ZINC March 2017
India's Zinc Mines Heading Underground

India’s mine production is going through significant change. The world’s largest zinc mine, Hindustan Zinc’s 750ktpa Rampura Agucha will see its share of total Indian zinc production decline from approximately 90% to 50%. The fall comes as part of Hindustan Zinc’s US$1.5bn plan over six years to expand existing underground operations and move underground at Rampura Agucha as it targets a mined metal capacity of 1.2Mtpa by FY2019. Progress towards the target has not been smooth sailing as shaft construction issues, and water ingress, ventilation and geotechnical problems, have limited the advancement.

India’s Mined Zinc Production

Over the past six years, India has produced, on average, 791kt of zinc in concentrate, making it the world’s 5th largest producer. Production is dominated by Hindustan Zinc (Vedanta) with more than 92% of all zinc in concentrate for the country. Previously, production primarily came from Hindustan Zinc’s open-cut Rampura Agucha mine, but because of a change in operational plans, this is changing.  

 

In Indian fiscal year 2013 (ending the 31st of March 2013), Hindustan Zinc announced that it would expand its zinc-lead mines in Rajasthan in a phased approach, to increase their metal capacity by approximately 25% to 1.2Mtpa by fiscal year 2019. The transformation is coming at an annual average capital expenditure of US$250m. The change marks a notable operational transformation. In 2010, 76% of Hindustan Zinc’s ore came from open-cut operations. By the June Quarter of 2018, this will have dropped to zero as a result of the closure of the high-grade (>12% zinc) Rampura Agucha open cut. Hindustan Zinc’s average zinc grade per tonne of ore mined will fall from 11.1% in 2010 to 7.4% in 2020. This does, however, remain well above the expected world average of 3.3% in 2020.

Hindustan Zinc’s move to, and expansion of underground operations has not only come as a function of diminishing open-pit Reserves, but also due to the size of underground Resources, environmental permitting, orebody geometry, declining zinc grades and high silver grades at Sindesar Khurd. The move to underground, and a ramp-up in mining capacity has not come without limitations and issues, with the operations in Rajasthan encountering shaft sinking issues, water ingress, ventilation problems, and geotechnical barriers. The effect of commodity prices has also caused a delay to some development. 

Rampura Agucha

Hindustan Zinc’s Rampura Agucha mine is transitioning from a 6Mtpa open-cut operation to a 3.75Mtpa underground operation from 2019. Since starting underground production in 2013, the mine has run into a number of problems, both at surface and underground. Most of the challenges have stemmed around the geotechnical nature of the orebody. In 2016, instability in the open cut required Hindustan Zinc to pre-split and pre-tension cable bolt areas to improve safety and stability. This instability required an increase in waste volumes resulting in a reduction in ore production. The geotechnical issues will also limit the final pit depth to 430m, 20m shallower than planned. Geotechnical issues have limited the underground production ramp-up in both stoping development and shaft sinking. While shaft sinking was completed in the December Quarter of 2016, it encountered a number of issues, most notably water ingress due to a geological fault. The mine is ramping up production, but will not approach 3.75Mtpa until after the shaft is commissioned in the second half of 2018. AME expects this will reduce haulage and operating costs at the mine while increasing production as the operation will have both shaft and decline access.

Sindesar Khurd

Unlike its counterparts in Rajasthan, the expansion of Sindesar Kurd from 1Mtpa to 3.75Mtpa of ore, has been ahead of schedule, reaching its design capacity in the June Quarter of 2016. The production expansion has been completed via decline haulage, as Sindesar Khurd’s shaft is not expected to commission until the second half of 2018. As a result of a quick ramp up in production at Sindesar Khurd and the delay in other projects, Hindustan Zinc announced in 2016 that it would commission an additional 1.5Mtpa mill at the operation, taking capacity to 4.5Mtpa. Hindustan Zinc plans to commission the mill in the March Quarter of 2017. Further expansions to the mine may be restricted by environmental clearances as Sindesar Khurd is currently limited to 4.5Mtpa of ore production.

Zawar Mines

The Zawar mines are expanding from 1Mtpa of ore to 5Mtpa. In the December Quarter of 2015, Hindustan Zinc announced that it would halt and review expansion plans due to low commodity prices and the marginal zinc and lead grades. The halt was short-lived with the go ahead of a staged expansion announced in the June Quarter of 2016. The ramp up of Zawar has been fast with monthly throughput increasing from 80kt in January 2016 to 180kt in January 2017. Approximately 2.5Mt of ore is expected from the mine in 2017. With Zawar now holding environmental permits for 4Mtpa, AME forecasts the mine will process at capacity in 2018 before increasing to 5Mt in 2019, subject to environmental clearance. 

Rajpura-Dariba

Rajpura-Dariba has had the least development of Hindustan Zinc’s mines in Rajasthan. As part of the expansion plans, the operation is moving from 600ktpa of throughput to 1.2Mtpa by 2019.  However, advancement has been limited. The expansion was placed under review in 2015 and 2016. The primary limiting factor has been ground conditions. The fractured dolomite host rocks and graphitic nature of the shear zone in which the deposit is located have adversely affected stability and dilution. This has required Hindustan Zinc to employ a vertical crater retreat mining method; a higher-cost, less efficient method than regular stoping. Rajpura-Dariba is also encountering acidic water issues and ventilation problems. With only 670kt (+100kt year on year) of ore mined in the year ended the 31st of March 2016, AME believes the mine will continue to fall behind the expected ramp-up rate. 

Limitations and Opportunities

The expansion of Hindustan Zinc’s mines in Rajasthan is expected to increase zinc in concentrate production by 56% to 1,014kt by 2020. This will create an opportunity for the company’s 88ktpa Debari, 210ktpa Dariba and 525ktpa Chanderiya smelters in Rajasthan to expand and lift production. Hindustan Zinc has outlined plans for expanding the operations by debottlenecking and adding zinc fumers to improve recovery. Hindustan Zinc has ruled out restarting the historic 56ktpa Vizag smelter due to jarosite disposal issues and its environmentally sensitive location. The smelter is also 1,600km away from the other mines and smelters. If Hindustan Zinc is unable to expand the capacity of its smelters to meet the forecast mine production, potential exists for the company to start exporting some of its output. However, AME believes the exports would be short lived with concentrate production expected to decline to approximately 900ktpa after 2023.

In 2017, AME forecasts Indian refined zinc demand to total 720kt, a figure that is exceeded by India’s expected refined production of 823kt. However, with India’s zinc demand rising at a rate of approximately 7% per year, Indian demand will outstrip Indian supply by 2020 if Hindustan Zinc does not expand its smelters.