Whyalla’s Man of Steel Sanjeev Gupta would be a natural buyer for Nyrstar’s Port Pirie smelter
Nyrstar may be in serious financial trouble, but it doesn’t mean a crisis for Port Pirie. A potentially ideal new owner for the Pirie smelter is already doing remarkable things in the area.
- Sanjeev Gupta has huge plans for renewable energy in SA
- … he already wants to build a copper smelter in SA
- … so does he have a role to play as Nyrstar faces financial woes?
Whyalla’s Man of Steel Sanjeev Gupta would be a natural buyer for Nyrstar’s Port Pirie smelter, giving him the opportunity to be the white knight for two South Australian towns in the space of two years.
There are a number of reasons for this, but firstly it’s important to point out that Nyrstar’s financial woes do not necessarily translate into trouble for Pirie.
Nyrstar itself says the Pirie smelter is on track to be making plenty of money in coming years.
In its most recently quarterly update the company says the smelter is expected to make money this year, and produce pre-tax earnings of $200 million by 2020.
It stands to rights that a new smelter would be profitable, and therefore attractive to a buyer, should the need to sell it eventuate.
This does not mean that the process would be without disruption, but the takeaway is that Port Pirie, notwithstanding Nyrstar’s financial problems, should be fine in the medium term, and political argy bargy about commentary threatening the future of the city should be taken in this context.
That does not mean that South Australian taxpayers are off the hook though.
The debt deal struck with Nyrstar wasn’t secured to the smelter, meaning that any money raised by its sale would go to paying all of Nyrstar’s debt — not just pay off the money borrowed to build it.
And Nyrstar owes a lot of money — just less than 1.4 billion euro, or $2.15 billion dollars.
So even a sale of the smelter for several hundred million dollars would not necessarily absolve SA taxpayers of paying the $290 million we have underwritten.
Now back to Mr Gupta — there are several reasons why Mr Gupta’s GFG Alliance, which bought the Arrium steelmaking and mining business out of administration, giving Whyalla an economic lifeline in the process, would be a natural buyer for the smelter.
The first of these is that Mr Gupta has already expressed a desire to build a copper smelter in the Upper Spencer Gulf.
He told The Advertiser in May that he had spoken to “all the major players” in the copper sector in SA about the potential for a smelter, and feasibility studies were under way.
The new Pirie smelter already has the capacity to produce copper as well as lead, silver, gold and zinc oxide.
Secondly, the Australian deputy CEO for GFG’s operations is Michael Morley, who, in his previous role in a 10-year career at Nyrstar “led the US$500m flagship project to completely revitalise the ageing Port Pirie lead smelter’’.
GFG’s general manager of business development, Robert Evans, also spent more than seven years at Nyrstar before jumping over to GFG.
Mr Gupta already owns aluminium smelters, including one in the UK he bought and struck a deal to buy the Dunkirk smelter from Rio Tinto — the largest in Europe, earlier this year.
And with his $US1 billion plan for renewable energy production about to get underway in the Upper Spencer Gulf region with a massive solar farm about to break ground, the operating synergies are obvious, not to mention the benefit from running two large industrial businesses with one management team.
The Advertiser has contacted GFG Alliance for comment, and it should be noted that there are many possible outcomes to Nyrstar’s current financial issues, many of which do not involve a sale of the Pirie smelter.
But the town’s future looks bright regardless.