Hindustan Zinc CEO Expects 30% Of Revenue From Rare Earth Minerals In Five Years

Hindustan Zinc Ltd. expects 30% of its revenue from mining of rare earth minerals in five years, Chief Executive Officer Arun Misra said on Monday.

The company's forte is mining minerals available in nature in low percentage, whose processing and recovery is difficult. And hence, critical minerals and rare earth minerals are within its ambit, Misra told NDTV Profit in a conversation.

Hindustan Zinc is "picking up slowly" in this regard and it has created an exploration company to mine rare earth minerals, with mining commencing after five years, according to the CEO.

With China processing around 90% of the world's rare earth ores, Hindustan Zinc is expected to engage in indigenous exploration and mining of these minerals, which is set to make up 30% of their revenue.

"Next year, on Jan. 20-27 or so, it (silver prices) may go up to $41-42 per troy ounce. We started a business plan with $33 per troy ounce, and will get a gain out of that," Misra said.

Spot silver prices went up above $35 per ounce for the first time since October 2012, with Hindustan Zinc seeing an upside of 14-15% on weekly charts, NDTV Profit reported.

The CEO said there was a shortage of 2,000 tonnes on the consumption side as compared to the supply side of silver globally. He expects this shortage to increase due to demand for more solar energy panels and cars and electric vehicles, which all have a major demand for silver as a conducting element.

The Hindustan Zinc CEO said the current price hike was just the beginning and he expects to see prices go up much faster in the next four to five years.

Misra said that if zinc prices do not go up considerably, he expects the company to focus more heavily on silver mining and exploration.

With silver contributing a third of their earnings before investment, taxes, depreciation, and amortisation, the firm may look into redesigning the production process and maximising silver production. "If zinc prices are not going up, if it stays there, we will have to figure out how to mine more silver," Misra said.

He said the company will be ready with a strategy to produce more silver and to avail the benefits of the silver market before the next quarter begins.

The company plans to evaluate its mine plans, ascertain mining sites and determine the grade of metals they will be able to obtain before expanding silver production. "Let me do the strategy right, just because I'm wishing to produce more silver doesn't make it so," he said.

If the rally continues, and prices do not come down any sooner, the company may consider expanding silver production. But it will be at the cost of production of more zinc in that case, Misra said.

"If silver is above $33 per ounce and zinc remains $26-27 per ounce, better to attack those areas of the mine," the CEO said. "In that case, 38% of Ebitda contribution (for silver) can go up to 45% Ebitda contribution because we will be producing more silver and less zinc."