Hindustan Zinc to maximize silver production amid record rally

Mumbai: In an effort to capitalise on the rising prices of silver, Hindustan Zinc, India’s leading producer of the precious metal, will maximize its output at the expense of zinc, the company's honcho said.

Silver prices have shot up 15% in the past one month, and 30% in the past year. Zinc prices, on the other hand, have remained flat in the past year and shown a slight rise since April.

“We have decided that we'll change our operating regime in our Chanderiya smelter to focus more and more on lead and silver production," Arun Misra, the company's chief executive said in an interview on Thursday. Silver is a by-product of lead production.

The company plans to increase silver production by 10 tonnes per month starting June, according to Misra. But the company has retained its FY25 guidance of 750-775 tonnes silver production.

This could add up to ₹100 crore to the company's top line each month if the current rally in silver prices persists. It could also improve the company’s margins as silver is a high-margin commodity.

With 817,000 tonnes produced in FY24, Zinc had nearly 80% share of the company's overall refined metal production by volume in the fiscal, and silver had less than 0.1%. Hindustan Zinc also produces lead.

“Any commodity price rally is beneficial for Hindustan Zinc," said Kunal Kothari, Research Analyst at Centrum Broking. “In FY25, their profitability will see a significant improvement, especially when compared to FY24." 

Kothari added that Hindustan Zinc's Ebitda could reach ₹19,000 crore by FY26 from ₹13,677 crore in FY24 “despite conservative estimates at 10-15% lower to current zinc and silver prices".

“That’s over 18% CAGR," he said. Ebitda is short for earnings before interest, tax, depreciation