Big Zinc Rally to Spur Vedanta Unit's Mine Expansions, Says CEOBy
Hindustan Zinc fresh from announcing record dividend payout
Joins other producers in considering boost to output of metal
Hindustan Zinc Ltd. plans to accelerate its mining expansion as India’s biggest producer of the metal sees room for a further rally in prices.
The unit of billionaire Anil Agarwal-owned Vedanta Ltd. is fresh from doling out a special dividend that takes its payments this year above $4 billion. A 57 percent gain in zinc prices over the past 12 months has helped deliver what the company says is a record return to shareholders by an Indian company.
“As the zinc price is close to its nine-year high, the company might also think to accelerate its expansion plans,” Sunil Duggal, chief executive officer, told Bloomberg Quint in an interview. “The company has two or three licenses in the advanced stage of application and depending on the success of these licenses, some of these may be converted into mines in the next one year or so.”
Zinc, used to galvanize steel, has benefited from mine shutdowns and improved economic prospects in China, the top consumer.
“I am very bullish on zinc prices,” Duggal said on Thursday, forecasting more gains over the next three to four months as thinning supply of ore forces smelters to pare output. It’s an increasingly common refrain among producers, who view rising prices as a reason to ramp up production.
Zinc will keep rallying as production lags demand, Australia’s Orion Gold NL said Wednesday, having acquired a long-shuttered South African mine that it plans to restart. Japan’s Mitsui Mining & Smelting Co. is considering the resumption of some production at a mine in Peru, while industry heavyweight Glencore Plc said last month it’s closely monitoring smelting fees as a precursor to deciding whether to increase output.
Hindustan Zinc’s shares rose 1 percent in Mumbai and have nearly doubled in the past year. The Udaipur-based company currently has five zinc and lead mines in its home state of Rajasthan, with total reserves of 390 million metric tons. It’s on track to achieve 1.2 million tons of annual zinc production by 2019 on capital expenditure of 110 billion rupees ($1.7 billion), Duggal said.
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