We are proud to have achieved a record mined metal production for the full year. We are expanding all our mines simultaneously to continue to increase our mined metal production capacity and are in the midst of a significant transition from open cast to underground mining.Akhilesh Josh, CEO, Zinc India
While volumes lowered and productions costs this year increased due to exceptional circumstances, there are some exciting new opportunities opening up. We continue to focus on increasing the mine life of our assets and are particularly excited about the potential from Gamsberg, which would replace depleted production from other mines.Deshnee Naidoo, CEO, Zinc International & CMT
|Total mined metal||887||880||0.8%|
|Zinc refined metal – total||734||749||(2.1)%|
|Lead refined metal – total1||127||123||3.7%|
|Saleable silver – total (moz)2||10.53||11.24||(6.3)%|
- 1 Excluding captive consumption of 8kt vs 7kt in FY2015 vs FY2014.
- 2 Excluding captive consumption of 1,293 thousand ounces vs 1,232 thousand ounces in FY2015 vs FY2014
|Average zinc LME cash settlement prices (US$/T)||2,177||1,909||14.0%|
|Average lead LME cash settlement prices (US$/T)||2,021||2,092||(3.4%)|
|Average silver prices (US$/ounce)||18.1||21.4||(15.3%)|
|Zinc (US$ per tonne)||1,093||1,093||11.7%|
|Zinc (other than royalty) (US$ per tonne)||868||817||6.2%|
- 1 With IFRIC 20 impact.
Mined metal production for the full year was 887,000 tonnes, marginally higher than a year ago, achieving a new annual record. Production in the second half of FY2015 was higher than the first half. This increase is in line with the mine plans for Rampura Agucha and Sindesar Khurd.
Integrated refined zinc, lead and silver metal production reduced by 3%, 5% and 11% respectively over FY2014 due to lower mined metal production in the first half and lower silver grades at the Sindesar Khurd mine. In accordance with its mine plan, silver grade is expected to improve in the next year. However, higher mined metal production volumes over the second half of FY2015 added to the mined metal inventory, a large part of which will be consumed in FY2016.
Zinc prices gathered strength during the year despite a weak start. This was driven by improving demand in India and the continued global demand-supply gap. LME zinc prices averaged US$2,177 per tonne compared to US$1,909 per tonne over the same period in FY2014, an increase of 14%. Lead average prices weakened by 3% on the back of marginally higher supply and lower demand. Average silver prices reduced significantly by 15% in line with the general weakness in precious metals against the backdrop of a stronger US dollar.
The unit cost of zinc production increased by 12% to US$1,093 per tonne, compared to FY2014. This was due to a higher royalty, higher landed coal cost and increased employee expense due to long-term wage settlements partly offset by higher acid credits and lower fuel costs. In India the zinc and lead royalty rates were increased from 8.4% to 10.0% and from 12.7% to 14.5% respectively, effective 1 September, 2014. At these levels, these are amongst the highest in the world and higher than other base metals. In addition, an amount equal to 35% of royalty was provided with effect from 12 January 2015 for the contribution to the proposed District Mineral Fund (DMF) (33%) and National Mineral Exploration Trust (NMET) (2%), ahead of notification for these under the Mines and Mineral Development and Regulation (Amendment) Act 2015 (MMDRA).
EBITDA for FY2015 increased to US$1,193 million, compared with US$1,145 million during FY2014. This increase was mainly due to higher zinc LME prices and premia, which were partially offset by a reduction in lead and silver prices, lower metal sales volumes and higher cost of production.
|EBITDA margin (%)||50.6%||52.2%||–|
|Depreciation and amortisation||133.2||114.8||16.0%|
|Operating (loss)/profit before special items||1,059.3||1,030.2||2.8%|
|Share in group operating profit (%)||61.0%||45.0%||–|
HZL is in the midst of a transition from open cast to underground mining. Historically, open cast mining has accounted for about 80% of total MIC production, which in future will be replaced by underground mines. Open cast production will gradually taper off and by FY2021, all production will be from the underground mines. The announced expansion of Rampura Agucha open pit will extend open pit life giving a sufficient cushion for underground transition. The ultimate open pit depth will go down by 50 metres to 420 metres, with preparatory work having started in Q4 FY2015. Underground expansion is progressing well, and for FY2016, significant progress is expected in terms of mine development and ore production.
HZL is enhancing its ore production capacity in Sindesar Khurd by 50%, from 2mt to 3mt. The shaft sinking project at Sindesar Khurd is ahead of schedule with the main shaft sinking almost complete, having reached the depth of over 1km of the planned depth of 1.05km. Development of associated infrastructure is also progressing well and production from the shaft is planned to commence ahead of schedule, in the latter half of 2018.
The progress of the underground shaft project at Rampura Agucha is behind schedule and has reached a depth of 650 metres of the planned depth of 950 metres. With the planned extension of the open cast mine, overall production from Rampura Agucha is expected to remain on track.
During the year, gross additions of 19.4mt were made to reserves and resources (R&R), prior to a depletion of 9.4mt. Total R&R at 31 March 2015 were 375.1mt, containing 35.3mt of zinc-lead metal and 970moz of silver. Overall mine life continues to be over 25 years.
Significant progress is expected in terms of mine development and ore production from the underground mine projects. Rampura Agucha will continue to provide the majority of mined metal in FY2016, although overall production from this mine will be less than in FY2015. The gap in production will be made up primarily by higher volumes from Sindesar Khurd.
In FY2016, mined metal production is expected to be higher from FY2015, while integrated refined metal production, including silver, will be significantly higher as the Company will process the available mined metal inventory from the previous year.
The cost of production excluding royalties is expected to remain stable. There would be an additional outflow to the District Mineral Fund and National Mineral Exploration Trust in accordance with the MMDRA 2015 as mentioned earlier.
- Progress on brown field expansion of mines to achieve 1.2mtpa of mined zinc-lead.
- Managing the transition from open-pit to underground mining at Rampura Agucha.
- Ramping up silver production volumes.
- Rampura Agucha open cast mine life extension.
- Asset optimisation and operational efficiencies to maintain cost leadership.
- And continuing focus on adding reserves and resources through exploration.
Mined metal output for FY2015 was 14% lower compared with FY2014, primarily due to lower production at Lisheen by 22,000 tonnes, unplanned disruptions at Skorpion and lower ore grades.
The Lisheen mine, which is near the end of its life, is expected to end production in mid-FY2016. At Skorpion, production was lower by 23,000 tonnes. This was primarily due to a fire incident in the cell house, resulting in the refinery shutting-down during January 2015 for 23 days, followed by a gradual ramp-up. The production loss was also due to a lower zinc feed grade (FY2015: 8.7% vs FY2014: 9.6%).
The production at BMM was 12% down due to lower ore grades and the change in mining methods.
|Total production (kt)||312||364||(14.3)%|
|Production – mined metal (kt)|
|Skorpion (refined metal)||102||125||(18.2)%|
The unit cost of production increased to US$1,393 per tonne, up from US$1,167 per tonne in FY2014. This was mainly driven by reduced volumes and increasing treatment and refining charges. Due to unplanned disruptions, maintenance expenses were higher, resulting in increased cost of production.
|Zinc (US$ per tonne) CoP||1,393||1,167||19.4%|
EBITDA reduced by 15% to US$181 million for FY2015 due to lower volumes and higher costs, partially offset by higher zinc prices.
|EBITDA margin (%)||30.8%||32.3%||–|
|Acquisition related amortisation||25.4||47.0||(46.0)%|
|Operating profit before special items||69.7||76.1||(8.4)%|
|Share in Group operating profit (%)||4.0%||3.3%||–|
Gamsberg will partially replace the loss of production from Lisheen and restore production to over 300ktpa. Project execution is in the final stages of planning. Capex has been rephased in line with the Group strategy of optimising capex and focusing on critical pre-stripping and associated activities. The first ore production is planned for FY2018, and the ramp-up to full production will be in line with the revised capex profile.
In FY2016 production volume is expected to be c.220-230kt.
Cost of production is expected to be in the range of c.US$1,450/t-US$1,500/t despite the mines going deeper.
At Skorpion, plans are in place to extend the mine from FY2017 to FY2019. This is being achieved by deepening the current open pit to access additional reserves. Mine production will end in FY2019 and oxide ore processing will continue until FY2020 from stockpiles.
At BMM, near-mine resource potential remains high. The Company is taking a focused approach to improve confidence in other deposits within the mining licence, to firm up its plan for the next five years.
- Execution of the Gamsberg project in a phased manner.
- Extending the mine life at Skorpion.
- Smooth closure of the Lisheen mine.