Production and Operations ASSIGNMENT 1

An assignment on

Submitted to Dr Jagadeesh Raj Submitted By Gourav Sharma 11138 Section C

Introduction
Hindustan Zinc Limited (HZL) is an integrated mining and resources producer of zinc, lead, silver and cadmium. It is a subsidiary of Vedanta Resources PLC. HZL is the world's second largest zinc producer. It comes under mining and smelting sector. Operational Performance and Organic Growth HZL has reported a record production of Zinc-Lead mined metal, refined Zinc metal and refined Silver during the year. The Zinc-Lead mined metal production during the year was 840,000 tonnes, up by 9% compared to the previous year. Refined Zinc metal production during FY 2011 was highest ever at 712,000 tonnes, up by 23% compared to the previous year. The refined Silver production for FY 2011 was higher at 179,000 kg. During the year, our total power generation increased by 14% to 2,811.8 Million Units, compared to the previous year. The wind power generation was marginally lower at 201.4 Million Units, compared to the previous year. HZL have accelerated the pace of ramp-up at our Silver-rich Sindesar Khurd mine with the commissioning of 1.50 mtpa concentrator. During the year, HZL also successfully commissioned 160 MW (80X2) CPP at Dariba. Commissioning of the 100 ktpa Lead smelter at Dariba is expected to be completed in Q1 of FY 2012, post which, HZL would achieve our stated objective of over 1 mt of metal production capacity as reported by their chairman. HZL portfolio of existing assets and recently completed expansion projects continues to yield superior performance, and they continue to make investments and pursue opportunities that drive longterm sustainable growth. Exploration HZL reported that their ongoing exploration activities have yielded significant success with an increase of 22.1 mt to the reserves and resources, prior to a depletion of 7.5 mt in FY 2011. Contained Zinc-Lead metal has increased by 1.4 mt, prior to a depletion of 0.84 mt during the same period. Contained Silver has increased to 885 million ounces from 832.8 million ounces last year. Total reserves and resources as on 31 March 2011 were 313.2 mt containing 34.7 mt of Zinc-Lead metal and 885 million ounces of Silver. Expansion of their reserves and resources base through exploration is a part of our sustainable growth strategy.

History
Hindustan Zinc Limited was incorporated from the erstwhile Metal Corporation of India on 10 January 1966 as a Public Sector Undertaking. In April 2002, Sterlite Opportunities and Ventures Limited (SOVL) made an open offer for acquisition of shares of the company; consequent to the disinvestment of Government of India's (GOI) stake of 26% including management control to SOVL and acquired additional 20% of shares from public, pursuant to the SEBI Regulations 1997. In August 2003, SOVL acquired additional shares to the extent of 18.92% of the paid up capital from GOI in exercise of "call option" clause in the share holder's agreement between GOI and SOVL. With the above additional acquisition, SOVL's stake in the company has gone up to 64.92%. Thus GOI's stake in the company now stands at 29.54%.

Vision Mission & Values Vision Be the world's largest and most admired Zinc-Lead & Silver Company Mission

Enhance stakeholders value through exploration, innovation, operational excellence and sustainability Be a globally lowest cost producer Maintain market leadership and customer delight

Values Entrepreneurship Growth Excellence Trust Sustainability

Owners and Promoters

HZL Board of directors comprises of Chairman.COO and Directors. The people holding these profiles are listed below.

Mr. Agnivesh Agarwal Chairman Mr. Akhilesh Joshi COO & Whole-time Director Mr. A. R. Narayanaswamy Director Mr. Navin Agarwal Director Mr. R.K. Malhotra Director Ms. Anjali Anand Srivastava Director

Products
HZL are India's largest and the world's second largest integrated zinc-lead producer; and also one of the lowest cost zinc-lead producers in the world. HZL have mining, smelting and power operations in multiple locations throughout India. Our principal products are refined zinc metal and refined lead metal. In addition HZL also recover silver and cadmium as by products. Zinc and lead metal produced at world class Chanderiya Smelting complex are registered brands on the London Metal Exchange (LME). The LME brands are recognized worldwide as one of the most demanding standards, signifying highest product quality, uniform physical characteristics and consistency of ingots. This re-emphasizes HZLs capability and commitment to meet the world class standards. HZL also have Quality Management Systems in place for all their products which complies with the requirements of ISO 9001:2008 standards.

Principal products of HZL are: 1. Zinc HZL produce refined zinc metal which is used in a number of applications including glavanising, oxides, die castings and alloys.HZL produce zinc in a variety of grades

Special High Grade (SHG) High Grade (HG) Prime Western (PW)

Our Special High Grade zinc products are LME registered products under the brand names

HZL SHG 99.995 Vedanta SHG 99.995

2. Lead HZL produce refined lead at our Chanderiya Smelting Complex, which is LME registered under the brand name of "Vedanta 99.99".Lead metal is used in a number of applications including battery segment, lead-based pigments, and cathode ray tubes. Their refined lead metal is available in standard 24 kgs ingots.

Other valuable products of HZL are: 1. Silver 2. Cadmium

Locations
The headquarters of HZL are located in Udaipur,Rajasthan. Mining locations HZL operates the world's third largest open-pit mine, and World's largest Zinc Mine in Rampura Agucha, Rajasthan. Other mines with HZL are located in Sindesar Khurd, Rajpura Dariba and Zawar, all in Rajasthan.

Smelting HZL operates Zinc and Lead smelters and refineries at Chanderiya (Chittorgarh), Debari (Udaipur) & Dariba (Rajsamand) in Rajasthan, and at Vishakhapatnam in Andhra Pradesh.

Performance
Performance Indicators FY FY FY FY FY 2011 2010 2009 2008 2007 Revenue (Rs Crore) 9,912 8,017 5,680 7,878 8,560 PBDIT (Rs Crore) 6,454 5,392 3,665 6,231 6,639 ROCE (%) 56.06%57.51%44.07%93.58%138.96% EPS (Rs) 11.60 9.56 6.45 10.40 10.51 Particulars

Financial Highlights for FY 2011

Revenue of Rs. 9,912 Crore and PBDIT of Rs. 6,454 Crore. Highest ever production of Zinc-Lead Mined metal, Refined Zinc metal and Silver. Stable operating costs, supported by higher volumes and increased operational efficiencies. Return on capital employed (ROCE) continues to be strong at 56.06% Strong balance sheet with shareholders fund base of Rs. 22,533 Crore. Cash flow and liquid investments of Rs. 14,965 Crore. Earnings per share of Rs. 11.60.

Achievements
HZL is the largest producer of zinc in the country .Some of its other achievements are: 1. IMC Ramakrishna Bajaj National Quality Award - Performance Excellence Trophy (RBNQA- 2010) - Chanderiya Smelting Complex. 2. Amongst the top 25 Companies declared as Hewitt Best Employers in Asia in 2009 3. CII- National Award for Excellence in water Management- Rampura Agucha Mine. 4. CII-ITC Sustainability Award (Commendation for Strong Commitment towards sustainability) - Hindustan Zinc Ltd. 5. Hindustan Zinc received the prestigious Annual FICCI Award 2008 in the category of Rural and Community Development Initiatives. The award was presented by Mr Pranab Mukherjee.

Milestones
For Fiscal year 2010-2011, the milestones achieved by HZL are: 1. Commissioned 1.50 million tonnes per annum concentrator at Silver-rich Sindesar Khurd Mine. 2. Commissioned 160 MW (80X2) Captive Power Plant at Dariba Smelting Complex 3. Around 48 MW addition in wind power generation capacity 4. Rampura Agucha Mine expansion from 5.00 million tonnes per annum to 6.00 million tonnes per annum, increasing the total mining capacity of the Company to 8.40 million tonnes per annum. 5. Commissioned the 210,000 tonnes per annum Hydrometallurgical Zinc Smelter at Rajpura Dariba, increasing the Zinc & Lead metal production capacity to 964,000 tonnes per annum (879,000 tonnes of Zinc and 85,000 tonnes of Lead).

Operation Strategy
HZLs sustainable strategy aligns with the overall business strategy and reflects a clear understanding of the needs and expectations of their key stakeholders.The key drivers of their approach are: proactive engagement with their stakeholders; attracting and retaining the best talent; their provision of a safe and healthy working environment; focus on using environmentally friendly technologies and drive to conserve natural resources. They have a set of ambitious targets to optimize our natural resources usage. HZLs people are their valued asset and HZLs vision is to build a flexible, agile and flat organization with world-class capabilities and a high-performance culture. HZL is committed to achieving the best practices in health safety and environment at all of their sites. Their systems are well established and are regularly reviewed and monitored taking into account their own experiences and industry best practices. They believe they have a responsibility to engage with the communities in which they operate and to foster their social and economic development. These principles are embedded across the organization and are a key element of their employee training, development and performance at all levels. Through this strategy they are dedicated to meeting their sustainable development challenges. They have a well defined sustainable development framework that comprises of governance structures and policies, that act as pillars and supports their sustainable development endeavor.

The Company has set up a three tier governance structure, which helps it in strategic decision making, operations and project implementation: 1. Strategic Supervision: The Board of Directors exercises overall strategic supervision to lay down strategic goals, major expansion projects, capital expenditure and business plan approvals which ensure that the Company is focused on fulfilling shareholder aspirations. 2. Operation Management and Control: The Business Management Group comprises of functional heads and unit/plant heads steered by the COO and the CFO. It handles management and coordination through regular reviews and meetings with the objective to seek continuous improvements in the working of the Company and to harness potential. 3. Plant/ Unit Executive Management: comprising of several strategic business units (SBUs) for overall execution and empowerment through decentralized decision making.

Problems the Company Faced

The Company faced many problems like objections from government agencies for polluting the environment near their mining plant sites. In 2010 According to some of the residents in Vizag, over decades three generations in these surrounding areas were drastically lost their peaceful life. Wells were completely fed up with waste outlet and ground water is totally polluted, percentage of oxygen was down due to the let out wastage released by Hindustan Zinc Smelter, Visakhapatnam. Number of complaints were registered against HZL to Union Ministers, Central and State Pollution Control Boards.

Measures to Overcome the Problems

Air and water pollution control facilities and plants at all the units of the company have been operating regularly with optimum performance to maintain emissions within permissible limits. Solid wastes generated at mining units were utilised for raising tailing dam height and filling low lying areas. Excess waste is being properly stacked and stabilized. Regular monitoring of air, water, noise, etc., is being carried out throughout the year. Nearly 8,500 numbers of new saplings were planted during the year in addition to the existing trees being kept well maintained at all the mining units of the company. Are they bringing any strategies on their own or following others? Give some theoretical support in the form of a reference. That is cite another company doing similar to this company. HZL is following production and operation strategies of its own .As there are no major competitors in India in the same sector, the strartegies followed by HZL has paid off and contributed to HZL success story.

Productivity
The Income overview of HZL is given below:

FY FY FY FY FY 2011 2010 2009 2008 2007 Revenue (Rs Crore) 9,912 8,017 5,680 7,878 8,560 PBDIT (Rs Crore) 6,454 5,392 3,665 6,231 6,639 ROCE (%) 56.06%57.51%44.07%93.58%138.96% EPS (Rs) 11.60 9.56 6.45 10.40 10.51 Particulars

From the table we can see that revenue of HZL has been increasing by over 1000 crores every year.As Compared to FY 2010, there is an increase of 23.6% revenue earned by HZL. ROCE (Return on Capital Employed) This is calculated on the basis of PBIT before exceptional items & other non operational incomes/expenses, net off effective tax; as a ratio of capital employed in business as at the balance sheet date. Capital employed is shareholders fund & loan funds, net off non operational net cash and investments after adjusting the non operational debt. The objective is to earn consistently a return to ensure that capital is invested efficiently and this indicator measures the efficiency of our productive capital.

PBDIT(Profit Before Depreciation Interest and Taxes) is a factor of volumes, prices and costs of production. This is calculated by adjusting operating profits, depreciation interest and amortisation. Our objective is to take advantage of our low cost base to achieve the best possible margins across the Businesses. EPS (Earnings Per Share) EPS is the net profit attributable to equity shareholders. By producing a stream of profits and EPS we will be able to pay a progressive dividend to our shareholders. EPS growth also demonstrates that our capital structure is being managed efficiently.

The production details of HZL are given below: FY 2010 FY 2009 FY 2008 FY 2007 682,772 6,51,494 551,295 504,956 85,848 83,802 77,724 67,364 578,411 551,724 426,323 348,316 71,627 65,332 63,566 50,187 176,381 131,739 115,971 89,316

Mined Zinc (tonnes) Mined Lead (tonnes) Refined Zinc (tonnes) Refined Lead (tonnes) Refined Silver (kg)

The Major Product produced by HZL is Zinc and Lead.HZL is also into silver mining and the production out put is as shown in the table above.

Competitiveness
HZL holds 82% of market share in India. The increased supply of zinc from mine expansions in China, Australia, Bolivia, Kazakhstan, India and Canada has led to a global surplus inventory of about 150,000 tonnes in 2008. The spot price of zinc has decreased by more than 48% within the year. The lower prices have reduced the already narrow margin of some of the more cost ineffective mines around world. Intec, Aim Resources and Hudson Bay Minerals have suspended operations and stopped development works at their mines. Perilya and CBH Resources also have announced to cut down the production by over 20% in their mines. The continuation of the trend would ensure the survival of only the relatively cost effective producers. Taking advantage of it's lower cost of production, HZL has announced plans to increase its production to over 1 million tonnes/annum. What is the companys ranking in its sector? HZL is the largest producer of zinc in India. As there are no major competitors, it has a monopoly. What are the issues and challenges? The Company faced many problems like objections from government agencies for polluting the environment near their mining plant sites.

How consistent is the company in its ranking? The company is the major producer of zinc and lead in country since 1966, so it has always been consistent in its ranking at top. Do their products enjoy monopoly? Yes, their products enjoy monopoly in the market as demand for zinc and lead in the country keeps increasing and HZL is the only major producer of these metals.

Forecasting
The production data of fiscal years from 2007-2010 is given below:

Mined Zinc (tonnes) Mined Lead (tonnes) Refined Zinc (tonnes) Refined Lead (tonnes) Refined Silver (kg)

FY 2010 FY 2009 FY 2008 FY 2007 682,772 6,51,494 551,295 504,956 85,848 83,802 77,724 67,364 578,411 551,724 426,323 348,316 71,627 65,332 63,566 50,187 176,381 131,739 115,971 89,316

Considering the above historical data and applying 3 year weighted moving averages, The forecasted values of the products are given below. The weights considered here are 0.7,0.2,0.1.
Weighted 3 year moving average forecast for Mined Zinc Fiscal Year Production WMA forecast 2007 504956 2008 551,295 2009 651494 2010 682,772 616800.4 2011 663368.7

Corresponding trend line is:

800000 700000 600000 500000 400000 300000 200000 100000 0 2006 2007 2008 2009 2010 2011 Series1 Linear (Series1) y = 63365x - 1E+08 R = 0.9612

Weighted 3 year moving average forecast for Refined zinc Fiscal Year Production WMA forecast 2007 348316 2008 426323 2009 551724 2010 578411 506303 2011 557864.8

Trend line:
800000 600000 400000 200000 0 2006 2007 2008 2009 2010 2011 y = 81569x - 2E+08 R = 0.9507 Series1 Linear (Series1)

Weighted 3 year moving average forecast for Mined Lead Fiscal Year Production WMA forecast 2007 67364 2008 77724 2009 83802 2010 85848 80942.6 2011 84626.4

100000 80000 60000 40000 20000 0 2006 2007 2008 2009 2010 2011 y = 6153x - 1E+07 R = 0.9163 Series1 Linear (Series1)

Weighted 3 year moving average forecast for Refined lead Fiscal Year Production WMA forecast 2007 50187 2008 63566 2009 65332 2010 71627 63464.3 2011 69561.9

80000 60000 40000 20000 0 2006 y = 6608.6x - 1E+07 R = 0.8952 Series1 Linear (Series1)

2007

2008

2009

2010

2011

Weighted 3 year moving average forecast for Refined silver Fiscal Year Production WMA forecast 2007 89316 2008 115971 2009 131739 2010 176381 124343.1 2011 161411.6

200000 150000 100000 50000 0 2006 y = 27696x - 6E+07 R = 0.96 Series1 Linear (Series1)

2007

2008

2009

2010

2011

References
http://www.hzlindia.com http://www.capitaline.com http://en.wikipedia.org/wiki/

Justification why my report needs to be graded good: 1. I got most of the data from the official site of the organization. 2. Covered all the topics asked . 3. Various mathematics tools are used for forecasting.