Nyrstar NV

Published : February 07th, 2013

announces 2012 Full Year Results

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Published: 07:00 CET 07-02-2013 /Thomson Reuters /Source: Nyrstar /XBRU: NYR /ISIN: BE0003876936

Nyrstar announces 2012 Full Year Results

Regulated Information

7 February 2013

HIGHLIGHTS

Contribution from Mining segment continues to grow in line with strategy; group underlying EBITDA and PAT adversely impacted by macro-economic conditions

  • Group underlying EBITDA of EUR 220 million, down (17)% on 2011 (EUR 265 million)
    • Mining EUR 129 million, up 79%, in line with strong production growth
    • Smelting EUR 135 million, down (43)%, impacted by lower treatment charges and reduced contribution from silver bearing material at Port Pirie of EUR 24 million compared to EUR 78 million in 2011
  • Mining underlying EBITDA per tonne[1] EUR 413, up 19% on 2011 (EUR 348)
  • Smelting underlying EBITDA per tonne[2] EUR 125, down 40% on 2011 (EUR 209)
  • EPS of EUR(0.57) (PAT EUR (95) million) impacted by one-off impairments of non-core assets and restructuring expenses
  • Proposed distribution of EUR0.16 per share via a share capital reduction

Growth in production of all metals; full year guidance delivered

  • Mining production of 312kt of zinc in concentrate, up 105kt (51%) on 2011 (207kt)
    • Own mine production (excluding deliveries under Talvivaara zinc stream) of 282kt, up 172kt (64%)
    • Langlois ramp up completed in line with management expectations with production of 39kt
    • Tennessee Mines delivered significantly improved performance with production of 109kt, up 36%
    • Talvivaara deliveries of 30kt, down 5kt (14%)
  • Mining production guidance achieved for lead (16.2kt actual), copper (13.0kt) and silver (5,517ktoz) and all significantly up on 2011, by 108%, 69% and 50% respectively; gold production slightly below guidance (94.6ktoz actual) but again significantly up on 2011 (90%)
  • Zinc metal production of 1,084kt at smelters, in line with guidance

Challenging trading environment with downward movements in commodity prices and treatment charges

  • Commodity prices remained volatile throughout 2012, with zinc, lead, copper and silver prices all down in 2012
  • Zinc price averaged USD 1,946/t, down 11% on 2011 (USD 2,191/t), and 14%, 10% and 11% declines in the average lead, copper and silver prices respectively
  • 2012 zinc benchmark treatment charge (TC) significantly below 2011 terms, with realised TC declining 15%
  • Partly benefited from weaker Euro, however smelting cost base challenged due to strength of the Australian Dollar, averaging 0.81 against the Euro (up 8% compared to 2011)

Improving the Nyrstar cost base and maintaining capital discipline

  • Average zinc mining C1 cash cost[3] of USD 1,154/t of payable zinc in H2 2012 (USD 1,255/t in H1 2012)
    • Tennessee Mines C1 cash cost significantly improved 20% in H2 2012 to USD 1,705/t (USD 2,143/t in H1 2012) due to increased volumes and unit cost reduction following optimisation programme
  • Smelting operating cost per tonne of EUR 577 in 2012 impacted by strength of Australian dollar and production issues in H2 2012 at Port Pirie
  • Implemented comprehensive group wide review of operating costs, Project Lean, identifying to date EUR 50 million in incremental annualised sustainable savings and a reduction in employee and contractor headcount of 15-20% across smelting, mining and corporate; expect full benefit to be realised by end of 2014
    • First phase implemented in Q4 2012 through optimisation of Peruvian operations, with reduction in employee and contractor headcount by approximately 1,000
  • Planned reduction in capital expenditure to EUR 200-230 million in 2013 (including growth spend of EUR 35-55 million), compared to EUR 248 million spent in 2012 which was in line with guidance

Continued roll-out of optimisation programme (Mining for Value) across Mining segment

  • A back-to-basics, systematic analysis of processes and capabilities to develop an optimal, sustainable operating model for each mine, incorporating standardised operating systems, life of mine planning and optimised capital allocation
  • Successful implementation at Tennessee Mines in H1 2012 resulting in increased zinc in concentrate production and significant (20%) improvement in C1 cash cost in H2 2012
  • Implemented at Campo Morado in H2 2012, with tangible benefits expected to start materialising in H1 2013, and to be rolled out at other mines during course of 2013

Strong financial position with a high quality portfolio of long-term debt

  • Successfully refinanced EUR 400 million structured commodity trade finance facility
  • Significant cash inflow from operating activities due to working capital initiatives
  • Net debt of EUR 681 million at the end of 2012, compared to EUR 718 million at the end of 2011
  • Gearing[4] maintained at 37.0% at the end of 2012, compared to 35.0% at the end of 2011

Delivering on Strategy into Action

  • Reached in-principle agreement to transform the Port Pirie smelter into an advanced poly-metallic processing and recovery facility, through an innovative financing and support package, providing an opportunity to strengthen and further diversify group earnings and preserving capacity to continue execution of mining strategy
  • Unlocked untapped value through the successful commissioning of the indium metal plant at Auby smelter, realisation of operational synergies at Clarksville with production of germanium residue from Tennessee Mine zinc concentrates and production of tellurium concentrate at Port Pirie smelter
  • Increased focus on core mining and smelting businesses with divestments of non-core assets; ARA Sydney (Australia) and Galva 45 (France)
  • Commenced Smelting Strategic Review aimed at identifying opportunities to sustainably improve profitability of zinc smelting business
  • Continue to explore value accretive M&A opportunities

 

Commenting on the 2012 full year results, Roland Junck, Chief Executive Officer of Nyrstar, said,

"During 2012 we completed a major step in the long term strategic repositioning of Nyrstar from a pure smelting business to integrated mining and metals company. Through the execution and implementation of our strategy we have transformed the composition of our result, with mining EBITDA surpassing smelting EBITDA in H2 2012; a result achieved with zinc mining volumes approximately three times lower than zinc smelting volumes. This structural shift is further evident in the EBITDA contribution per tonne from the Mining segment which, despite a decline in commodity prices, was up 23% in H2 2012 to EUR 456 compared to H1 2012, while EBITDA per tonne in the Smelting segment continued to come under pressure with a decline of 29% to EUR 104 over the same period. This reinforces our backward integration strategy as mining is proven to be structurally more profitable per tonne than smelting.

The improvement in mining profitability was driven by considerable growth in the production of all metals. Zinc in concentrate production of 312kt in 2012, was 51% higher than in 2011, with own mine production up 64%. Lead, copper, silver and gold production was also significantly up on 2011, by 108%, 69%, 50%, and 90% respectively. Production guidance was achieved for all metals, except for gold which was slightly below due to temporary operational interruptions experienced in H1 2012 at El Toqui and Coricancha.

These improvements were delivered in a challenging trading environment, with zinc, lead, copper and silver prices all down in 2012 and all remained volatile throughout the year. The zinc price averaged USD 1,946/t, down 11% on 2011, while there were 14%, 10% and 11% declines in the average lead, copper and silver prices respectively. This negatively impacted mining C1 cash costs, through the reduction in by-product credits. That said, due to improving the quality of our mining portfolio we still delivered an improvement in the average zinc mining C1 cash cost, down 5% in 2012 compared to 2011. This included a significant improvement in the C1 cash cost at Tennessee Mines to USD 1,705/t in H2 2012, down 20% compared to H1 2012, due to increased volumes and a unit cost reduction following an optimisation programme. The lower price environment also impacted smelting gross profit, which was additionally affected by lower 2012 zinc benchmark treatment charge (TC) terms, with realised TCs down 15% on 2011. Nyrstar did partly benefit from a weaker Euro although this did not offset the decline in commodity prices. The other currency impacting our results in 2012 was the Australian dollar, which continued its strong performance averaging 0.81 against the Euro, up 8% compared to 2011. While the zinc smelters maintained their cost in local currency, given approximately 40% of our smelting costs are denominated in Australian dollars, the average smelting operating cost per tonne in Euro terms increased to EUR 577.

Due to this unfavourable trading environment, in absolute terms our results declined in 2012 compared to 2011. Group underlying EBITDA of EUR 220 million, declined by 17% on 2011, with smelting underlying EBITDA, down 43%, also impacted by the reduced contribution from silver bearing material at Port Pirie (EUR 24 million in 2012 compared to EUR 78 million in 2011). Loss after tax of EUR (95) million was also impacted by increased depreciation and depletion charges in our Mining segment, the latter a non-cash item related to the accounting treatment of the Breakwater Resources and Farallon Mining acquisitions, higher finance expenses, and one-off charges for impairment of EUR 17 million against non-core assets and restructuring expenses of EUR 17 million mainly in relation to our announced cost savings programme, Project Lean.

At our 2012 Half Year results, we announced that we had commenced a group wide review of our corporate offices, mining operations and smelting operations to identify opportunities to sustainably reduce our operating costs, and that we were taking measures to reduce sustaining capital expenditure in H2 2012, whilst retaining our ability to invest in organic growth opportunities. Both initiatives are core elements of our strategy to achieve excellence in everything we do and we are pleased to announce we have made significant progress in both areas. We have identified to date EUR 50 million in incremental annualised sustainable operating cost savings, and have developed a detailed plan to implement this programme, known internally as Project Lean, by the end of 2014. We have already executed a first phase of this project through the optimisation of Peruvian mining operations, reducing employee and contractor headcount by approximately 1,000. With a significant portion of savings expected to be delivered within the Mining segment, we expect Project Lean to enable us to deliver on our medium term average mining C1 cash cost target of less than USD1,000/t. With regards to capital expenditure, we contained spend in H2 2012 and so total spend in 2012 was EUR 248 million, in line with our 2012 guidance and for 2013 we are guiding to a reduced level of full year spend of EUR 200-230 million.

Maintaining the strength of our balance sheet was of critical importance during 2012, as commodity price conditions remained volatile and we continued to invest in organic growth opportunities. A key cornerstone in achieving this aim was our ability to successfully refinance our EUR 400 million structured commodity trade finance facility. In addition, we took a number of measures to improve our management of working capital that enabled us to deliver a year-on-year reduction in our net debt position, and we took the step of writing down a number of non-core businesses.

Entering 2013, Nyrstar is a stronger company, with a larger and more diversified mining and metals footprint. Coupled with our focus on improving the Nyrstar cost base, through the implementation of Project Lean, our targeted reduction in capital expenditure and the development and execution of organic growth opportunities, we will be in a more robust position to deal with the possibility of continued short term volatility in our markets. We continue to plan on a prudent basis to ensure our operations and commercial department maintain a sharp focus on maximising profitability and free cash performance even at constant prices. That said, we remain confident in the medium and long term fundamentals of the zinc and other related commodity markets. We continue to explore value accretive M&A opportunities, and will ensure our, balance sheet continues to support our growth strategy."

 

CONFERENCE CALL

Management will discuss this statement in a conference call with the investment community on 7 February 2012 at 09:00am Central European Time. The presentation will be webcast live on the Nyrstar website, www.nyrstar.com, and will also be available in archive. The webcast can be accessed via: http://www.media-server.com/m/p/3n29rrqa.

 

[1] Mining segment underlying EBITDA per tonne of zinc in concentrate produced
[2] Smelting segment underlying EBITDA per tonne of zinc metal produced
[3] C1 cash costs are defined by Brook Hunt as: the costs of mining, milling and concentrating, on-site administration and general expenses, property and production royalties not related to revenues or profits, metal concentrate treatment charges, and freight and marketing costs less the net value of by-product credits..
[4] Gearing: net debt to net debt plus equity at end of period

 

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 an integrated mining and metals business, with market leading positions in zinc and lead, and growing positions in other base and precious metals; 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, China and Australia and employs over 7,000 people. Nyrstar is incorporated in Belgium and has its corporate office in Switzerland. Nyrstar is listed on NYSE Euronext Brussels under the symbol NYR. For further information please visit the Nyrstar website, www.nyrstar.com

 

For further information contact:
Jaideep Thatai   Manager Investor Relations   T: +41 44 745 8103   M: +41 79 722 3089   jaideep.thatai@nyrstar.com
Geert Lambrechts   Manager Corporate Communications   T: +32 14 449 646   M: +32 473 637 892   geert.lambrechts@nyrstar.com


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Nyrstar NV

PRODUCER
CODE : NYR.BE
ISIN : BE0003876936
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Nyrstar is a zinc and silver producing company based in Belgium.

Nyrstar produces zinc, silver, copper, gold and lead in Mexico and in Peru, and holds various exploration projects in Mexico.

Its main assets in production are CORICANCHA in Peru and G-9 CAMPO MORADO in Mexico and its main exploration properties are CAMPO MORADO, EAST TENNESSEE and MIDDLE TENNESSEE in Mexico.

Nyrstar is listed in Germany. Its market capitalisation is €UR 459.4 millions as of today (US$ 588.4 millions, € 400.0 millions).

Its stock quote reached its highest recent level on June 24, 2005 at €UR 2.70, and its lowest recent point on November 28, 2008 at €UR 0.38.

Nyrstar has 935 640 000 shares outstanding.

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BERLIN (NYR.BE)
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Produces Copper - Gold - Lead - Silver - Zinc
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