At a time when the government has objected to Hindustan Zinc’s (HZL) plan of acquiring Vedanta’s global zinc assets for around $3 billion as it is a related-party transaction, the company is looking at buying zinc mines in South American and South African countries or Europe. It is ready to spend anywhere around $1.5 billion-$2.5 billion for the right buy.
HZL’s consolidated gross investments and cash and cash equivalents stand at Rs 16,482 crore as in December 2022.
The company had earlier said its board’s decision to buy Vedanta’s global zinc assets can be taken forward only with shareholders’ approval in a general meeting. It also said the notice calling a shareholders’ meet to consider the transaction has not been issued so far.
A letter dated February 17 from the mines ministry had threatened legal action, if the company pursued the board decision of acquiring Vedanta’s global zinc assets. HZL has said the letter would be placed before the next board meeting for consideration.
The government’s stake in HZL stands at 29.54%.
The company, the country’s largest and world’s second-largest lead and zinc miner, would continue to invest $300 million as sustenance capex per annum.
“It’s difficult to get zinc mines across the globe as there is nothing up for sale. Our consultants are looking at many properties, but we haven’t shortlisted anything as of now. We are cash-rich and debt-free, and so anywhere up to $2.5 billion is not a big deal for us,” HZL CEO Arun Misra told FE.
“We are producing more zinc than India’s demand and the balance has to be exported and for exports we incur costs such as sea freight, port and logistics. So, if we have mines and smelting facilities in other locales, these can take care of western geographies like the US, Europe and even the Middle East (West Asia),” he added.
HZL produces about 800,000 tonne zinc per annum, while the consumption in India is about 650,000-680,000 tonne per annum.
Going forward, the company would continue to spend $300 million a year as sustenance capex, which is mostly for developing underground mines. HZL has completed investing its earlier planned capex for raising annual production capacity to 1.2 million tonne (MT) from the earlier 800,000 tonne.
“Now, we have embarked on some balancing facilities, including for the facility in Debari and for the proposed 500,000 tonne per annum fertiliser manufacturing plant at Chanderiya in Chittorgarh district (both in Rajasthan),” Misra said.
The firm is also setting up a zinc alloy plant in Dariba, Rajasthan. This year, HZL expects to cross 1 MT in metals as it aims to reach 1.2 MT in a year and later to 1.35 MT.
“So, if the government puts up more zinc mines for auction, as of now there aren’t any, we will participate and if we get some merchant mines, we can expand our capacity to 1.5 MT.”
The company, which is also steadily switching to electric vehicles for underground operations, has a target of replacing its 900-odd, diesel-run, mining vehicles to battery operated ones over the next five years. HZL has earmarked an investment of over $1 billion for EV migration over the same period. The company has also entered into agreements for round-the-clock supply of renewable power of 450 MW with Serentica Global, which is expected to start from next year.
“I feel that by 2024 beginning, we will have 100 MW ready for us and our operations will be slowly transferred from thermal power into renewable power,” he added.
HZL sees the fourth quarter and next fiscal to be “good” due to myriad reasons, including the opening up of the Chinese economy with the country being a destination for exporting galvanised steel, power prices expected to come down, India increasing infrastructure spends and a rise in demand from places such as Europe.