Trafigura Tries to Save Troubled Zinc Smelter Nyrstar

In an effort to save the sinking ship that is Nyrstar (OTC Pink:NYRSY,EBR:NYR) from bankruptcy, major shareholder Trafigura Group is taking control of the European zinc smelter.

On Monday (April 15), Trafigura entered into a lockup deal and agreed to interim funding arrangements with Nyrstar in order to restructure the company’s balance sheet, in turn becoming its majority owner.

The agreement will see Trafigura provide US$250 million in secured bridge financing to Nyrstar to keep operations afloat. This comes after the company provided Nyrstar with a US$650 million working capital facility in November 2018 to help its liquidity, necessary because Nyrstar had experienced increased capital requirements that had an “adverse impact” on its company wallet.

“Nyrstar has been faced with substantial financial and operational difficulties over the last few years, but it also has very solid industrial and mining operations on which we can build a stable future,” Trafigura Executive Chairman and CEO Jeremy Weir said in Monday’s statement.

“The proposed debt restructuring is, we believe, the best possible solution for all stakeholders despite significant and painful losses incurred. The alternative would have put the future of the Nyrstar Group at imminent risk causing significant losses to all stakeholders including the company’s approximately 4,100 employees,” he continued.

Alongside the bridge financing, Trafigura will issue Nyrstar bondholders 262.5 million euros in Trafigura perpetual bonds, 80.6 million euros in Trafigura senior notes and a 225 million euro seven year instrument in exchange for eliminating 955 million euros worth of debt.

Despite its financial woes, Nyrstar stands tall as Europe’s largest zinc producer and also has assets in Australia, Canada and the United States. The company produced approximately 139,000 tonnes of zinc in concentrate last year, a 14 percent gain on 2017’s production, but still below full year guidance of 140,000 to 150,000 tonnes.

The company warned in September 2018 that its earnings for the second half of the year would be “materially below” its first half results due to external market conditions, specifically highlighting zinc prices, which took a notable tumble last year.

As of April 12, zinc was trading at US$3,008 per tonne on the London Metal Exchange.

Nyrstar shares closed 52.38 percent lower in Brussels on Monday, hitting 0.31 euros.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.