Nyrstar plunges as it signals possible restructuring

Another zinc company in strife..........

Shares in Nyrstar nosedived on Thursday as its new chief executive laid bare the challenges facing the world's biggest zinc producer, saying an equity fund raising might be needed to meet a looming bond repayment and bolster its balance sheet.

Bill Scotting, who ran the mining division of ArcelorMittal, the steelmaker, said business as usual was not an option for the Belgian-listed company and division action was needed,write Neil Hume and James Wilson.

"Given the current market environment, the Nyrstar Board and management continue to assess all capital market financing alternatives to address the upcoming maturity in the current environment and provide increased financial flexibility," the company said, flagging the possibility of another equity offering.

Earlier this week analysts at ABM Amro said Nyrstar needed to raise at least €250m to help repay a €415m bond that matures in 2016.

The comments by Mr Scotting came as Nystar reported disappointing third quarter results on Thursday, flagging higher costs at key projects and warning that zinc production would be at the low end of market forecasts.

Shares in Nrystar were down 25 per cent at €1.53 at publication time. Trafigura, the commodities trading house, has built up a 20 per cent stake in Nyrstar, a move that has triggered speculation of a possible takeover bid
Trafigura declined to comment on the share price or whether it would be prepared to back an equity issue.

In the nine months to September, underlying group earnings before interest, tax, depreciation and amortisation rose 38 per cent year on year to €215m, helped by metals processing.

But Nyrstar said its mining division was loss-making at an Ebitda during the first nine months of the year.

Operations at two mines have been completely or partly suspended and more could be shuttered or sold, Nyrstar said.

Zinc has been one of the commodities under most pressure this year, with prices falling from almost $2,200 per tonne at the start of 2015 to a five-year low of close to $1,600/t in September. Glencore, another major producer, this month announced significant production cuts to try to support the market.

Mr Scotting, who took over as chief executive in mid-August, blamed previous lack of mine investment and planning for the "difficult situation" for some assets. He said:
Financial performance, impacted by a further weakening in commodity prices during the quarter, remains far below expectations,.

A number of the mining assets have potential, but at current prices, the mining segment will need an extended period to regain operational strength and financial health.
Analyst at Citi said an increase in costs at Nyrstar's Port Pirie smelter in Australia was another "negative" and said the probability of Nyrstar's raising equity had increased.

The company raised €600m through a bond and equity issue less than a year ago to shore up its balance sheet amid an extensive smelter upgrade programme.

Mr Scotting's appointment was welcomed by analysts, who say the industry veteran has the background and experience to get to grips with Nyrstar's troubled mining arm. But it will be a difficult task to change the company's fortunes.

Mr Scotting said on Thursday that company's strategy of operating mining and processing assets was "fundamentally appropriate", but its financial performance and business delivery require a step change improvement.

Shares in Nrystar have plunged almost 50 per cent this year and are down 92 per cent from their 2017 flotation price of €20, making it one of the worst performing mining stocks in the world over that period. Nyrstar's bonds are now yielding more than 13 per cent.

"The results were disastrous, worse than we or the market were expecting," said on fund manager. "An equity issue is now essential. The company is distressed."

http://www.ft.com/intl/fastft/412291/nyrstar-plunges-it-hints-restructuring