Hindustan Zinc Ltd.HINDZINC₹582.50 +2.61%

Shares of Hindustan Zinc Ltd. rallied nearly 3% on Wednesday’s early trades to hit a new 52-week high of ₹587.80. The surge is driven by a massive spike in global silver prices, which have crossed $65 per ounce for the first time.

In the past seven trading sessions, the company’s share price increased by nearly 20%!

While Hindustan Zinc is known primarily for its base metal business, it is also India’s only integrated silver producer. This gives the company a unique advantage: it produces silver as a by-product of zinc and lead mining. Since the cost of mining is largely covered by the zinc business, rising silver prices flow almost entirely into the company’s profit margins.

Currently, silver contributes to around 40% of Hindustan Zinc’s overall operating profit (EBIT). The company plans to expand its silver capacity by 4% to 830 tonnes per annum, and refined metal capacity by 34% to 1.5 MTPA, by the second quarter of 2029 as per reports.

In international markets, silver prices jumped 2.8% to a record $65.63 per ounce. On the domestic front, prices on the MCX (Multi Commodity Exchange) rose over 3% to cross ₹2 lakh per kg.

Two main factors are driving this rally:

  • US Economy Weakness: Recent data showed higher unemployment in the US. This has led investors to believe the US Federal Reserve will cut interest rates soon. When interest rates fall, the US dollar usually weakens, and commodities like silver and gold become more valuable.
  • Safe Haven Buying: Geopolitical tensions, specifically regarding Venezuela and US sanctions, have made investors nervous. In uncertain times, investors often buy precious metals (known as “safe-haven assets”) to protect their money.

Sentiment was further boosted by news regarding its parent company, Vedanta Limited. The NCLT has approved a plan to split Vedanta’s various businesses (like aluminum, oil, and steel) into separate companies. Vedanta Limited will continue to hold the stake in Hindustan Zinc.