- Silver prices have risen 63% year-to-date due to strong industrial demand and supply deficits
- Hindustan Zinc earns 20–25% of revenue and 35–40% of EBITDA from silver as a zinc by-product
- A $1/oz change in silver price alters Hindustan Zinc's EBITDA by approximately 1%
Silver is currently experiencing one of its most dynamic periods, transforming from a traditional safe-haven metal into a critical industrial commodity. This surge has profound implications for Indian miners, particularly Hindustan Zinc Ltd., whose unique exposure to the metal could significantly influence the financial outlook for itself and its parent, Vedanta Ltd.
Silver's Momentum
The prices of silver, also known as the devil's metal, have seen an impressive rally, climbing a remarkable 63% year-to-date. This upswing is fuelled by a convergence of powerful global market forces: a strong uptick in consumption for electronics and the rapidly growing EV and solar energy sectors, persistent supply deficits keeping the physical market tight, and a Weak DXY (US Dollar Index), which makes dollar-priced silver cheaper for foreign buyers, further boosting global demand
Hindustan Zinc's Edge
For Hindustan Zinc, this rally creates an exceptional financial opportunity due to the company's structural advantage. Silver is a by-product of Hindustan Zinc's primary zinc production. This results in a high-margin business segment where silver contributes a significant 20–25% of the company's revenue and an outsized 35–40% of its EBITDA. Crucially, 88% of silver revenue is a direct pass-through to EBITDA, giving Hindustan Zinc extreme price sensitivity. In fact, a simple $1/oz move in silver prices yields a 1% sensitivity to the company's EBITDA.
Global Ranking and Valuation Potential
Hindustan Zinc is a sizable global silver miner, with an annual production of 22.5 million ounces (Moz). This places it among the top silver producers worldwide, as shown below:
Vedanta's Direct Consolidated Uplift
The financial fortunes of Hindustan Zinc are directly integrated with those of its parent company, Vedanta. Hindustan Zinc is a cornerstone asset for the diversified major, contributing approximately 40% to Vedanta's consolidated EBITDA. Therefore, a sustained strong move in silver, leading to higher EBITDA and a potential re-rating for Hindustan zinc , is expected to provide a significant direct uplift for Vedanta.
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