Vedanta Resources plc Annual Report & Accounts 2013

Operational Review:

Zinc - India

Download as PDF (1mb)
Operator operating driller at underground SK lead-zinc mine, HZL
Production performance

(In US$ millions, except as stated)
FY
2012–13
FY
2011–12

% change3
Production (kt)      
Total mined metal 870 831 4.8%
Zinc 765 739 3.5%
Lead 106 92 14.9%
   Zinc refined metal – Total 677 759 (10.8)%
Integrated 660 753 (12.3)%
Custom 17 6 -
   Lead refined metal – Total1 125 99 26.4%
Integrated 107 89 19.7%
Custom 18 10 -
Saleable silver – Total (moz)2 13.11 7.78 68.6%
Integrated 10.35 7.62 36.0%
Custom 2.75 0.16 -

1 Including captive consumption 7kt v/s 7kt in FY 2012–13 v/s FY 2011–12.
2 Including captive consumption 1,088 thousand ounces v/s 1,123 thousand
   ounces in FY 2012–13 vs FY 2011–12.
3 All % change in production figures have been calculated without rounding the number up to 1,000.


Operations

Mined metal production for the financial year was 870,000 tonnes, 4.8% higher than the previous year primarily due to increased production from the Rampura Agucha mine.

The integrated production of refined zinc was 660,000 tonnes, lower than the previous year but in line with the mine plan for the year. Sales of Zinc metal-inconcentrate (‘MIC’) were 61,000 tonnes, following surplus concentrate produced in second half. Integrated production of refined lead was up 19.7% at 107,000 tonnes for the financial year.

Integrated production of silver was a record 10.35moz for the financial year, up 36.0%, driven by higher output from Sindesar Khurd mine and Dariba lead smelter.

Unit costs

(In US$ millions, except as stated)
FY
2012–13
FY
2011–12

% change
Unit costs      
   Zinc (US$ per tonne) 998 1,010 (1.2)%
   Zinc (Other than Royalty) (US$ per tonne) 835 834 -

During FY 2012–13, the unit cost of zinc production was lower at US$998 per tonne as against US$1,010 per tonne in FY2011–12 partially helped by the depreciation of the Indian rupee, even though acid credit was much lower than the previous year. During the year the fall in coal price and lower specific coal consumption helped in reducing the captive power cost. The business remains in the lowest cost quartile compared with other global producers backed by high quality assets.

Financial performance

(In US$ millions, except as stated)
FY
2012–13
FY
2011–12

% change
Revenue 2,263.3 2,316.1 (2.3)%
EBITDA 1,165.3 1,244.8 (6.4)%
EBITDA margin (%) 51.5% 53.7% -
Depreciation and amortisation 107.3 109.2 (1.7)%
Operating profit 1,054.8 1,126.6 (6.4)%
Share in group operating profit (%) 42.0% 47.2%  
Capital expenditure 287.1 220.8 30.0%
   Sustaining 51.6 53.4 (3.4)%
   Growth 235.5 167.4 40.7%

EBITDA for FY 2012–13 decreased to US$1,165.3 million, as compared to  US$1,244.8 during FY 2011–12. The positive impact of higher volumes of silver and lead and depreciation of the Indian rupee was offset by lower metal prices, lower zinc volumes and lower by-product credits. Metal prices were lower during the year: zinc was down by 7.2%, lead reduced by 6.9% and silver fell by 13.6%.

Projects

The Board of Directors of Hindustan Zinc Limited (‘HZL’) has approved the next phase of growth. HZL has been actively conducting exploration activities, which have increased net Reserve and Resources (‘R&R’) across all mines to 348.3mt of ore as at the end of FY 2012–13. Based on a long-term evaluation of assets and in consultation with mining experts, Zinc India has finalised plans for the next phase of growth, which will involve the sinking of underground shafts and developing underground mines.

The plan includes developing a 3.75mtpa underground mine at Rampura Agucha and expanding the Sindesar Khurd mine from 2.0mtpa to 3.75mtpa. Other mines will also be expanded: capacity at the Zawar mines will expand from 1.2mtpa to 5.0mtpa, the Rajpura Dariba mine from 0.9mtpa to 1.2mtpa and the Kayad mine from 0.35mtpa to 1.0mtpa. It will also involve the opening up of a small new mine at Bamnia Kalan in the Rajpura Dariba belt.

The growth plan will increase mined metal production capacity to 1.2mtpa MIC. These mines will be developed using best-in-class technology and equipment, ensuring the highest level of productivity. The projects will be completed in six years and the benefit of these growth projects will start flowing in from the third year, even though project activities will continue until FY 2018–19. Annual capital expenditure for these projects will average US$250–US$300 million over the next six years (totalling approximately US$1.5 billion).

The Company’s Board has approved HZL’s proposal for the next phase of growth to 1.2mtpa MIC.

Exploration

Our exploration success has continued and during the year we added 24.6mt to R&R, prior to depletion of 8.6mt. With a total R&R of 348.3mt containing 35.1mt of zinc lead and 910moz of silver as at 31 March 2013, we have maintained our leading position with over 25 years of remaining mine life.

We have a strong track record of low cost exploration and have increased R&R five times, net of depletion, since 2003.

Outlook

Mined metal production in FY 2013–14 is expected to be close to 1mt, 15.0% higher than FY 2012–13. We expect commercial production to commence at the Rampura Agucha underground mine and the Kayad mine during the current financial year and normal operations at the Zawar mine will also contribute to increased mined metal production. In addition, we expect to produce around 11.2moz of integrated saleable silver in FY 2013–14. During the current year, we expect mined metal and refined metal capacities to be nearly balanced.

map
Key achievements
  • Highest ever mined zinc and lead production of 870kt
  • Record integrated silver metal production of 10.35moz, up 36.0% over previous year
  • Ramp-up of lead and silver production from the Dariba Smelter and Sindesar Khurd Mine
  • Maintained lowest quartile cost position
  • Gross addition of 25mt to Reserves and Resources
Strategic priorities
  • Realise production capacity
  • Develop cost efficient and reliable underground mines
  • Achieve growth to 1.2mtpa mined zinc-lead metal
  • Continue to focus on adding reserves and resources
Production – Mined metal (kt)
Graph
EBITDA (US$m)
Graph
image
Engineers at control room of Chanderiya smelting complex, HZL.
Case Study:

Delivering efficiencies that drive environmental benefits

Two initiatives in Zinc India’s operations have delivered both efficiency improvements and environmental benefits.

Process cooling for the acid and gas cleaning plants at the Dariba zinc smelter was carried out by induced draft cooling towers – a process that required a huge amount of water, around 37,000m3 per month. Replacing these with adiabatic cooling towers that are not dependent on water evaporation for cooling, dramatically reduced water consumption to 1,000m3 per month and also decreased maintenance costs.

Implementing advanced process control technology for the zinc roaster has reduced the standard deviations in the roaster bed temperatures significantly, by almost 50%, resulting in higher roaster throughput of 0.22 tonnes per hour and decreasing energy consumption.

Report and Accounts Downloads:Download Full PDF (5.6mb)