Huge debt, share price plunge sparks fears for future of Hobart zinc works

UPDATE: Unions are concerned cuts to maintenance staff at Nyrstar’s Hobart zinc smelter will put workers at risk.

Nyrstar’s zinc works on the River Derwent. Picture: SAM ROSEWARNE.

UPDATE: Unions are concerned cuts to maintenance staff at Nyrstar’s Hobart zinc smelter will put workers at risk.

AMWU state organiser Jacob Batt said with exisiting job cuts at the plant and a proposal to now cut maintenance workers, the union was worried about safety.

“Effectively they are wanting to reduce maintaence staff by 30 per cent,” he said.

“We are worried how this amount of cutting will affect the safety not only of maintence workers but all who work at the site — especially with an ageing plant.”

Mr Batt’s comments come as the plummetting share price of the Belgian-listed metals giant has raised fears about the future of the Lutana smelter and the jobs of 600 workers.

“Clearly the Hobart plant is bearing the brunt of bad investment decisions overseas,” Mr Batt said.

EARLIER: THE future of Nyrstar’s Hobart zinc smelter and its 600 staff has been thrown into doubt following a plummeting global share price and debt concerns interstate.

The Belgian-listed zinc-smelting giant’s share price has dropped 88 per cent on European markets since mid-September prompting analysts to urge clients to “abandon ship” on the stock.

Nyrstar was trading on Tuesday night at 55 euro cents, down from €4.50 in September.

The slump leaves the company valued at €85 million — with a debt worth €1.2 billion. The fall has raised fears in South Australia that taxpayers could be left with a $291 million debt if the company collapses.

Nyrstar Hobart would not comment on Tuesday on the future of its operations in the state’s capital.

The company said in a statement last week gradual reductions of its workforce during the next three years was aimed at ensuring the Hobart plant’s long term sustainability. Nyrstar is in discussions with unions regarding a reduction of 12 roles filled by contractors.

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“Nyrstar Hobart values its contractor workforce very highly and will only reduce numbers where absolutely necessary and where it is safe to do so,” a spokeswoman said.

South Australian Treasurer Rob Lucas said the State Government would do all it could 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.

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.

Nyrstar is Port Pirie’s biggest employer, with an estimated 600 to 700 workers. About 100 were axed last week.

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.

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.

The company’s underlying problems stem from a combination of plunging zinc prices, a heavy debt load and cashflow issues, ABN Amro said.

Nyrstar operates a number of mines in North America as well five zinc and lead smelters in Europe, the United States and Australia, according to the Financial Times.

Mr Lucas will meet with Nyrstar chief executive Hilmar Rode next Monday.