[SMM Analysis] Nyrstar: EBITDA fell 52% month-on-month in 2018 on the verge of bankruptcy. Tok risked rescue.

SMM5, 27 March: recently, Nyrstar announced its full year 2018 results. The company's profit before tax, interest, depreciation and amortization in 2018 was 99 million euros, down 52 percent from 2017, mainly due to a significant reduction in zinc and lead treatment costs. And the dollar fell against the euro (1.13 to 1.18), while energy prices rose and direct operating costs in the metalworking and mining businesses increased. This was partly offset by increases in zinc metals and zinc in concentrate production (4 per cent and 14 per cent, respectively).

Of these, as a result of increased zinc production in mining and metalworking, higher electricity prices at smelters, the resumption of operations at Myra Falls and increased mining costs, direct operating costs increased by 1.614 billion euros, or 16 per cent, in 2018. Mining business in central Tennessee also increased. As the dollar weakened against the euro, lead and silver prices fell, benchmark zinc treatment fees decreased by 15 per cent and direct operating costs increased.

In metal processing, the company produced about 1.06 million tons of zinc metal in 2018, an increase of 4 per cent over 2017. Although Auby,Balen,Clarksville and Hobart plan to maintain shutdowns, zinc production has increased year-on-year.

As a result of the planned blast furnace maintenance outage in the second quarter of 2018 and the blast furnace shutdown in December 2018, lead production at Pirie Port was 160kt, down 7 per cent from a year earlier. In December 2018, the company chose not to operate the old sintering plant in (Port Pirie), Pili Port, to further support the reduction of lead emissions in air emissions, which were below the prescribed limits at the end of the year. In addition, Nyrstar carried out maintenance of the TSL furnace and blast furnace in December 2018, which was shut down to solve the cooling problem of the TSL furnace.

Processing of metal products in 2018:

Nyrstar's mining business produced about 139 kilotons of zinc concentrate in 2018, an increase of 14 per cent over 2017. The total output of concentrate zinc mines in 2018 is slightly less than the revised full-year guidance range of 140 to 150 kilotons. The lower levels of zinc in concentrate production were mainly due to disappointing production performance at the Langruva and Central Tennessee mines and a slightly lower start of commercial production at the Myra Falls mine than expected and affected at the beginning of the year. Mining was suspended at the end of the year to address defects found in the compliance order of the Department of Energy, Minerals and Petroleum Resources of British Columbia.

According to Bloomberg, it was Nyrstar's biggest annual loss ever, reflecting the difficult operating conditions of the zinc market and the debt crisis forcing Trafigura to buy. According to the statement, the company posted a net loss of 618 million euros ($693 million) in 2018. Profit before tax, interest, depreciation and amortization in 2018 (EBITDA) was 99 million euros. That was below the company's forecast in February, when the company said it could earn 110 million to 130 million euros from its core business.

Earlier, in its article "Nyrstar is on the verge of bankruptcy, Trafigura ventured to rescue and decrypt," SMM pointed out that Nyrstar has a variety of global operations, is a market leader in zinc and lead, and is the world's largest zinc producer. Annual production exceeds 1 million tons and the share of other basic and precious metals is also growing. Nyrstar has mining, smelting and other operations in Europe, America and Australia, with approximately 4300 employees. Nyrstar is incorporated in Belgium, has a corporate office in Switzerland and is listed on the pan-European exchange in Brussels.

Nyrstar was founded in 2007 and when it went public in Brussels the same year, the company bought zinc mines from mines and had very strong mineral resources. A few years later, the company embarked on debt-called mining acquisitions. But many of the company's newly acquired mines did not live up to their promises, and Nyrstar was forced to write down its value or sell at a loss. Nyrstar's main business is to buy ore and smelt it into metals. In recent years, the cost of zinc ore has soared and the company's profits have been hampered.

2018 was a crucial year for Nyrstar NV, where debt accumulated as a result of failed acquisitions sent the company's shares to an all-time low, down 29 per cent in 2018. "from an operational point of view, Nyrstar's mines have high profit margins and stable production, but the wrong decisions on mining investment have come at a high price.