Toke extended a helping hand to the Nyrstar zinc smelter

SMM4, March 27: in order to help Nyrstar smelter out of bankruptcy, Trafigura Group (Trafigura Group), as its largest shareholder, will acquire Nyrstar, Bloomberg reported.

It was also the largest acquisition in the history of Tok.

Nyrstar is one of the big falls in zinc prices and rising energy prices that made it difficult for companies to make money last year.

Nyrstar lost money in the third quarter of last year and its profit fell 74%, putting the company under huge debt pressure and forcing it to restructure its debt.

That's why there was the acquisition.

On April 15, Trafigura (Trafigura) reached a lock-in agreement with Nyrstar and agreed to make temporary financing arrangements for Nyrstar.

Under the terms of the agreement, Trafigura will provide Nyrstar with $250 million in bridge financing to help it maintain its operations. Earlier, Trafigura provided $650 million in liquidity to Nyrstar in November 2018 to expand its liquidity.

Jeremy Weir, executive chairman and chief executive of Trafigura, said in a statement on Monday: "Nyrstar has faced enormous financial and operational difficulties over the past few years, but its mining business has a very strong base, which will contribute to the stable development of Nyrstar in the future."

And he believes the proposed debt restructuring is the best solution. But it must also be admitted that this will cause some damage. Otherwise, the risk to the Nyrstar Group is imminent, causing significant losses to all shareholders and to the company's 4100 employees.

In addition to bridge financing, Trafigura will issue 262.5 million euros of permanent bonds, 80.6 million euros of preferred notes and 225 million euros of seven-year notes to Nyrstar bondholders to cancel its 955 million euros of debt.

Despite its financial woes, the Nyrstar smelter has not wavered in its position as Europe's largest zinc producer.

Nyrstar produced about 139000 tonnes of zinc concentrate last year, up 14 per cent from 2017, but below its full-year target of 140000-150000 tonnes.

So in fact, Nyrstar sensed danger last year.

It warned in September 2018: "due to the sharp fall in zinc prices, the company's results in the second half of the year will be 'significantly lower' than in the first half."

The move is also a test of Trafigura's ability as the world's second-largest zinc producer.

Headquartered in Geneva, Trafigura is Nyrstar's largest shareholder with a 24.42 per cent stake.

But Jean-Francois Lambert, an industry consultant at HSBC, said: "buying a company with such large production assets is not the best choice."

And it's not in line with Trafigura's usual style. Unlike Glencore (Glencore Plc), Trafigura generally does not acquire productive assets and prefers warehousing and logistics.

But for now, since Nyrstar no longer has enough money to stay afloat, and given Trafigura's years of business partnership with Nyrstar, Trafigura should lend a helping hand.

But this is not an easy business for Trafigura, which will add to the burden on Trafigura.

(note: this article is translated from Bloomberg. If you are concerned with copyright issues, please contact SMM. We will deal with them in a timely manner.)

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