Nyrstar in last-ditch talks to secure financial lifeline for Port Pirie, Hobart smelters

Nyrstar is in last-ditch talks to secure a financial lifeline for its embattled lead smelter in Port Pirie, revealing the staggering losses being racked up each month.

Nyrstar’s Port Pirie Smelter seen from the boat ramp in Port Pirie. Picture: Emma Brasier

Nyrstar Australia is in last-ditch talks with state and federal governments to secure a financial lifeline for its embattled lead smelter in Port Pirie, which the company says is bleeding tens of millions of dollars a month in losses amid a losing battle with Chinese rivals.

Nyrstar, owned by global commodities company Trafigura, says the smelter faces the serious prospect of being shut down unless governments come to the party with a “transitionary” funding package while plans for a near $1bn investment in smelter upgrades at Port Pirie and in Hobart are worked through.

A strategic review of Nyrstar’s two Australian smelters is in progress, and it’s understood a decision on the their future could come as early as next month.

Nyrstar’s zinc smelter in Hobart, Picture: Supplied

The federal government has previously promised $50m to Nyrstar to help with a $400m upgrade of its zinc smelter in Hobart, and the company wants to spend even more at Port Pirie to retrofit the site to produce critical metals used in defence, renewables and other emerging industries.

But it’s calling on state and federal governments to chip in for a $45m feasibility study over two years, and to contribute to ongoing maintenance work required to keep the Port Pirie smelter operational over that time.

“We’re looking for a hand up, not a hand-out,” Nyrstar Australia chief executive Matt Howell told The Advertiser on Wednesday.

“We’ve been very clear this is transitionary support to enable the complex and thorough feasibility studies to be conducted while the business is losing money, because that’s the reality right now.

“During that time, absent any government support, the business will lose many hundreds of millions of dollars. So the owners are quite rightfully asking why would we do that? Why would we put more money after bad?

“We can make these investments to produce the metals that our nation wants and needs, but we need some transitionary assistance while we do that work.”

Mr Howell would not pre-empt the findings of the strategic review announced by Trafigura earlier this year, but warned the future of the smelters was touch-and-go despite their strategic importance and potential to deliver on the federal government’s critical minerals ambitions.

He said that without government support the Port Pirie smelter, which employs about 900 people and has been operating for more than 130 years, would likely be forced into closure.

“The truth of the matter is it (Port Pirie smelter) is losing very considerable money, tens of millions a month at the moment,” he said.

Nyrstar Australia chief executive Matt Howell. Picture: Supplied

“Would a buyer come along and stump up their private capital to fund that? We don’t think that would happen.

“But if we put the capital into it, and put these critical metal extraction circuits in, the business can stand on its own. Not only does it give a future to the community of Port Pirie ... but it’s giving Australia sovereignty over metals that it needs, that it’s currently utterly dependent on other nations for.”

Australia’s ageing smelters and China’s stranglehold on the critical metals supply chain, which has driven up the cost of raw minerals, have been raised as two key reasons behind the demise of Australia’s capacity to produce basic metals, including copper, lead, zinc and nickel.

“This is a consequence of deliberate policies by a nation state that are distorting the raw material market,” Mr Howell said.

“There are lots of competing tensions, but that’s what’s making smelting uneconomic – lower cost labour and state-subsidised smelting, which means that they can pay more for raw materials.”

Nyrstar is hoping to leverage its existing lead and zinc processing capability to produce five critical minerals – antimony, bismuth, tellurium, germanium and indium – but wants the federal government to respond to China’s “distortion” of the market with its own measures to support local production.

Trafigura chief executive Richard Holtum put a cloud over its Australian operations in March when he revealed a strategic review of Nyrstar’s Australian sites, and suggested there was a strong case for some form of government ownership of its two smelters.

However Mr Howell said financial support from government could also come in the form of grants, loans and tax incentives.

A spokeswoman for federal Industry Minister Tim Ayres said the government was maintaining “regular contact” with Nyrstar, and was closely monitoring market developments.

“We will continue to consider how to secure our critical minerals and strategic materials supply, including the contribution of zinc and lead refining to production of valuable by-products,” she said.

“We are working closely with our Tasmanian and South Australian counterparts and our priority will always be the national interest.”

A spokesman for state Mining and Energy Minister Tom Koutsantonis said the government remained “supportive of initiatives that contribute to the ongoing sustainability of refinery operations across our state”.

“The state government meets with Nyrstar regularly and will continue to do so,” he said.

Originally published as Nyrstar in last-ditch talks to secure financial lifeline for Port Pirie, Hobart smelters