Regulated Information
22 February 2017 at 07:00 CET
HIGHLIGHTS:
- Strong progress made in 2016 on the key strategic initiatives:
- Zinc metal production in-line with guidance with solid performance improvement in both zinc smelting and mining in Q4'16 compared to Q3'16
- balance sheet strengthened with completion of a rights offering, convertible bond, upsizing of zinc metal prepay and upsizing of the Trafigura working capital facility on a committed basis;
- mining divestment advanced with the El Mochito and El Toqui sales completed, Contonga and Coricancha having binding sale agreements and further divestments for value planned for 2017;
- Mining cashflow positive at current macros; and
- Management team changes implemented to deliver next phase of strategy
- Group underlying EBITDA[1] of EUR 193 million for 2016, a decrease of EUR 74 million on 2015, primarily due to reductions in treatment charge terms and impact of planned and unplanned production outages, partially offset by cost reductions
- Metals Processing underlying EBITDA of EUR 222 million, down EUR 114 million year-on-year, driven primarily by a reduction in the zinc benchmark treatment charge and average discount to treatment charge and planned and unplanned production outages; and
- Significantly improved Mining underlying EBITDA of EUR 6 million, up EUR 37 million year-on-year, driven by the suspension of the Myra Falls mine and the care & maintenance of the Middle Tennessee mines through to September 2016
- Net debt excluding zinc metal prepay and perpetual securities of EUR 865 million at year end, an increase of EUR 84 million on 2015 driven predominantly by working capital outflow due to higher commodity prices, partially offset by the rights offering and convertible bond issuance completed in 2016. Net debt inclusive of zinc metal prepay and perpetual securities of EUR 1,163 million at year end, an increase of EUR 226 million on 2015
- Net loss of EUR 414 million for 2016, mainly as a result of an impairment charge of EUR 266 million nearly entirely related to the Mining assets (comprising of EUR 133 million for continuing operations and EUR 133 million for discontinued operations)
- Port Pirie Redevelopment has been comprehensively reviewed and the business case has been confirmed; TSL furnace hot commissioning will be postponed by 6 months to September 2017 allowing for re-work of modules and enhanced slag tapping process; additional cost of c. EUR 70 million to complete, with expected increased fully ramped-up earnings uplift in the region of EUR 130 million per annum
Commenting on the 2016 full year results, Hilmar Rode, Chief Executive Officer said:
"The business has made substantial progress over the course of 2016 to progress the clear strategic priorities that were announced in November 2015.
Since joining Nyrstar in December 2016, we have conducted a thorough review of the business and identified a number of opportunities for operational improvements aimed at ensuring the long-term viability of the business and delivering increased production and earnings. We have appointed a seasoned executive with Frank Rittner as Chief Operating Officer to lead the improvements necessary for delivering consistent operational performance and Sebastião Balbino as Chief Commercial Officer to strengthen the sourcing and allocation of raw materials to Nyrstar's smelting operations which is crucial to ensure Nyrstar's long-term success in the market. We are confident that we now have the right people and assets to move forward in delivering a step change in operational and financial performance across all of our operations."
2016 in review
The zinc price started the year at a depressed level USD 1,554 per tonne and moved down to a 6 year low of USD 1,444 per tonne in mid-January 2016. Since hitting this low, on a relative basis, zinc outperformed the rest of the base metals complex and was one of the best performing commodities during 2016. Over the course of 2016, the zinc price averaged 2,095/t, up 9% on 2015.
On the back of the tightening availability of zinc concentrate, the annual 2016 benchmark treatment charge terms were settled at the end of Q1 2016 at approximately 17% below the 2015 terms. The average realized zinc treatment charge in 2016, on the basis of the settled benchmark, was USD 211 per tonne of concentrate. This compares favourably to the average spot zinc treatment charge which declined over the course of the year and averaged approximately USD 100 per tonne of concentrate. The vast majority of Nyrstar's concentrate requirements are priced at benchmark or benchmark related terms. Spot treatment charge exposure for Nyrstar is typically only in the range of 5-10% of the concentrate feed book. In the medium term, the bullish trend for the zinc price is expected to continue on the back of supportive supply and demand fundamentals, supporting Nyrstar's financial performance.
The operational and financial performance of the group was materially impacted during 2016 with a number of planned maintenance shuts in Metals Processing and a number of exceptional operational outage issues experienced in Q3 2016 in Metals Processing and Mining. Despite these issues, Nyrstar's production was in-line with guidance, supported by strong operational performance and sales across the group in Q4 2016.
Mining performance continued to improve in 2016 with positive underlying EBITDA of EUR 6 million versus negative EUR 31 million in 2015 on the basis of the continuing operations. The cash consumption of Mining has been substantially reduced with the divestment or agreed divestment of the majority of the Latin American mining operations and operational improvements at the continuing operations during 2016. Nyrstar's continuing mining operations consumed EUR 15 million of cash in 2016 versus EUR 74 million in 2015. In 2017, the Company will continue to make operational improvements to the continuing mining operations and expects that at current zinc prices the segment will be cash flow positive. Limited additional exploration capex will be deployed to further enhance the mine plans, convert resources into reserves and make operational improvements to maximize the free cash flow generating potential and facilitate the best possible sale proceeds for the remaining mining assets.
The Company's balance sheet has been substantially strengthened in 2016 with the completion of a number of financing initiatives. During 2016, the Company completed a EUR 274 million rights offering; repaid the EUR 415 million retail bond that was due in May; and introduced an uncommitted USD 150 million revolving working capital facility with Trafigura which in November 2016 was upsized to USD 250 million and extended to the end of 2017 on a committed basis. Furthermore, in July 2016, the Company issued a EUR 115 million convertible bond due in 2022; in August and November 2016 increased the USD 150 million zinc metal prepay that was issued in December 2015 to USD 175 million and USD 185 million respectively; and finalised a USD 75 million short term silver prepay in April 2016 and a further short term silver prepay of USD 50 million in December 2016. We will continue to monitor the market for additional opportunistic financings in order to further strengthen the balance sheet and extend our existing maturity profile and improve liquidity.
Substantial progress was made on the Port Pirie Redevelopment in 2016 with the delivery and installation of a number of large modular components and the commencement of cold commissioning activities at the end of H1 2016. During January 2017, all of the remaining modular components for the redevelopment were delivered to the Port Pirie site from the Chinese fabrication yards.
As communicated by the Company on 9 February 2017, a comprehensive review of the Port Pirie Redevelopment concluded in February 2017 resulted in the postponement of the hot commissioning by 6 months to September 2017 to rework the fabrication of key module components, further reduce ramp-up risk and ensure an increased earnings uplift for the long term. The total estimated cost to complete the project is expected to increase by approximately EUR 70 million to AUD 660 million and the incremental EBITDA uplift is expected to increase from the previous full ramp-up guidance of EUR 80 million per annum to EUR 130 million, based on 2016 macroeconomic assumptions as to metal price and foreign exchange rates.
CONFERENCE CALL
Management will discuss this statement in a conference call with the investment community on 22 February 2017 at 9:00am Central European Time. The presentation will be webcast live and will also be available in archive. The webcast can be accessed via: http://edge.media-server.com/m/p/kant788f
FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements that reflect Nyrstar's intentions, beliefs or current expectations concerning, among other things: Nyrstar's results of operations, financial condition, liquidity, performance, prospects, growth, strategies and the industry in which Nyrstar operates. These forward-looking statements are subject to risks, uncertainties and assumptions and other factors that could cause Nyrstar's actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Nyrstar cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which Nyrstar operates may differ materially from those made in or suggested by the forward-looking statements contained in this news release. In addition, even if Nyrstar's results of operations, financial condition, liquidity and growth and the development of the industry in which Nyrstar operates are consistent with the forward-looking statements contained in this news release, those results or developments may not be indicative of results or developments in future periods. Nyrstar and each of its directors, officers and employees expressly disclaim any obligation or undertaking to review, update or release any update of or revisions to any forward-looking statements in this report or any change in Nyrstar's expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation.
About Nyrstar
Nyrstar is a global multi-metals business, with a market leading position in zinc and lead, and growing positions in other base and precious metals, which are essential resources that are fuelling the rapid urbanisation and industrialisation of our changing world. Nyrstar has mining, smelting, and other operations located in Europe, the Americas and Australia and employs approximately 5,000 people. Nyrstar is incorporated in Belgium and has its corporate office in Switzerland. Nyrstar is listed on Euronext Brussels under the symbol NYR. For further information please visit the Nyrstar website: www.nyrstar.com.
Important information
This announcement is for general information only. It does not constitute, or form part of, an offer or invitation to sell or issue, or any solicitation of an offer to purchase or subscribe for, nor shall there be any sale or purchase of, the securities referred to herein. In particular, this announcement is not an offer of securities for sale in the United States. Any such securities may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. The Company does not intend to register any part of any offering in the United States or to conduct a public offering of securities in the United States. Any offering of securities will be made by means of an offering document that will contain detailed information about the company and management as well as financial statements. This announcement is not a prospectus within the meaning of Directive 2003/71/EC of the European Parliament and the Council of November 4th, 2003, as amended and as implemented respectively in each member State of the European Economic Area (the "Prospectus Directive"). This announcement does not, and shall not, in any circumstances constitute a public offering nor an invitation to the public in connection with any offer to buy or subscribe for securities in any jurisdiction.
For further information contact:
Anthony Simms - Group Manager Investor Relations T: +41 44 745 8157 M: +41 79 722 2152 anthony.simms@nyrstar.com
Franziska Morroni - Group Manager Corporate Communications T: +41 44 745 8295 M: +41 79 719 2342 franziska.morroni@nyrstar.com
[1] Underlying EBITDA is a non-IFRS measure of earnings, which is used by management to assess the underlying performance of Nyrstar's operations and is reported by Nyrstar to provide additional understanding of the underlying business performance of its operations. Nyrstar defines "Underlying EBITDA" as profit or loss for the period adjusted to exclude loss from discontinued operations (net of income tax), income tax (expense)/benefit, share of loss of equity-accounted investees, gain on the disposal of equity-accounted investees, net finance expense, impairment losses and reversals, restructuring expense, M&A related transaction expenses, depreciation, depletion and amortization, income or expenses arising from embedded derivatives recognised under IAS 39 "Financial Instruments: Recognition and Measurement" and other items arising from events or transactions clearly distinct from the ordinary activities of Nyrstar. For a definition of other terms used in this press release, please see Nyrstar's glossary of key terms available at: http://www.nyrstar.com/investors/en/Pages/investorsmaterials.aspx
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