Nyrstar financial crisis could hit SA taxpayers with $291m bill for Port Pirie smelter loan, Treasurer Rob Lucas warns
South Australian taxpayers could be on the hook for $291 million in debt owed by Port Pirie’s main employer, smelter owner Nyrstar, as the company’s share price plunges and doubts about its future grow.
- Nyrstar axed 100 jobs at Port Pirie just last week
- In May it missed its first loan repayment to the State Government
South Australian taxpayers could be on the hook for $291 million in debt owed by Port Pirie smelter owner Nyrstar, as the company’s share price plunges and doubts about its future grow, Treasurer Rob Lucas has warned.
Mr Lucas says the State Government will do all it can to protect “the $291.25 million in taxpayer funds that we have swinging in the breeze”.
A financial analyst is urging investors to ditch their shares in Nyrstar as the metals giant’s share price continues to crash.
Nyrstar’s share price plunged to 63 Euro cents today, an 86 per cent decline from its 4.50 Euro share price in mid-September.
Analyst ABN Amro urged investors to “abandon ship” and predicted that Nyrstar shares will be virtually worthless as the company grapples with a cashflow problem and $531 million of debt needing to be repaid by next September.
It predicts Nyrstar will pursue a debt for equity swap, where a creditor agrees to cancel some level of debt in exchange for a stake in the company.
The former Labor government underwrote Nyrstar building a new smelter at Port Pirie as part of a deal former premier Jay Weatherill struck with Independent MP Geoff Brock to secure a fourth term in power.
The deal has come under consistent criticism from Mr Lucas after Nyrstar delayed repayments to the State Government.
Nyrstar axed about 100 jobs at Port Pirie last week. Exact job numbers at the smelter are not known but it is believed to employ about 600 to 700 people.
Mr Lucas cautioned against overreacting to the opinion of “one particular analyst” but said the State Government was worried about the analysis and the drop in Nyrstar’s share price.
“I don’t think anyone would not be worried by the reports. Given the potential impact of the stories referencing its international operations, it would be no surprise that we share those concerns,” he said.
“Nyrstar itself would also be concerned by the advice, although I suspect they would argue about its accuracy. They would certainly prefer that that sort of analysis was not done.
“It will be interesting to see when the market settles down if it settles down at that level (that ABN Amro has predicted).”
The company’s underlying problems stem from a combination of plunging zinc prices, a heavy debt load and cashflow issues, ABN Amro said.
Mr Lucas will meet with Nyrstar chief executive Hilmar Rode next Monday. He guaranteed the government would “do all we can” to protect the operations in Port Pirie and to protect the interests of South Australian taxpayers on the hook for the loan to Nyrstar.
The share price hit comes as an Environment Protection Authority report showed levels of lead in the air in Port Pirie spiked to their highest since 2014, despite the operation of a new furnace that was spruiked as helping to lower emissions.
Industrial unions will meet with Nyrstar’s Port Pirie management on Wednesday over the rising lead levels and looming job losses.
Labor energy spokesman Tom Koutsantonis, who as former treasurer underwrote the deal with Nyrstar, did not comment directly on the share price plunge but called for the government to cease using “highly provocative language” about the company.
“Public threats of legal action by the government send negative signals to Port Pirie’s biggest employer,” he said.
Mr Brock said the reports were “not great” but wanted to focus on the positives the new lead smelter would bring when it was fully operational.
“We’ve got the chief executive of Nyrstar meeting with the Premier and the Treasurer next week and they’ve given me their undertaking to keep me in the loop as the local member,” he said.
“We all want to work collectively to ensure this plant reaches full operational capacity.”
Nyrstar did not respond to requests for comment.