As silver price rally, Hindustan Zinc's plans entry into value-adds

Hindustan Zinc appoints Hugo Schumann as head of silver division to intensify focus on the white metal

Earlier this month, Hindustan Zinc (HZL) announced its rise to become the world’s third-largest producer of silver. Globally, the metal has been on a price rally, pushing HZL to explore expansion strategies, including value-added initiatives.

“We are exploring options in the value-added segment for silver,” said Arun Misra, chief executive of the company in a call with Business Standard last week. Misra said the company may look at segments such as silver coins and industrial-grade silver production, under the value-added category.

In line with HZL’s increased focus on silver, the company at the start of April also made a new, senior appointment. The metal producer appointed Hugo Schumann as the CEO of its silver business. Misra said, Schumann will chalk out more plans for the value-added entry and other measures to increase silver-related recovery. More details on this plan, Misra said, will be announced at the company’s next board meeting.

For the full year 2023-2024, HZL produced 746 tonnes of silver, its highest ever. The company plans to take this number to 750 – 775 tonnes in the current financial year. In its presentation, HZL also noted it has the potential of recovering 3 kt (thousand tonnes) of silver from its accumulated waste stockpile and targets recovery of 30 tonnes in FY25. In terms of profitability, silver contributed 45 per cent to HZL’s overall profit before interest and tax in FY24.  Company executives expect this to remain in the range of 35-40 per cent, as the share fluctuates depending on zinc prices, which have been under pressure.

In an analyst call after the results announcement last week, company executives noted, “On silver demand, while current Indian industrial silver consumption is relatively lower, it is expected to increase significantly with developing industrial use-cases like EVs and 5G etc. The rally in prices and this momentum is a great start for the new financial year.”

Wealth management firm Nuvama in a note on HZL said it has raised the silver price estimates to $30 per ounce (from $25 per ounce) and that changes their FY25 Ebitda estimates by 5 per cent. Ebitda is earnings before interest, taxation, depreciation and ammoritsation.