London 02/03/2016 - Hindustan Zinc (HZL) has played down the impact of an issue at its Rampura Agucha zinc mine that briefly compromised its concentrate production and its output of refined metal - despite local premiums soaring last week.
The company, which accounts for a substantial proportion of the Indian market, will still meet its production guidance of 605,000 tonnes of zinc for April-December 2016, as detailed in the company's third-quarter financial results, a HZL representative said.
Rampura Agucha, in Rajasthan in the north of India, accounts for roughly 45-50 percent of raw material feed to HZL's refined production, sources said. It is the world's largest zinc-producing mine, according to HZL.
The company is in the process of extending the underground shaft project at the mine, ensuring a stable transition from open-pit mining to underground operations.
But this transition caused the aforementioned feed issue, which lowered its concentrate production, at least temporarily.
"There was a mine [ore] line temporary issue, which was resolved. Sometimes you get better concentrate and sometimes you don't. At the moment we are in full swing; currently, [the issue] is not happening," a HZL representative told FastMarkets.
But tightness - whether real or perceived - in the concentrate and refined metal markets stemming from the issue triggered a spike in premiums in India last week while buyers scrabbled to secure metal supply.
Traders inside and outside India have been sourcing and shipping ingots back into the country and paying premium rates to meet the sudden surge in spot demand, market participants said.
"We received all of a sudden many, many enquiries from India," a zinc producer source said.
Sources quoted CIF India premiums at $175-185 per tonne this week after a spike to as high as $240 last week.
"Some duty free western brands went at $230-240 per tonne," a source in India claimed.
HZL produced 517,000 tonnes of zinc in the first three quarters of the 2015 financial year. It exports roughly a third of its zinc production.
Although Rampura Agucha is also a key mine for lead concentrate, the company exports most of its refined 99.99 percent purity refined lead, with the Indian market tending to prefer secondary material.
(Additional reporting by Meimei Qin, editing by Mark Shaw)