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.