London 09/11/2015 - Nyrstar is pursing strategic alternatives for its mining assets, both individually and as a portfolio which could result in additional mine suspension, asset disposal or a full exit from mining, it said in a release on Monday.
The moves comes as part of a range of measures to enhance its balance sheet growth as Trafigura confirmed that it plans to increase its shareholding of Nyrstar – of which it currently already holds 20 percent.
Amid a clanging background of weak commodity prices, Nyrstar said that should commodity prices remain weak, it will consider further suspensions of its mines, which could potentially reduce global supply by up to a further 400,000 tonnes of zinc concentrate – this is in addition to the 100,000 tonnes removed by the Myra Falls and Campo Morado suspensions.
The zinc price was last trading at $1,662 per tonne, a $2 increase on the previous day’s close. In September the metal fell to $1,601, its softest since June 2010.
“Despite our belief that the medium to long-term fundamentals for zinc remain strong, the recent sharp and accelerated deterioration in the commodity price environment requires firm and decisive action and is a reminder that capital discipline, financial returns and our capacity to translate our strategy into business results are critical for the Company,” Bill Scotting, chief executive officer of Nyrstar said.
As well, Nyrstar has retained financial advisors to assist with a process to pursue strategic alternatives including a sale of certain or all of the mining segment assets.
“This will not only eliminate the short-term cash burden of supporting the mining assets at this time, but should allow latent potential in the assets to be realised and offer local stakeholders a more sustainable future. Where appropriate, offtake agreements will be put in place to maintain Nyrstar's access to concentrates,” Scotting said.
Nyrstar has reviewed its performance and capital requirements as Trafigura has announced plans to subscribe for Nyrstar shares for up to 125 million euros of the 250 – 275 million euro rights Nyrstar has announced it is offering.
“We strongly support the initiatives that have been announced by Nyrstar today and we are happy to confirm our intention to underwrite half of the planned rights issue. This is a sign of our confidence in the ability of Nyrstar’s management to execute the company’s strategy with a significantly strengthened balance-sheet.” Jeremy Weir, Trafigura CEO said.
The European Commission (EC) received notification of Trafigura's proposal to take sole control of Nyrstar on October 26 and has invited comments from third parties.
According to the EC website, all proposed mergers notified to the Commission are examined to see if they would significantly impede effective competition in the EU.