A listed PSU, Hindustan Copper Ltd. (HCL) is a vertically integrated copper producer, engaged in mining, beneficiation, smelting/refining and manufacturing value-added products. Recently, HCL has been taking efforts to insulate itself from the volatility of international copper prices by entering into non-LME linked items of production. The company’s CMDSantosh Sharmashares his thoughts. Excerpts from an interview:
HCL is now pursuing a ₹5,500 crore mine-expansion plan that will increase its capacity to 20 million tonnes by 2024. Could you elaborate?
Mining and ore exploration are HCL’s key growth areas.
ADVERTISEMENT
Our mine expansion plan aims to take ore capacity from 3.8 million tonnes in 2018 to 20 million tonnes by 2024.
The capital outlay is phased over five years. About ₹1,000 crore has already been invested.
The strategy involves expansion of existing mines, reopening of closed mines in Jharkhand and development of new mines.
ADVERTISEMENT
The expansion projects are located in Madhya Pradesh, Jharkhand and Rajasthan. Most of the funding would be through internal accruals.
To what extent will it reduce import dependence?
With the completion of the expansion projects by 2024-25, copper availability will be suffice to meet 30% of India’s demand against the present 5%.
Consequently, concentrate import will decline by 25%. It will help HCL to enhance its profitability (even if LME prices drop sharply). This is because of a huge cost reduction due to the economies of scale.
For HCL, the benefit would be that we will then be able to scale up and play by volume.
India holds about 2% of global copper reserves. Increasing resource base through investments in exploration is needed urgently.
HCL has a crucial role to play here.
Depth exploration in existing mining leases (beyond the 300-500 metres done now) is another thrust area. We plan to undertake an exploration programme covering geophysical and depth drilling in existing mines in Rajasthan, Jharkhand, and Madhya Pradesh and complete it in two years.
Our joint venture, Chhattisgarh Copper Co. Ltd will boost these efforts.
Could you share your mine expansion strategy?
We are implementing a three-pronged strategy of expansion at four mines — Malanjkhand (Madhya Pradesh), Surda and Khetri (Jharkhand) and Kolihan (Rajasthan).
We are reopening two mines at Rakha and Kendadih (Jhakhand).
Of these, Kendadih has already been reopened. These were closed years back due to unviable operations.
This has now improved with availability of new technology and larger operational scale. The tendering process has begun for Rakha. Alongside, we are also setting up a greenfield mine at Chapri Sideshwar (Jharkhand).
So, the bulk of the projected capacity will come from the underground mine under development at Malanjkhand, which has the single largest copper deposit in India?
The eight-million tonne capacity will come from the Malanjkhand underground mine which is under development. Initially, five-million tonne capacity will be achieved. We are going to try out new things here.
What is your progress at Banwas?
The production ramp-up from the Banwas mine has commenced this fiscal and will increase to six lakh tonnes by 2020. At Malanjkhand, we will gradually taper off opencast mining.
Will HCL operate these new expansion projects, or will you outsource?
Except Khetri and Kolihan, we have planned to operate all the other mines through outsourcing mode. Tendering process is now under way. We plan to expand through the EPC mode for most of these mines.
What advantages does HCL enjoy over its competitors like Sterlite and Birla Copper, as India’s sole copper miner?
The business model of private companies viz. Birla and Sterlite are based on custom smelting i.e they are importing copper concentrate and processing in their smelter and refinery plant.
Private players’ business is essentially low-margin, high-volume business. As an integrated producer, HCL’s margins are linked with LME copper prices. Compared to private players, HCL enjoys higher profit margin.
You had plans of getting into new metals as a means of entering non-LME linked sectors. Has this progressed?
We have taken initiatives to monetise the waste generated during ore mining.
These are copper ore tailings and mine waste rock of Malanjkhand mine.
A plant of annual capacity of 3.3 million tonnes has been installed at Malanjkhand to treat ore tailings and the trial run has begun.
HCL has over 100 million tonne stocks of tailings at Malanjkhand and at Khetri.
So, we have the raw materials and now, we only need to prove our efficiency in processing in this parallel line of business, where Hindustan Copper can actually become a precious metals producer too.
The 200 million-tonne rock stock at Malanjkhand can be used as railway ballast aggregate in the construction sector. Lab tests by RDSO, Lucknow have been successful.