Project Execution Risks for Mining Projects

Our Company’s current and future mining projects may be significantly delayed by failures in timely receival of regulatory approvals, technical difficulties, natural disasters, human resource, technological and other resource constraints, resulting in cost overruns and delayed delivery of our growth plans and negative market perception.

Our expansion to 1.2 mtpa of mined metal is complete and the next phase of expansion is under planning. To reduce the risk associated with a mining project, we conduct project feasibility and development work to establish the new economic production source.

Furthermore, we continuously explore newer mining models to achieve accelerated mine development rate, improved productivity and optimised cost.

Operational Risks

Our profitability is dependent on our price realisation, which is linked to zinc-lead LME and silver London Bullion Market Association (LBMA), and our cost of production. A negative movement in prices directly impacts our operating profit.

Rising cost of production due to the falling grade of existing mines, higher coal and fuel prices and lower metal recovery also impact profitability.

To offset adverse LME and LBMA price movement, we focus on reducing our cost of production and increase our metal premiums.

We proactively manage commodity costs, especially oil and coal basket, to drive lower structural costs via focus on efficiency (consumption norms, recoveries, manpower and equipment productivity) and increase our VAP portfolio.

To prevent a fall in ore grades and recovery, we are improving stope ore recovery through better instrumentation and drilling plan and conduct mine by mine study to understand the challenges and peculiarity of every mine location

People Risk

Our Company’s inability to recruit and retain skilled manpower might hamper operations and projects. There is limited availability of experienced underground mining contractors in India. Also, digital enablement in operations attracts increased technological skill and specialisation among employees and opportunity for business disruption and risk on the future of the existing workforce.

Investments are being made in suitably trained external and internal workforce with specialised skills in the domains of digitalisation and automation to stay efficient and minimise business disruption.

We are hiring expats for specialised jobs in the area of underground mining. We have established the Underground Mining Academy to improve local skillset. We are strengthening capability mapping and skill tracking of contractual manpower via Project RuBaRu.

Financial Risk

Like any large and complex business, our operations are also prone to interest rate volatility on treasury funds, counter-party risk and insurance risk. If the financial policies are not designed well or not implemented rigorously, it could lead to control breakdown and impact our Company’s cash reserves, profitability, growth and image.

We have adopted a conservative treasury policy revolving around capital protection and yield maximisation, in that order.

We have defined policies to mitigate counter-party risks by making the most of our sales on a secured basis, while our investments are only in highly rated debt instruments with defined counter-party limits.

Our investment portfolio is periodically reviewed by an external agency.

We have a well- structured insurance programme in place.

R&R and Discovery Risk

Our Company’s long-term viability depends on its ability to access mineral resources that have the desired geological characteristics, enabling mining at competitive costs.

One of our strategic priorities is to extend the life of our resources at a faster rate than we consume them, through a focus on drilling high-potential exploration targets within mine leases.

To achieve this, we have a strong exploration organisation, latest tools and technologies and right fit contractors.

Additionally, our Company has an active portfolio of tenements where it has preferential rights under MMDRA Act, 2015 at different stages of approval. It also participates regularly in mineral auctions announced by the government.

Health and Safety Risks

The resources sector has inherent hazards and is therefore subject to extensive health, safety and environmental laws, regulations and standards. Any incident can result in property damages, injuries and potential fatalities and also adversely impact the surrounding communities and environment. Such incidents may result in litigation, disruption of operations, penalties and loss of Company image and goodwill.

Our Company has implemented a set of standards that align its sustainability framework to globally accepted international practices such as International Finance Corporation (IFC), International Council on Mining and Metals (ICMM) and the Organisation for Economic Co-operation and Development (OECD) standards.

All safety and environmental incidents are thoroughly investigated for root cause analysis and to eliminate recurrence.

The Company regularly monitors occupational health, identifies hazards and incorporates analysis in all critical operations. The focus is on capturing leading indicators to eliminate incidents, while continuing to invest in the training of employees and contractors along with being focused on creating a zero-harm culture across the organisation.

Tailing dam management has been a recent area of focus, where the Company is implementing the recommendations from the global experts to mitigate associated risks. The first dry tailing plant has been commissioned at Zawar and the Company plans to adopt it at all its mining locations.

To increase the safety of underground operations, we have 100% traffic management and use of technology to reduce man-machine interaction and exposure of risk-prone areas, along with regular trainings. We are constructing an underground workshop to manage and reduce vehicular movement under the surface.

Environment Risk

The Company is subject to extensive environment laws related to emission norms, waste discharge, waste management, etc. Non-compliance with these laws may result in suspension of operations, occupational hazards to employees and cancellation of Consent to Operate.

The Company has undertaken several initiatives to control air, water and noise pollution, including dust suppression, electronically delayed blasting for minimal vibrations and dust, regular effluent monitoring and waste management. It has also committed to reducing its environmental footprint by judicious use of natural resources such as water and energy and has taken concrete steps for alternate use of various wastes.

The Company is investing in technologies to minimise emissions and waste generation. It has also invested in wind and solar energy and has already started working towards reducing GHG emissions to meet its commitments as a signatory to the Science Based Targets initiative (SBTi).

Community Relations Risk

Inability to provide inclusive growth to the communities and any disruption to their lives due to our operations will cause discontent and can have a negative impact on our Company’s reputation and social license to operate.

Establishing and maintaining close links with stakeholders is an essential part of our sustainability journey and we work with our stakeholders to understand their expectations and alleviate disruptions to the maximum extent feasible.

A baseline and impact assessment was study was conducted in FY 2018-19 and a community need assessment is planned in the current year. The Company will refocus its CSR efforts based on the results of the impact study. The Company has initiated several projects for enhancing the skills of the local youth to increase their employment prospects as well as projects for supporting community water requirements, apart from ongoing projects in its focus areas.

Technology Transition Risk

Globally, companies are facing disruptions by digital technologies. Our success depends on our ability to successfully adapt to the emerging technology trends, including digitalisation. This is an emerging risk for the Company.

We have implemented key digitalisation projects, including Collaboration Centre, Project Drishti at mines, Project Sarathi for supply chain automation, and E-volve for real-time quotes and online purchasing of our metals.

We are exploring digital solutions for exploration, mining operations, mining value chain processing, maintenance and trading in line with new-generation digital technologies and have made a time-bound short-term and long-term digital road map. To integrate multiple data bases and system, the OSISoft-PI system has been selected and deployment is in progress.

We are hiring specialised manpower in niche areas such as AI, intelligent automation and advanced optimisation.

Currency and Price Risk

The price and demand of our finished products are inherently volatile and remain strongly influenced by global economic conditions. Any fluctuation in finished product prices or currency has direct impact on our revenue and profits.

Exposure to commodity price fluctuations is an integral part of our business and our policy is to sell our products at prevailing market prices.

We have a well-defined policy framework wherein no speculative positions are taken and limited commodity hedging is done to achieve month-average rates both in currency and metal prices.

We take forward cover for net foreign currency exposure, if the net is payable in foreign currency.

We also take forward cover for the next 12 months for projects on a rolling basis.

Availability of Natural Resources Risk

We are highly dependent on the availability of water, energy and land. Lack of availability of these resources will hamper our operations and impact future projects.

The Company maintains several water sources in conjunction with the government. A network of Sewage Treatment Plants (STPs) were also set up in Udaipur, which provides a sustainable water source to its operations. Dry Tailing Plants are planned across all mining sites and strengthening of wastewater recycling system with additional Reverse Osmosis (RO) and Multiple Effect Evaporation (MEE) plants in all smelters will further reduce our dependency on freshwater. We are further exploring options to utilise treated sewage generated from other cities/ towns situated in the vicinity of our operations.

We are self-sufficient in power through coal-based captive power generation for which we source high calorific value coal from the global market in addition to established linkages from indigenous sources. We have also invested in technologies to minimise emissions and waste generation.

We are aiming at zero waste to secured landfill. Fly ash generated in power plants is sold to the cement industry while major waste from zinc smelters is stabilised in an environment-friendly manner and disposed in secured landfills. Further, use of smelter waste in road construction and cement manufacturing and introduction of fumer, ancillary plants and paste fill technology will help in eliminating land requirement for landfills and would convert wastes into commercially usable byproducts/slag/back filling and help in manufacturing paver blocks.

Grey Swan Events

This covers emerging risks, but those that are unlikely to occur. One such development at the end of the year was the emergence of the COVID-19 pandemic around the world and the consequent measures taken to contain it, such as the nationwide lockdown.

Such events can significantly reduce labour supply and lead to cancelled/unfulfilled customer orders, interruption in supply chain management and availability of support services.

They can lead to closure of all the mining and operating facilities and result in operating loss.

Continuous scan of environment Preparation, review and implementation of the business continuity plan.

The following actions are planned for future preparedness for such events:

• Identify critical processes, operations and function
• Identify key dependencies and other areas that could possibly effect the operations
• Possibility of remote working for core operations to be determined keeping in mind these kind of medical emergencies where human intervention is drastically reduced
• Practice test of this pandemic response after its formation

Political, Legal and Regulatory Risks

Non-compliance with applicable laws and regulations as well as changes in the government policies around royalty mechanism or rates, reduction in export incentives, tax structure, cancellation or non-renewal of mining leases and permits as well as reduction or curtailment of duty and tax benefits available may adversely impact operations and hamper growth.

We have a strong team of professionally qualified experts to manage compliance with laws and have built in adequate checks and balances to monitor compliance through technology.

We proactively engage with all government functionaries to ensure that our suggestions and views are heard before policy making, which may impact the industry and our business.

We believe in responsible policy advocacy. We do not contribute funds to any political party.

Cyber Security Risk

With the ever-increasing reliance on Information Technology (IT), there is an enhanced risk of loss of data, operations and reputation due to exploitation of vulnerabilities in the IT infrastructure. Leakage of sensitive data and information can affect the organisation's smooth operations and performance. Hacking of operational system may bring complete organisational operations to a standstill, which can lead to production, operational and financial loss to the Company.

We have an IT security framework in place, which is periodically reviewed through expert agencies and strengthened to mitigate newer threats and risks.

We have recently deployed ISO standards for Information Security Management and have been accredited with ISO 27001 certification.

Fraud Risk

“Corruption, embezzlement, fraud, these are characteristics that exist everywhere. It is regrettably the way human nature functions, whether we like it or not…" - Alan Greenspan

We adhere to a strong Code of Conduct and encourage reporting of irregularities through its our whistle‑blower mechanism.

We have various control measures in place to prevent frauds. These are executed via the Foreign Corrupt Practices Act (FCPA) / ethics training, Updated SOPs, Training, IT /authorisation controls and consequence management

We are strengthening controls surrounding IT security through physical access control and logical access management.