if there was any fresh exposures taken in this quarter?

Amit, Sandeep here. So we have overall hedging gain in the 9 months logged in is INR 58 crore flowing to the P&L and the remaining around INR 64 crore is lying in the other comprehensive income, which will flow into P&L in the Q4. The open quantity is around 14,000 tonnes of the zinc, rest all has been squared off.

Okay. And no fresh exposures were taken in this quarter?

No. No fresh exposure.

Okay. The Second question is around -- in the prepared remarks, you mentioned that there was lower production due to maintenance-related shutdown. So is it possible to quantify what kind of -- in quantity terms, what would have been the loss?

So, if we see 259 Kt of metal, perhaps another 5 Kt, 6 Kt would have been added to it.

Okay. Okay, sir. Great. And given the level of LME prices at the moment, is it fair to assume that we will be running the combo smelter in zinc mode only, because zinc prices are -- appear to be quite favorable over lead?

Absolutely. We will be continuing in the lead plus zinc mode only. And also, quarter 4, typically, the mines are at their peak in producing concentrate and our best mines, best grid mines in Agucha, primarily being zinc mine. So we will have more of zinc MIC and we'll be continuing. And the prices are favorable. So we should be continuing in that same mode only.

And the geotechnical issues that you alluded to in your prepared remarks are now averted in SK Mine.

Geotechnical issues will come here and there in the mine, but we have got solid mechanism behind it to address along with international experts who work with us. So while they may have a little bit of issues while development, but I don't see a big challenge there.

[Operator Instructions] Our next question comes from Ashish Kejriwal from Nuvama Wealth Management.

Sir, quick three questions. First, you mentioned that you are still maintaining the overall mine metal production guidance as well as refined zinc guidance?

Yes, yes, of course, we are still holding on to it.

Because now that means that the fourth quarter could be 350 around Kt from 265 Kt to 350 Kt. Do you think that we will be able to manage that?

So Ashish, this is Sandeep here. So I think if we do 316 Kt of the mine metal -- I'm not sure how we are getting 350 Kt. If we do 316 Kt of the mined metal, we can achieve the guidance. And for the metal, we need 290 Kt. So, and the roaster is getting commissioned in the mid of February. So we're quite confident to achieve both of those.

Okay. That's great. Second question is in terms of royalty. Is it possible to quantify how much royalty we have paid to our parent in 9 months and 3 months, respectively?

So it's around INR 650 crore for the full year.

Okay. So we have already paid INR 650 crore for entire FY '25?

Yes, yes. We paid in advance and adjusted before the next payment is done.

Yes. And sir, lastly, last quarter also we said that we are working on to increase our capacity from 1.2 million tonnes to something like 2 million tonnes and can you give some kind of details. So any progress on that front?

So we have almost finalized mining contractors, because all said and done, the mines need to be deepened, new levels to be opened up. So whichever way we design the mine, we have to do that task, with a no-regret move. So we are finalizing the both the two Australian contractors and one Peruvian contractor, and that should happen in early February, and so that they can start mining in the month of April. So that will start adding more volume to next year's ore production. Second is expansion of smelter. Current expansion of new roaster, which is in getting commissioned in this quarter itself. And also, we are finalizing the order for a 250 ktpa of metal production capability in the smelter side. So as you -- as the strategy that we are adopting, you won't hear one project of 2 million tonne, you'll hear expansion projects being announced every now and then of some 250 ktpa, sometimes another 250 ktpa, depending upon where I find -- where we find it more suitable. And I'm sure first two steps are two mining contractors engaged in mines for deepening the mines and 250 ktpa order placement for expansion of smelters that will be followed by many such states.

So sir, is it possible if we can say for suppose next 5 years' plan, year wise, like we are 1.2 million tonne mined metal right now and refined metal of 1.1 million tonne, how we are stepping ahead and reached 2 million tonnes maybe 5 years, 7 years, whenever, but year-wise not -- obviously, as you rightly pointed out, it can't be go in a one go. But from 1.2 million tonnes, are we going to 1.35 million tonne, 1.5 million tonne? So year-wise, if it's possible to share?

Very correct. So as I said, 250 ktpa if I commission, 1.2 million tonne will go to 1.45 million tonne directly, which is close to 1.5 million tonne. And then maybe we will look at another 500 ktpa plant or 0.5 million tonne plant to take the capacity to 2 million tonnes. That will be in one go. But the first figure is from 1.2 million tonne to 1.45 million tonne and commensurate mining. If once that establishes, which I can see anywhere between 1.5 to 2.5 years' time, which will be take us to FY '27, and then we will see to take it from 1.45 million tonnes to 2 million tonnes.

Okay. Okay. So one thing is sure that from 1.2 million tonne, we are going ahead to 1.45 million tonne by FY '27 or max FY '28.

Absolutely.

[Operator Instructions]. The next question comes from the line of Manav Gogia from YES Securities India Limited.

Sir, one question I wanted to ask was on the Hindustan Zinc Alloy Plant. Could you quantify the amount of EBITDA that was generated during this quarter?

The EBITDA generated by Hindustan Zinc Alloy Private Limited is INR 43 crore during the quarter 3 and profit after tax of INR 31 crore.

Okay. And what would be the annual run rate that we can expect on a full year basis from the same?

So, full year basis, we can expect at a peak capacity of around INR 200 crore EBITDA. And since it's a new company, the ETR will be 17.44%.

Got it. So one more question was, can you give me the blend of renewable energy in the total energy mix that we had? I think in last quarter, we were somewhere around 14%, and we guided to be between 25% to 30% during this particular quarter. So just...

Yes. So during this quarter also, it was around 15%. In the overall total power, the renewable energy component was 15%.

The next question comes from the line of Raashi Chopra from Citigroup.

Just a couple of questions on the renewable energy, will you still exit the fourth quarter at 25%?

Renewable energy exit, we should be around between 18% to 20%.

Okay. And the -- I don't know if I missed this on this call, but the cost of production guidance for the full year, are you still maintaining what you had given earlier?

So we had a guidance of $1,050 to $1,100, and we are maintaining the same guidance. As I said in my talk track, we should be delivering towards the lower band of the guidance.

Okay. Just on the restructuring, I mean, there were press articles which were suggesting that you in talks with the government, have those concluded or they are still ongoing?

No, restructuring, we were -- government was busy on the OFS part, so we did not press for demerger because both were interconnected as I had spoken to the last quarter Board meeting. And also in the meantime, the critical mineral mission was declared, more and more blocks were being announced. So we focused our attention into bidding for new mineral blocks in the critical mineral mission, and we were successful in four blocks, out of which one, of course, has been canceled later on by the Government of India, three are with us. And this is another area we -- this also adds to the enterprise value and hence the shares. So we use that opportunity. In the meantime, government OFS 1.5% has been done. If nothing else happens, then again, we'll come back to talking about demerger.

All right. And just one last question for me. On the dividend side, I mean, there has been a bit of a slowdown vis-a-vis what Vedanta has been announcing. So is there any sort of change in dividend policy or we can expect it to kind of resume?

So I think, there is no change in the dividend policy. The dividend policies remain 5% of the opening networth or the 20% -- 30% of the profit. I think we have already delivered INR 12,000 crores for this financial year, which is almost equivalent to the profit after tax for the full year. So there's no change.

The next question comes from the line of Shreyans Daga from Barclays.

Congrats on the good set of numbers. I have one question on the Supreme Court ruling on mining sales last year. So has Hindustan Zinc received any new demands for any kind of sales related to mining? And are you making any provisions for the rest of the year for any such demands?

So Shreyans, I think, we have been very, very ultra conservative, and we provided INR 83 crore as a provision in the last quarter, and there has not been any demand on account of it. We will actually see whether to reverse in the subsequent quarters.

[Operator Instructions] The next question comes from the line of Shivani from Dolat Capital.

Sir, my question was regarding the silver production FY '25 guidance was 750 tonnes to 775 tonnes, but 9M volume shows that the guidance might not be achieved. So any impending reason for the same and future prospects regarding the status of additional silver volumes from the Fumer?

Although every year, we do give a guidance, silver guidance when we give the guidance for CoP, CapEx and the metal volume, but we all of us have to appreciate that silver is just a byproduct and it is a reflection of the grade and what we are mining as on date. So while -- since it's a byproduct, we would rather say -- our focus would be on meeting the guidance on metal and meeting the guidance on CoP, cost of production, meeting the guidance of -- meeting the guidance of CapEx. However, silver being a byproduct, we should try to reach to whatever level closer as is physically possible under the current circumstances, which Sandeep has already narrated. Anywhere between 710 tonnes or more we should be able to do. We may not be meeting the guidance, but it's not much of a concern because we should -- our primary focus is meeting the guidance on metals.

The next question comes from Anirudh from JM Financial.

Sir, first of all, congratulations on a good set of numbers. So I just wanted to have a question regarding the factors which will be driving the cost from $1,041 to $1,000. So can you please give a color on what will be the factors?

Yes. I think the $1,041 to $1,000, I think from going here, we had the highest cost of around, say, $1,297. And in the last 15 quarters, we have gone significantly down every quarter. And now around $1,041. As I said, we should be around $1,050 on a year basis. From here, the journey, the main component will be the renewable energy. As I have been explaining in the earlier part that we are the far from the mine. So we have a very significant logistic costs and renewable energy does not come with any cost of the logistics. So every 2% increase in the renewable energy will save $1 and as we have signed the two power delivery agreement with the Serentica, and the third power delivery agreement is going to be signed, so we will be almost 70% secured from the renewable power through the renewable energy and from 15% to 70%, that is around 55% increase will have a $30 cost reduction in the next 2 years. It will happen in the phases. So that is the key 80% component for my cost reduction. And second key component would be the volume increase. So more and more volume increase will have a more fixed cost absorption, even that, I have a 30% to 35% fixed cost. So over the FY '26 and FY '27, we should see the cost, I believe, and hopeful to see FY '26 exit cost around $1,000 and FY '27 should be below $1,000.

[Operator Instructions]. The next question comes from Ashish Kejriwal from Nuvama Wealth Management.

Sir, I missed that time, what could be the probable CapEx for this expansion, this 250,000 tonnes smelter as well as mine expansion, which we are planning to do?

So we are planning, as Mr. Misra said, from 1.2 million to 2 million tonnes, so it will be in the phases. But overall, CapEx as a very, very highly indicative basis our past CapEx performance and the global benchmark should be between $2 billion to $2.5 billion, spreading between the 3 to 5 years.

But sir, $2 billion to $2.5 billion is for 1.2 million tonnes to 2 million tonnes. So we have visibility only for 1.2 million to 1.45 million tonnes right now, so have we gone ahead with ordering or still it's in board stage?

No, no, Ashish, I think, we have -- we -- as of now, we have appointed a three global mining consultants and one for the smelter and three for the mining. So mining is more like doing a mine development. Smelter is very easy to set up. So smelter, our global benchmark is around $3,000 of the cost for the project cost in case of Europe, which is around $4,500 per tonne. Our case, it has been always $2,300 to $2,400 per tonne. So we should be remaining in the same range, so 250 Kt if multiply by $2,500 should be around a $500 million kind of numbers to put in a perspective -- sorry, $500 million of the numbers for putting the smelter. And similar, if I take the mining expansion, if I have to match that 250 Kt, it should be around $700 million to $800 million. So whole of 250 kt for mining and the smelter should be around, I think, $1 billion to $1.2 billion.

That's very clear. So -- and we are planning to start it from next year maybe.

Yes, yes, we should be planning for next year also -- next year. And we are also working on the 10 million tonne of the recycling project as well, tailing recycling.

Okay. Can you please explain, sir, give some more details on that 10 million tonne recycling?

No. So we will be putting up our 10 million-tonne recycling plant, which will be annually processing 10 million tonne of tailings. We have got huge quantity of tailings in Rampura Agucha mine, and we'll be taking the tailings out from the tailings dam, reprocessing it and produce zinc and zinc out of it. So roughly, it has a grade of anywhere between 2% to 2.5%. And since there is no cost attached to the import side, so the only thing we need to do is process it which can be a function of the current technology we are exploring is the functional -- combination of flotation and then leaching with sulfuric acid and produce directly zinc sulphate out of it and then transport zinc sulphate to smelter and produce zinc. So this is something we'll make our process more sustainable. It's a reuse and recycle principle and also produce additional zinc from the tailings that we have. We don't have to mine it.

Sir, is it possible to share how much tailings we have and when we are going to plan or start this recycling plant or when will it start hitting our P&L?

So maybe we'll have to wait for one more such calls, maybe after another Board meeting, then we'll come back with further details. But as I know, we are working aggressively with the designers, you are sending samples to Australia for testing so that the technology can be frozen. Once, I guess, another 1, 1.5 months, that will be done. And once that is done, then we can come back and share with you how much will be the yield of it, how much will be the CapEx of it. And I'm sure this will be a very high payback project, it will happen. And also, it will be one of its kind in the world. No other zinc mining and smelting company has ever thought of making such a large-scale plant for tailing reprocessing.

Yes. And this will be under Hindustan Zinc only?

Of course, this will be under Hindustan Zinc, if the demerger doesn't happen before that.

The next question comes from Jainam Shah from Indsec Securities & Finance Limited.

Congratulation on good set of results. My only question is that what is the revenue potential from the DAP plant that is going to be expected to be commissioned in FY '26?

So, Jainam, thanks for your question. The fertilizer plant will get commissioned by the Q4 '26. So we are not expecting any revenue from the DAP plant in FY '26. On the full scale basis for this 5.1 lakh tonne of the fertilizer plant, we are having the EBITDA potential of INR 400 crore to INR 450 crore annually.

Yes. So you have been mentioning EBITDA across the different calls that has been there, but revenue potential is not shared. So any specific reason for that? Or it's still in the books? So what will be the revenue potential? I just wanted to know that.

Revenue potential will be, I think, we are talking of the -- because we are having -- taking a 12%, 13% margin, so in this kind of the project will be -- revenue will be around INR 2,000 crores to INR 2,500 crores. That's the revenue. So I think very simple maths, nothing to hide about it.

The next question comes from Shweta Dikshit from Systematix.

A couple of questions from my side. Is there an annual CapEx guidance for the next 2 years?

So Shweta, I don't think we will give the -- we give the annual CapEx guidance during the start of the year. And as Mr. Misra has said, about the 1 million to 2 million tonne and I explained one of the other analyst also. We will be having a -- if we launch this 2 million tonne project, it will be 2 -- between 3 to 5 years, $2 billion to $2.5 billion, it will depend upon the Board approval. As of now, we are sticking for this year annual guidance around $200 million on the growth CapEx and maintenance CapEx around $375 million. For the next year guidance, we are still in the process of business planning. And once the Board approves this CapEx, then we can announce it formally.

So, I mean, for a model perspective, we can at least for now take this as a steady-state basis for the next 2 years, that will be the minimum CapEx for the 2 years?

Yes, yes, you can take that for your model purpose.

And another question on the recycling plant, that's a 10 million tonne processing capacity per annum, right, as you mentioned?

Yes.

And recovery of around 2% to 2.5%?

Yes, it should be having the content of 2% of the metal.

And this is likely to be only zinc or are you looking at other -- any other metal or minerals here?

So we are focusing more into the zinc and silver.

Zinc and silver, okay. And this -- since you said, this is something which does not entail any input costs since that these are basically zinc tailings that you'll be utilizing. So could you give an indication of what -- like what kind of visibility do you have of processing 10 million tonne every year? Like what's your input?

So you have to wait for those numbers. As of now, we are undergoing sending samples for testing and finalizing the technology. Capacity, roughly, we assume that we should be having a 10 million tonne processing plant. We have got enough of tailings in stock for that. And also, every year since we'll be increasing the volume to 2 million tonne metal so to that account production of tailings will also go up many folds from the current level. So supply side is not an issue. Issue is only finalizing technology, so that we can attribute the right cost numbers, and we can calculate the right return on investment. So that, I think, you have to wait for another one quarter to know that.

[Operator Instructions] The next follow-up question comes from Manav Gogia from YES Securities India Limited.

Sir, one question I wanted to ask was basically on the fumer getting ramped up. Last quarter, I believe you had mentioned that there were some design inefficiencies that are taking place. So I just wanted to know how are we placed on the fumer ramping up?

So right now, we have taken a shutdown and that shutdown is over, both the furnaces are up and running from today. And also, we have design inefficiencies regarding the coal mill so that we have brought in new equipments, and we have put in place during the shutdown. So we have done whatever in our knowledge, what we could do. At the same time, we are also trying for Chinese experts to get Visa so that we don't have such problems that we encountered for last couple of years in the coming days. And I'm sure from this quarter onwards, the fumer would be delivering what it was designed for.

Okay. And has this fumer produced any of the volumes till now?

Yes, yes, it has produced a 5 tonne of the equivalent of the silver in the last 6, 7 months. So it is not like that's not producing. It is producing at the run rate, of course, 30% of the design capacity. But we are hopeful that in the Q4, it should be almost 60% to 70% of the design capacity.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Ms. Jain for closing comments.

Thank you, Sagar. Thank you, everyone, for joining us today on this call. If there are any follow-up questions or if there are any clarifications required, you can reach out to the Investor Relations team. Thank you so much.

Thank you.

Thank you.

Thank you. On behalf of Hindustan Zinc, that concludes this conference. Thank you for joining us. You may now disconnect your lines.