New dawn — What the Port Pirie smelter upgrade means for South Australia
SOUTH Australia is celebrating news that Port Pirie’s Nyrstar smelter is in line for a $350 million upgrade. Here’s what the news means to the state.
SOUTH Australia is celebrating news that Port Pirie’s Nyrstar smelter is in line for a $350 million upgrade. Here’s what the news means to the state.
What has happened?
The smelter has operated for more than 120 years and employs almost 900 of the 13,000 residents who live in Port Pirie.
A further 2500 people depend indirectly on the success of the smelter, run by Belgian-Swiss company Nyrstar.
The equipment the company uses to process thousands of tonnes of lead, zinc, copper, silver and gold each year is outdated and badly in need of an upgrade to make it economically viable and meet environmental standards.
A $350 million funding package was needed to get the upgrade off the ground and produce the desired results — lower blood lead levels for Port Pirie children, a smelter with a smaller carbon footprint and higher profit margins.
Without the funding packing the smelter would likely close, spelling disaster for the community and sending reverberations throughout the State.
What is happening now?
Nyrstar has given conditional approval to the redevelopment, after the State Government advised it had agreed to underwrite parts of a funding package.
The company is in the final stages of wrapping up a complicated deal that underpins the funding and support package with the SA Government.
What does the funding involve?
Under a 2012 agreement between Nyrstar, the State Government and the federal Export Finance and Insurance Corporation, the funding package was drawn up.
Nyrstar said it would pay euro 80 million ($100-$120 million) itself and another euro 80 million by forward sales of products into the lead, zinc and silver markets. The State Government previously agreed to underwrite the forward sales.
Nyrstar will seek euro 120 million ($150-$180 million) investment from third parties in a deal which was expected to be underwritten by the federal Export Finance and Insurance Corporation.
In a strategic update last year, Nyrstar said it had signed a preliminary agreement with the Export Finance and Insurance Corporation to underwrite the euro 120 million investment.
The State Government has now undertaken to take on that responsibility if the EFIC deal is not concluded.
Trade and Investment Minister Andrew Robb declined to confirm whether the EFIC side of the deal would stand.
“EFIC is continuing its engagement with both Nyrstar and the State Government in advance of the final investment decision being announced by mid-May,” Mr Robb said.
“The South Australian Government took a decision to provide contingent support for the third party financing in advance of EFIC finalising its work, which is their prerogative.
“This is not inconsistent with decisions taken by other state governments in regard to businesses in their states and is obviously positive for the people of Port Pirie.”
Nystar said in a statement on Wednesday that negotiations will be finalised by May 16.
If the SA Government ends up underwriting both the forward sales and the third-party financing, SA taxpayers will have at risk Euro 200 million ($250 million to $300 million, depending on currency exchange rates).
Underwriting does not necessarily require the Government to pay anything. It acts as a guarantee that the Government will contribute the funds - or cover any shortfall in funds - if Nyrstar is unable to raise the money through its intended conventional, commercial channels.
Having an underwriter gives more certainty to the venture and makes it easier to raise funds from commercial operators.
What does it mean for jobs?
The redevelopment will secure the jobs of about 3250 South Australian workers.
The smelter directly employs about 850 people and it supports another 2400 jobs in the Spencer Gulf city.
During the two-year redevelopment, a construction workforce peaking at 400 people will be needed as the ageing processing plant is replaced by the latest technology.
What does the deal mean for the environment?
The technology will be more efficient and environmentally cleaner.
It would allow a broader range of metals to be processed and attract ore from Nyrstar’s mines around the world.
As a result of the upgrade, the annual average air lead concentrations in the area are predicted to reduce to approximately 50 per cent of current levels.
Nyrstar will also design features of a new plant that prevents cross contamination of aquifers at the smelter.
What are the politics?
The smelter’s future was a critical bargaining chip when Premier Jay Weatherill persuaded independent MP Geoff Brock to back Labor to form government after the March state election. Mr Brock is the member for Frome, which is centred on Port Pirie and he is now the Regional Development Minister.
‘South Australia has always supported the transformation project at the Port Pirie smelter and I welcome the significant decision made by the board today,” Mr Brock said.
‘I look forward to seeing finalisation of the agreement over the coming weeks.”
In March, Assistant Infrastructure Minister Jamie Briggs said the Federal government would not be an ATM of last resort for failing big corporations.
Mr Briggs deferred comment to Trade and Investment Minister Andrew Robb.
This morning Mr Briggs told The Advertiser: “I am pleased for the people of Port Pirie for the certainty Nyrstar’s decision brings. But I cannot possibly comment on a deal I have not seen.”