Zinc price and debt position crippling Nyrstar
The Belgian owner of key metal smelters in South Australia and Tasmania is under increased pressure to survive.
The Belgian owner of key metal smelters in South Australia and Tasmania is under increased pressure to survive, with one analyst labelling the company as near worthless.
Shares in Nyrstar, which owns the Port Pirie and Hobart smelters, plunged in recent days after ABN Amro analyst Philip Ngotho slashed his target price for the company to just €0.01 (1.6c) a share.
Nyrstar owns a string of zinc and lead refineries and mines around the world, but its debt has become increasingly burdensome in recent months amid a decline in the zinc price.
On Monday night, Mr Ngotho warned that Nyrstar’s debt position meant the company was likely to be pushed into a debt-for-equity swap with its major shareholder, trading house Trafigura, that would result in “a full wipe-out” of Nyrstar’s equity.
“Given Nyrstar’s liquidity and large debt and interest burden, we believe a debt restructuring process is inevitable,” Mr Ngotho said in a research note titled Abandon ship!.
Nyrstar’s Australian smelters are important customers for some Australian miners. Concentrate from MMG’s Rosebery base metals mine in western Tasmania is shipped to both the Port Pirie and Hobart smelters, while Nyrstar is an offtake customer for Queensland’s New Century Resources’ Century zinc mine.
Most recently, Nyrstar has been investing in a redevelopment of Port Pirie aimed at improving the refinery’s flexibility and profitability. The company has also been trimming workers from its Hobart operations, with discussions in progress over a dozen redundancies.
Nyrstar shares halved on the back of the report from ABN Amro, closing at €0.63. The stock was trading at as much as €7.35 a year ago and was at more than €16 a share in 2015.
Mr Ngotho noted that the company could consider asset sales as part of an effort to address its debt issues, but warned such a move would also hit the company’s earnings capacity.
The company’s origins can be traced back to Australia, with Nyrstar itself formed out of former ASX-listed miner Zinifex.
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