Nyrstar has booked a large write down against its smelters in Port Pirie and Hobart

Nyrstar has written down its Australian smelting assets at Port Pirie and Hobart by more than $450m, while a Mongolian fraud cost its parent Trafigura more than $US1bn.

Nyrstar’s multi-metals processing facility at Port Pirie.

Nyrstar has written down the value of its smelters at Port Pirie and Hobart by more than half a billion US dollars over the past two years, citing “continuing challenges” at the assets.

The full year financial report of Nyrstar’s parent company, Trafigura, shows it wrote down the value of the combined entities by $US297m ($466m) for the financial year ended September 30, following a $US226.9m write down the previous year, worth $338m in Australian currency at this time.

The Australian assets, which employ about 1300 people, include a zinc smelter at Hobart and a multi-metals recovery plant at Port Pirie, which are accounted for as a single business unit due to the integration of their operations.

Trafigura said both of the assets performed below expectations.

“During the financial year 2024, both the zinc smelter in Hobart and the multi‑metals recovery plant in Port Pirie faced continuing challenges, which resulted in a revision of the business plans and a consequential revision of the assumed recoverable value of the Australian cash generating unit,’’ Trafigura said in its financial report.

“Both sites have underperformed against budget which was considered as an indication for a potential impairment.’’

Nyrstar’s Hobart zinc works at Lutana.

The Port Pirie plant has been performing below management expectations, leading to a downward revision of its expected future performance, the company said.

“The suboptimal process stability in the Port Pirie operations during the year led to a reduced throughput, below‑plan metal recoveries, and escalating cost levels to support the operations,’’ Trafigura said.

“Whilst management continues to target improvements, the challenges around process stability and metal recoveries have resulted in a downward revision to the expected future performance of the operations.

“This has specifically resulted in a revision to the assumptions on both production volumes and achievable recoveries, as well as increased cost levels.

“Competitive disadvantages notably around recoveries, paired with increasing payables for metals contained in feed sources, limit the operation’s ability to compete for feed.’’

Trafigura said it expected Port Pirie to experience pressure on margins in the short to medium term.

At Hobart, Trafigura said the facility delivered a consistent operational performance but “continues to be affected by ageing infrastructure’’.

“During the year, the operations incurred additional recovery losses driven by a combination of feed mix impacts and plant performance,’’ the company said.

“This also resulted in a downward revision of expected zinc recoveries in the business valuation.

“In line with the current environment as described … for Port Pirie, the challenges of the current market environment have put additional pressure on treatment charge levels which impacts short to medium term profitability of the Hobart operations.

“Similar to the European cash generating unit, the absence of vertical integration with mining operations result in an increased exposure of both Port Pirie and Hobart to the unprecedented market circumstances disclosed above.’’

Nyrstar suspended the $400m expansion of the Hobart electrolytic cell house during the year due to the difficult market conditions, telling News Corp Australia in recent months the cost projections had blown out by $100m.

The project attracted strong support from the federal government, with pre-election pledges of $50m from both major parties – as well as a promise of $20m from the Tasmanian state government.

Trafigura also booked a $US1.1bn loss across five years, with $US358m attributed to the most recent financial year, related to serious misconduct by individuals in its Mongolian petroleum business.

“The misconduct included manipulation of data and documents, resulting in inflated sums being paid by Trafigura, and deliberate concealment of overdue receivables,’’ the company said.

“It involved a complex chain of transactions with a small number of local counterparties.

“The external investigation remains ongoing but has confirmed a significant exposure for the group, accumulated over approximately five years.

“A substantial proportion of the total exposure has been acknowledged as a debt owed to Trafigura by the group’s principal counterparty in Mongolia.’’

The company said the wrongdoing in Mongolia was uncovered as a result of increased scrutiny in recent years.

“We have reviewed other higher‑risk offices and lines of business, and we are confident that these issues are isolated to a self‑contained operation in Mongolia,’’ Trafigura said.

“An external investigation remains ongoing, but we are already implementing a series of actions to improve processes, controls and oversight.’’

Trafigura’s revenue was flat at $US243.2bn while net profit fell from $US7.3bn the previous year to $US2.8bn.

Originally published as Nyrstar has booked a large write down against its smelters in Port Pirie and Hobart