Nyrstar operational and financial update
1 February 2019 at 21.30 CET
Nyrstar NV ("Nyrstar" or the "Company") today provides an update on the
ongoing capital structure review and certain operational and financial
matters including the Port Pirie Redevelopment and expectations for full
year 2018 Underlying EBITDA.
Capital structure review
The Nyrstar Board of Directors and management, with the assistance of
independent advisors from Alvarez & Marsal, Morgan Stanley and
Freshfields, are continuing the comprehensive review of the Company's
capital structure as previously announced. This review is being led by a
special independent committee of the Nyrstar Board of Directors. As part
of the review, Nyrstar has developed a new five year business plan (the
"Business Plan") that provides the basis for negotiations with financial
stakeholders to establish a robust and sustainable long term capital
structure for the Company. During the course of this week, Nyrstar has
engaged in constructive discussions with representatives of its various
financial stakeholder groups to work towards this objective in an
accelerated timeframe. Following these discussions, Nyrstar deems it
appropriate to update all stakeholders with this release.
The Company will make additional announcements as these discussions
progress, as appropriate.
Cyber-attack
Further to the press release issued on 22 January 2019 advising that the
Company had been the subject of a targeted cyber-attack which had
severely impacted certain IT systems, including email and network
servers across Nyrstar's headquarters in Zurich, Switzerland and
globally at the Metals Processing and Mining operations, the Company can
now confirm that the cyber-attack was contained on 22 January 2019 and
Nyrstar's IT department, with assistance from key IT-partners and global
cyber security agencies, has been working on a technical recovery plan
over the past ten days. Nyrstar's IT systems, including email
correspondence and access to file servers, are expected to return to
normal operation during the course of the coming week. Nyrstar's Metals
Processing and Mining operations were not materially impacted
operationally by the cyber-attack.
Myra Falls ramp-up activities
As communicated in the second interim management statement for 2018 that
was published on 30 October 2018, the Myra Falls mine commenced zinc
production during September 2018. This production was made possible due
to the fact that the primary components of the restart scope of works
had been completed, including the rehabilitation of the underground
mines, the rebuilding and refurbishment of the processing plant, repair
of the underground crusher, rehabilitation and upgrade of key
infrastructure including roads and loading facilities and upgrade of the
underground fleet of mobile equipment.
Following the restart, at the end of Q4 2018 Nyrstar was required to
suspend ore extraction and production at the mill to address
deficiencies identified in compliance orders from the Ministry for
Energy, Mines & Petroleum Resources in British Columbia. Nyrstar is
currently working to address the necessary repairs and production should
resume by the end of Q1 2019 or during Q2 2019 at the latest. In the
meantime, Nyrstar is continuing with its underground development and
remediation activities at the Myra Falls mine.
Port Pirie Redevelopment - Operational update
During the course of 2018, the new TSL furnace has ramped-up
successfully, including in terms of operating time, volume of material
treated and the proportion of high margin residues in the feed. In H2
2018, the residue consumed in the TSL feed was approximately 60% of the
overall feed mix, exceeding the fully ramped-up target of 40% residue in
the feed. The volume of material treated in the TSL furnace has also
continued to increase quarter-on-quarter during 2018 and will further
increase during 2019.
In December 2018, the Company chose not to operate the old sinter plant
at Port Pirie in order to further support reducing lead in air emissions
which ended the year below the defined limit. In addition, Nyrstar also
performed maintenance on the TSL furnace and blast furnace during
December 2018. These maintenance shuts were to address a TSL furnace
cooling issue; and to bring forward maintenance previously scheduled for
the blast furnace in January 2019. The TSL furnace resumed operation on
15 December 2018.
As the Port Pirie Redevelopment continues to ramp-up, it will
increasingly consume larger volumes of the internally generated residues
that have been stockpiled at Port Pirie. Further internal residues are
being generated for consumption at Port Pirie, primarily by the Hobart
zinc smelter, and the Port Pirie site continues to generate zinc fume
for consumption at Hobart. Nyrstar is evaluating future projects to
improve throughput of the slag fumer and increase the ability of the
Port Pirie site to treat the higher halide content of certain recycles
that are consumed as feed for the plant.
Port Pirie Redevelopment - Financial update
The Underlying EBITDA generated in the Metals Processing segment as a
result of the Port Pirie Redevelopment is subject to a number of macro
variables, including, but not limited to, metal prices, exchange rates,
lead treatment charge terms and energy prices, as well as operating
performance. Port Pirie's Underlying EBITDA contribution also reflects
the valuation of the internally generated residues processed by Port
Pirie, in particular those arising from Hobart. The Metals Processing
segment profitability of both the Australian sites are intrinsically
linked by the raw material flows between the two sites and are only
possible due to the Port Pirie Redevelopment. In the absence of the Port
Pirie Redevelopment, the Hobart and Port Pirie sites would both be
non-operational and would not contribute EBITDA to the Metals Processing
segment.
In preparing its Business Plan, Nyrstar has reforecast the expected
Underlying EBITDA contribution from Port Pirie and Hobart. The Business
Plan, which is based on modelled macro, operating and production
assumptions (with no additional constraints), indicates the following
Underlying EBITDA contribution included within the Metals Processing
segment from the two Australian smelters:
Pro-forma EBITDA EURm 2019F 2020F
Port Pirie 38 56
Hobart 57 69
Australian Metals
Processing 95 125
Between 2016 and 2018, Nyrstar has built-up valuable, internally
generated, residue inventories at Port Pirie. This will result in a
significant working capital cash flow benefit as this historical
inventory is processed. In 2019, this cash flow benefit is estimated at
approximately EUR 70 million.
Group Underlying EBITDA guidance and production update
On 20 September 2018, the Company issued a press release advising that
the Group would likely record an Underlying EBITDA result for H2 2018
that was materially below the EUR 120 million result achieved in H1
2018. The Interim Management Statement that was issued on 30 October
2018 reported a Q3 2018 Underlying EBITDA of EUR 13 million due to a
deterioration in commodity prices, the impact of historically low zinc
treatment charges and increased energy costs in Europe. Over the course
of Q4 2018, commodity prices, exchange rates and treatment charges were
at similar levels to those experienced in Q3 2018. However, energy
prices in Europe were higher and the Port Pirie site was impacted by
maintenance shuts for the majority of December 2018.
For primarily the above reasons, the Company expects to report a total
Underlying EBITDA result of approximately EUR 110 million to EUR 130
million for full year 2018. The Underlying EBITDA guidance contained in
this announcement is an unaudited estimate only and may change as the
Company finalises its year-end procedures.
Metals Processing produced approximately 1.06 million tonnes of zinc
metal in 2018, slightly below the revised full year 2018 guidance of
1.07 to 1.09 million tonnes, representing a 4% increase on 2017. The
increase in zinc metal production year-over-year was despite the planned
maintenance shuts at Auby, Balen, Clarksville and Hobart; and was
assisted by a lack of material unplanned outages which had impacted
production volumes in 2016 and 2017. However, zinc and lead metal
production was impacted during Q4 2018 by lower raw material inventory.
FY FY % H1 H2 %
2017 2018 Change 2018 2018 Change
Zinc metal ('000 tonnes)
Auby 166 155 (6%) 78 78 0%
Balen/Pelt 249 275 10% 137 138 1%
Budel 248 268 8% 133 136 2%
Clarksville 117 101 (14%) 52 49 (5%)
Hobart 238 264 11% 129 136 5%
Total 1,019 1,064 4% 528 536 2%
Lead metal ('000 tonnes)
Port Pirie 171 160 (7%) 69 90 30%
Other products
Copper cathode ('000 tonnes) 4.2 4.3 1% 1.6 2.7 65%
Silver (million troy ounces) 13.6 13.8 1% 4.9 8.9 8%
Gold ('000 troy ounces) 72.6 73 1% 25.7 47.3 84%
Indium metal (tonnes) 29.8 42.6 43% 21.4 21.2 (1%)
Sulphuric acid ('000 tonnes) 1,266 1,364 8% 653 712 9%
Nyrstar's Mining operations produced approximately 139kt of zinc in
concentrate in 2018, an increase of 14% compared to 2017. The total mine
production of zinc in concentrate in 2018 is marginally below the
revised full year guidance range of 140 to 150kt. This lower level of
zinc in concentrate production has been largely due to disappointing
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