Annual Report • Mar 20, 2018
Annual Report
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| About Nyrstar | 1 |
|---|---|
| Key figures | 3 |
| Chairman & CEO Statement | 4 |
| Board of Directors | 6 |
| Management Committee | 7 |
| Facts & Figures 2017 | |
| Management Report | 10 |
| Corporate Governance Statement | 34 |
| Remuneration Report | 58 |
| Report of the Board of Directors | 70 |
| Consolidated Financial Statements | 88 |
| Statutory Auditor's Report | 194 |
| Nyrstar NV summarized (non-consolidated) financial statements as at 31 December 2017 |
204 |
| Glossary | 206 |
Nyrstar is a global multi-metals business, with a market leading position in zinc and lead, and growing positions in other base and precious metals, which are essential resources that are fuelling the rapid urbanisation and industrialisation of our changing world. Nyrstar has mining and smelting operations located in Europe, North America and Australia and employs approximately 4,100 people. Nyrstar is incorporated in Belgium and has its corporate office in Switzerland. Nyrstar is listed on Euronext Brussels under the symbol NYR.
For further information please visit the Nyrstar website: www.nyrstar.com
| 2017 Full Year Results |
|---|
| Annual General Meeting |
| 2018 First Interim Management Statement |
| 2018 Half Year Results |
| 2018 Second Interim Management Statement |
Dates are subject to change.
Please check the Nyrstar corporate website (www.nyrstar.com) for financial calendar updates
| METALS PROCESSING PRODUCTION | 2016 | 2017 |
|---|---|---|
| Zinc metal ('000 tonnes) | 1,015 | 1,019 |
| Lead metal ('000 tonnes) | 187 | 171 |
| MINING PRODUCTION | ||
| Zinc in concentrate ('000 tonnes) | 96 | 123 |
| Copper in concentrate ('000 tonnes) | 2.1 | 2.1 |
| Silver ('000 troy ounces) | 554 | 553 |
| Gold ('000 troy ounces) | 1.8 | 1.9 |
| MARKET | ||
| Zinc price (USD/t) 2 | 2,095 | 2,896 |
| EUR/USD average exchange rate | 1.11 | 1.13 |
| KEY FINANCIAL DATA3 (EUR MILLION) |
||
| Group Revenue | 2,763 | 3,530 |
| Group Underlying EBITDA | 195 | 205 |
| Metals Processing Underlying EBITDA | 222 | 206 |
| Mining Underlying EBITDA | 8 | 47 |
| Other and Eliminations Underlying EBITDA | (35) | (48) |
| Profit / Loss for the period | (414) | 47 |
| Basic Loss / Profit per share from continuing | (2.59) | 0.10 |
| operations (EUR) | ||
| Group Capital Expenditure (CAPEX) | 280 | 364 |
| CASH FLOW | 2016 | 2017 |
|---|---|---|
| Cash flow from operating activities before working capital changes |
113 | 88 |
| Working capital and other changes | (195) | (49) |
| NET DEBT EXCLUSIVE OF ZINC PREPAY AND PERPETUAL SECURITIES |
||
| Net debt, end of period | 865 | 1,102 |
| Net debt/ Underlying EBITDA | 4.4 | 5.4 |
| NET DEBT INCLUSIVE OF ZINC PREPAY AND PERPETUAL SECURITIES |
||
| Net debt, end of period | 1,164 | 1,363 |
| Net debt/ Underlying EBITDA | 6.0 | 6.6 |
| RIR | 7.2 | 6.4 |
|---|---|---|
| DART | 5.2 | 3.9 |
1 FY 2016 & FY 2017 numbers were adjusted to exclude El Toqui, El Mochito, Contonga, Campo Morado and Coricancha as the mines are sold or reclassified as discontinued operations.
2 Zinc prices are averages of LME daily cash settlement prices.
3 Underlying EBITDA is a non-IFRS measure of earnings, which is used by management to assess the underlying performance of Nyrstar's operations and is reported by Nyrstar to provide additional understanding of the underlying business performance of its operations. Nyrstar defines "Underlying EBITDA" as profit or loss for the period adjusted to exclude loss from discontinued operations (net of income tax), income tax (expense)/benefit, share of loss of equity-accounted investees, gain on the disposal of equity-accounted investees, net finance expense, impairment losses and reversals, restructuring expense, M&A related transaction expenses, depreciation, depletion and amortization, income or expenses arising from embedded derivatives recognised under IAS 39 "Financial Instruments: Recognition and Measurement" and other items arising from events or transactions clearly distinct from the ordinary activities of Nyrstar. For a definition of other terms used in this document, please see Nyrstar's glossary of key terms available at: http://www.nyrstar.com or at the back of this document.
4 RIR: The frequency rate of cases requiring at least a medical treatment. DART: The frequency rate of cases with time lost or under restricted duties.
| FOR THE YEAR ENDED 31 DECEMBER | 2016 | 2017 |
|---|---|---|
| Market capitalisation | EUR 729,331,068 | EUR 731,724,121 |
| Number of issued ordinary shares | 93,563,960 | 109,033,545 |
| Number of treasury shares | Nil | Nil |
| Free float | 72% | 76% |
| Gross Capital Distribution | EUR 0 | EUR 0 |
| Closing share price | EUR 7.79 | EUR 6.71 |
| Intra-day high | EUR 9.59 | EUR 8.09 |
| Intra-day low | EUR 4.64 | EUR 4.75 |
| Average daily volume traded shares | 339,711 | 404,377 |
In 2017 we continued to make strong progress with the implementation of our strategic priorities: we delivered on the successful commissioning of the Port Pirie Redevelopment, optimised our mining portfolio, further strengthened our balance sheet to provide liquidity and an extended maturity profile, and stayed on track with our smelter production.
The health and safety of our employees is our first priority and we are pleased to report that 2017 saw the best safety performance since Nyrstar was founded. Lagging safety indicators further improved with a DART (Lost Time and Restricted Work Injuries) frequency rate of 3.9, and an RI (Recordable Injury - cases requiring at least a medical treatment) frequency rate of 6.4, an improvement of 25% and 11% respectively compared to 2016. In addition, the Port Pirie Redevelopment project was completed with an outstanding safety performance - more than 2.8 million hours worked over the past three years without a permanent disability injury and a DART frequency rate of 2.8.
No environmental events with material business consequences or long-term environmental impacts occurred during the period. We are committed to maintaining safe operations and proactively managing risks with respect to people and the environment.
The management has a strategy aimed at positioning the business for a sustainable future as a leading metals processing business. In 2017, we remained the second largest zinc metal producer globally with our geographically diverse smelter network. With the exception of some unplanned smelter outages, particularly in the second half of 2017, the business performed well throughout the year and delivered production in-line with guidance.
Major milestones were reached with the Port Pirie Redevelopment project with all major systems, including the slag caster and acid plant, commissioned. Port Pirie is ramping up and we expect it to contribute to earnings as previously guided.
We also completed the divestment of the Latin American mines with our North American mines now forming a core part of the business. Metals Processing was impacted by historically low treatment charges, unplanned outages at Budel and Hobart and lower lead metal and by-products at Port Pirie. We have completed the Metals Processing and Mining optimisation reviews and have identified improvements in production volumes and operating costs which will be realised in 2018 and beyond.
During the last year we completed a number of financing activities which strengthened our balance sheet, increased our liquidity and improved our maturity profile. The financing activities included the placement of leverage neutral EUR 500 million notes due 2024, the upsize and renewal of the committed structured commodity trade finance facility from EUR 400 million to EUR 600 million through to December 2021, a private placement of EUR 100 million of equity and a two year extension of the USD 250 million committed working capital facility with Trafigura through to the end of 2019.
The zinc price continued its rally throughout 2017 and topped the base metals charts for the second year in a row, backed by robust demand and supply deficiencies of both zinc concentrate and zinc metal.
HILMAR RODE CHIEF EXECUTIVE OFFICER
MARTYN KONIG CHAIRMAN OF THE BOARD OF DIRECTORS
In 2018, we expect to see a continued supply response from zinc mines with additional mine production to come online during the course of the year. Demand is also expected to remain strong throughout 2018 with economic indicators pointing to synchronous global growth. The zinc industry is now approaching a turning point in the treatment charge cycle where we expect treatment charges to start increasing during 2018. We remain positive on the short to medium term outlook for the zinc price.
The progress made in 2017 on our strategic priorities has placed Nyrstar on a solid footing for 2018 where we anticipate a sustainable improvement in operational and financial performance across our business.
We aim to be cash positive (defined as EBITDA – capex – interest – taxes) in 2018 underpinned by our three profit streams being our robust zinc smelting network, our North American zinc mines and the Port Pirie Redevelopment. Our 2018 strategic priorities remain consistent and key focus areas are:
3. Optimise the North American zinc mines to deliver their full potential
4. Ramp up the Port Pirie Redevelopment to deliver the guided earnings uplift
We are confident that we have the right strategy, asset base and people with the necessary technical, operational and commercial expertise to create value for our stakeholders and in particular shareholders.
On behalf of the Board of Directors we would like to express our thanks to all Nyrstar employees for their continued commitment and dedication. We would also like to express our gratitude to our customers, suppliers and shareholders for your on-going support and confidence in Nyrstar.
MARTYN KONIG CHAIRMAN OF THE BOARD OF DIRECTORS
HILMAR RODE CEO
Martyn Konig, Chairman
Martyn Konig was appointed Chairman in April 2016, having previously been Non-Executive Director on the Board since April 2015. He is currently the Chief Investment Officer for T Wealth Management SA, the private family office for partners and senior management of the Trafigura Group, as well as Non-Executive Chairman at Euromax Resources and Director at Newgold. Mr. Konig has over 35 years of experience in investment banking and the commodity markets as well as extensive experience in the natural resource sector.
Hilmar Rode, Executive Director
Hilmar Rode was appointed Executive Director in December 2016, having been appointed Chief Executive Officer of Nyrstar in the same month. He brings more than 20 years of experience in the metals, paper & packaging and chemicals industries to Nyrstar (see Nyrstar Management Committee for further details).
Carole Cable, Non-Executive Director
Carole Cable, Non-Executive Director, is currently a Partner of the Brunswick Group, an international communications firm, where she is the joint Head of the energy and resources practice specialising in the metals and mining sector. Prior to her current position, she worked at Credit Suisse and JPMorgan where she was a Mining Analyst and then moved into institutional equity sales covering the global mining sector as well as Asia ex Japan.
Christopher Cox, Non-Executive Director
Christopher Cox, Non-Executive Director, currently serves on the Trafigura Supervisory Board. He was also formerly the Head of the Non-Ferrous and Bulk Trading Division at Trafigura and a member of the Trafigura Management Board between March 2004 and December 2011 as well as a member of their Board of Directors from October 2013 until early September 2014. Prior to working for Trafigura, he was employed by Gold Fields of South Africa holding positions in mine and project evaluations and marketing of base metal concentrates and refined metals.
Anne Fahy, Non-Executive Director
Anne Fahy, Non-Executive Director, currently sits on the Boards of Interserve Plc and SThree Plc, and Chairs the Audit Committees of both companies. Prior to joining the board of SThree in October 2015, she was Chief Financial Officer of BP's Aviation Fuels business, having worked in a variety of finance and finance-related roles in her 27 years at the company. She is a Fellow of the Institute of Chartered Accountants in Ireland and worked at KPMG in Ireland and Australia prior to joining BP in 1988.
Jesús Fernandez, Non-Executive Director
Jesús Fernandez, Non-Executive Director, is currently Head of M&A at Trafigura Group Pte. Ltd. and sits on the Board of their mining division. He is a Board member of a number of companies including Bowie, Atalaya Mining and Mawson West and is a Principal of the Galena Private Equity Resources Fund. He has more than 15 years of experience in corporate finance, having previously worked for International Power PLC in its Project Finance Division.
Hilmar Rode, Chief Executive Officer
Hilmar Rode was appointed Chief Executive Officer of Nyrstar in December 2016. He has more than 20 years of experience in the metals (zinc, copper, coal and diamonds), paper & packaging and chemicals industries. He has worked at BHP Billiton, Glencore, Mondi, Anglo American and Praxair in senior management roles spanning operations, strategy, business development and R&D. Most recently, he led the successful transformation of Minera Escondida in Chile operated by BHP Billiton. Prior to BHP Billiton, Mr. Rode led a restructuring and business optimisation project at Glencore's Kazzinc operation in Kazakhstan.
Sebastião Balbino, Chief Commercial Officer
Sebastião Balbino was appointed Chief Commercial Officer of Nyrstar in January 2017. He has 35 years of experience in the metals and mining sector, holding senior commercial and management positions in the industry. He joined Nyrstar in May 2016 as Vice President Commercial. Before this, he was the Country Manager for Angola for DT Group. Mr. Balbino spent over two decades in senior commercial roles, including General Manager Commercial at Votorantim Metais Zinco, a global metals and mining company. He was also the Production Manager for Companhia Paraibuna de Metais.
Christopher Eger, Chief Financial Officer
Christopher Eger was appointed Chief Financial Officer in November 2015. He has extensive financial, M&A and commercial expertise related to the Metals and Mining sector, gained over a 15-year career in investment banking, metals trading and private equity. Previously, Mr. Eger was at Trafigura where he was a senior member of the Mergers and Acquisitions team. Prior to that, he was a member of the investment banking group of Bank of America Merrill Lynch, where he worked with metals and mining companies on debt and equity financing and M&A. He also worked as a Director in the Global Metals and Mining Group at BMO Capital Markets.
Willie Smit, Chief HR Officer
Willie Smit was appointed as Senior Vice President Corporate Services in January 2016. Prior to Nyrstar, he was Senior Vice President & Group Head of Human Resources at the Swiss-based cement producer Holcim Ltd. During his 30 year career, he held several senior management positions in HR including Executive Vice President and Head of HR at ArcelorMittal and Vice President HR Europe and Africa at the Siberian-Urals Aluminium Company (SUAL).
Frank Rittner, Chief Operating Officer
Frank Rittner was appointed Chief Operating Officer of Nyrstar in January 2017. He has almost two decades of experience in the metals and mining sector, holding senior positions in the industry as well as international consulting companies, such as PwC and McKinsey & Co. Prior to joining Nyrstar, Mr. Rittner was Chief Operating Officer at Glencore's Kazzinc operations in Kazakhstan. Before this, he was a Partner at PwC, leading Advisory Services for Metals and Mining clients in Central and Eastern Europe. He was also a Management Board member at Interpipe Group, a vertically integrated producer of steel and steel pipes.
| Management Report | 10 |
|---|---|
| Corporate Governance Statement | 34 |
| Remuneration Report | 58 |
| Report of the Board of Directors | 70 |
| Consolidated Financial Statements | 88 |
| Statutory Auditor's Report | 194 |
| Nyrstar NV summarized (non-consolidated) financial statements as at 31 December 2017 |
204 |
| Glossary | 206 |
Nyrstar is a global multi-metals business, with a market leading position in zinc and lead and growing positions in other base and precious metals, such as copper, gold and silver. Nyrstar has six smelters, one fumer and four mining operations, located in Europe, Australia and North America, and employs approximately 4,100 people. Nyrstar's global operations are located close to key customers and major transport hubs to facilitate delivery of raw materials and distribution of finished products.
The Company is incorporated in Belgium and has its corporate office in Zurich, Switzerland. Nyrstar is listed on Euronext Brussels under the symbol NYR. For further information, please visit the Nyrstar website: www.nyrstar.com.
The map below illustrates Nyrstar's operations worldwide.
A global leader in zinc: Nyrstar is one of the world's largest zinc smelting companies based on production volumes. Nyrstar produces zinc in concentrate from its mining operations and a variety of refined market zinc products including special high grade zinc (SHG), zinc galvanising alloys, and zinc die-casting alloys as an outcome of its zinc smelting process. Zinc has diverse applications and uses, from construction and infrastructure, to transport, industrial machinery, communications, electronics and consumer products. This makes it an essential and highly sought-after resource.
Nyrstar produces refined market lead (99.9%). Lead's primary usage is for the production of batteries. In fact, more than 80% of world production goes into the manufacture of lead acid batteries which continue to play an important part in the starter mechanism for automobiles as well as in batteries for ebikes where demand from developing economies remains significant. Other end uses for lead include underwater cable sheathing, glassware, solder and roof sheeting.
Nyrstar produces copper in concentrate and copper cathode. Copper is predominantly used in building construction. Other significant end-use markets include electrical products, transportation equipment, consumer products and industrial machinery and equipment.
Gold is produced in concentrate from our mining operations. Nyrstar also recovers gold in the lead refining process.
Silver is produced in concentrate from our mining operations. Nyrstar also recovers silver from the lead refining process as a silver doré and as a by-product from the zinc refining process into various leach products.
Nyrstar's management has a strategy aimed at positioning the business for a sustainable future as a leading metals processing business. Through its deep market insight and unique processing capabilities, Nyrstar aims to generate superior returns by extracting the maximum value inherent in the mineral resources and by-products it processes.
Accordingly, Nyrstar has developed a coordinated approach to operating its asset portfolio to optimise the concentrate feed into its smelters, maximise minor and precious metal extraction, and enhance the margins of its end-product mix.
To realise its strategy, management has determined the following strategic priorities:
As communicated by the Company on 9 February 2017, a comprehensive review of the Port Pirie Redevelopment project has been undertaken and completed to ensure that the scope, flow sheet and commissioning will provide Port Pirie with industry leading performance. The review confirmed that the Port Pirie Redevelopment is the right strategy for the Company as it will have a significant positive long-term effect on Nyrstar's operations and deliver a substantial earnings uplift. However, the review also identified that rework was required to the fabrication of key module components, which delayed the start of hot commissioning to the end of September 2017 as previously reported.
During 2017, the Port Pirie Redevelopment focused on completing the rework referred to above and enhancing the slag tapping arrangements on the TSL furnace whilst completing the modular construction and progressing the commissioning of the new infrastructure and related control systems. In addition, training of Nyrstar personnel at the Kazzinc lead smelting operations in Kazakhstan was concluded. The lime plant commissioning and the piling for the relocation of the slag caster was completed during the second quarter of 2017 and by the end of the third quarter of 2017, the hot commissioning of the TSL plant had commenced. At the end of October 2017, a further substantial milestone was achieved at the Port Pirie Redevelopment with the first feed to the TSL furnace and the production of molten metal. In December 2017, the first slag was successfully cast and in January 2018, the new acid plant started to process sulfur dioxide gas from the TSL furnace.
With construction having been completed at the Port Pirie Redevelopment in the fourth quarter of 2017, Nyrstar remains focused on delivering the guided incremental EBITDA uplift from the redevelopment.
The mine divestment process that commenced in January 2016 was formally concluded in the third quarter of 2017. Over the course of the divestment process, Nyrstar sold all five of its mining assets in Latin America with a total cash consideration of USD 72 million (USD 40 million upfront and USD 32 million in contingent milestone payments).
The remaining North American mining portfolio has undergone a full potential review and Nyrstar is rolling out optimisation plans for all four of the mining operations. These optimisation plans together with more favourable macros mean that the North American mines are now considered a core part of the Nyrstar business and are positioned to ramp-up to 200kt per annum of zinc in concentrate production and deliver continued improvements in operating costs. The Middle Tennessee Mines have now fully ramped-up and the restart of the Myra Falls Mine is progressing well and is on-schedule for zinc concentrate production by mid-2018.
Nyrstar continued strengthening its balance sheet throughout 2017 with the completion of a number of financing initiatives that increased the Company's liquidity, improved its maturity profile and reduced its bond yields.
In March 2017, Nyrstar conducted a placement of leverage neutral EUR 400 million notes due 2024. These notes were subsequently upsized by EUR 100 million in September 2017. At the time of this upsize, Nyrstar also tendered for the 2018 convertible bonds that are due in September 2018 and was able to reduce the amount outstanding from EUR 91 million to EUR 29 million.
In April 2017, Nyrstar completed an upsize of the committed structured commodity trade finance facility from EUR 400 million to EUR 500 million and in December 2017 the Company renewed the facility on similar terms with a maturity of December 2021 and an increased committed facility size of EUR 600 million.
In November 2017, Nyrstar completed a private placement of EUR 100 million of equity and a two year extension of the USD 250 million committed working capital facility with Trafigura through to the end of 2019. Over the course of the year, Nyrstar also continued to roll the existing prepays to maintain an amount outstanding between USD 250-300 million.
Nyrstar's liquidity position moved from EUR 382 million at the end of 2016 to EUR 733 million at the end of 2017. This liquidity is supportive in the current commodity price environment where working capital outflows are higher due to higher commodity prices and the impact of a weakening USD.
Nyrstar will continue to asses opportunistic financing options to either increase liquidity and or to extend the maturity profile of its existing debt. Nyrstar therefore continues to monitor and review a comprehensive list of both short and long term financing alternatives.
"Prevent Harm" is a core value of Nyrstar. The Company is committed to maintaining safe operations and to proactively managing risks including with respect to people and the environment. At Nyrstar, we work together to create a workplace where all risks are effectively identified and controlled and everyone goes home safe and healthy each day of their working life.
In 2017 we achieved our best safety performance since Nyrstar was founded. The frequency rate of cases with time lost or under restricted duties (DART) for the Company was 3.9, an improvement of 25% compared to a rate of 5.2 in 2016. The frequency rate of cases requiring at least a medical treatment (RIR) was 6.4, an improvement of 11% compared to 7.2 in 2016.
No environmental events with material business consequences or long-term environmental impacts occurred during the period.
In connection with Trafigura's commitment to support the 2016 rights offering, Nyrstar has executed a Relationship Agreement with Trafigura Group Pte. Ltd. and its affiliated persons to govern its relationship and ensure that all business transactions are conducted at arm's length and on normal commercial terms. The Relationship Agreement will have effect for as long as Trafigura holds at least 20% but less than 50% of shares in Nyrstar. Key elements of the Relationship Agreement include:
In addition to the Relationship Agreement, Nyrstar has negotiated strategic commercial agreements with Trafigura comprising of zinc and lead concentrate and finished refined aluminium metal purchase agreements, and finished refined zinc and lead and finished refined copper cathodes metal sales agreements. The key aspects of the strategic commercial agreements include:
These agreements provide Nyrstar with additional certainty of supply of concentrate in a market expected to tighten in the medium term, and leverage Trafigura's strong marketing presence for product sales.
Nyrstar remains positive about the fundamental strength of the zinc market which has supported its outperformance against other base metals over the past two years. Nyrstar's strategic priorities are consistent, focusing on ensuring the long-term viability of the Company and delivering increased production and earnings. Following the completion of a full potential optimization review, transformation initiatives are now being implemented with first benefits from a multi-year process expected to materialise in 2018.
| AVERAGE PRICES | FY 2016 | FY 2017 | % CHANGE |
|---|---|---|---|
| Exchange rate (EUR/USD) | 1.11 | 1.13 | 2% |
| Exchange rate (EUR/AUD) | 1.49 | 1.47 | (1%) |
| Zinc price (USD/tonne) | 2,095 | 2,896 | 38% |
| Lead price (USD/tonne) | 1,872 | 2,317 | 24% |
| Copper price (USD/tonne) | 4,867 | 6,162 | 27% |
| Silver price (USD/t.oz) | 17.14 | 17.05 | (1%) |
| Gold price (USD/t.oz) | 1,250 | 1,258 | 1% |
Zinc, lead and copper prices are averages of LME daily cash settlement prices. Silver/Gold price is average of LBMA daily fixing / daily PM fixing, respectively
Nyrstar's earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly the US Dollar, the Euro, the Australian Dollar and the Swiss Franc. Nyrstar's reporting currency is the Euro. Zinc, lead and other metals are sold throughout the world principally in US Dollars, while the costs of Nyrstar are primarily in Euros, US Dollars, Australian Dollars and Swiss Francs.
The US Dollar started 2017 strongly with the market confident that a mixture of tax cuts and infrastructure spending would allow the US economy to continue growing. However, as the year progressed, the dollar weakened steadily, finishing the year as the worst performing G10 currency, with markets recalculating as the economic agenda stalled. In contrast, the Eurozone economy continued to improve and the European Central Bank began discussing a potential end to fiscal stimulus, which resulted in the Euro outperforming the USD, finishing the year at 1.20. The Australian dollar traded in a 0.72 to 0.8 range, tracking commodity prices of key exports and supported by US Dollar weakness.
The zinc price carried its strength from 2016 into 2017, starting the year at USD 2,568/t and closing at USD 3,309/t. Year-on-year, the zinc price increased by 38%. The rise in the zinc price has primarily been due to zinc concentrate shortages, coupled with robust consumption of zinc metal. While the concentrates shortage has garnered most of the attention, demand for zinc remains strong, highlighted by the drawdowns in both exchange and off-exchange stocks. While 2017 saw continued price increases for zinc, the underlying causes of this are unlikely to disappear in the short-term. Indeed, early 2018 has seen prices continue to rally to a 10 year high of USD 3,609/t by the end of January 2018. Overall, the medium term outlook for the zinc market remains positive, with prices continuing to rise, with metals consultancy, Wood Mackenzie forecasting an average zinc price of USD 3,767/t for 2018.
The Lead price rallied during 2017, reaching levels not seen since 2011. Tightness in concentrate supply continues to be a key driver for the lead market, combined with strong demand from China with the country importing 78kt of refined lead in the first 11 months of 2017, having been a net exporter over the previous four years. The outlook for 2018 will depend partly on the extent of environmental measures initiated in China and subsequent imports, along with how quickly capacity comes back online following mine closures in 2015 and 2016. Consensus expectations are for the lead price to continue to strengthen, with metals consultancy, Wood Mackenzie, forecasting an average 2018 lead price of USD 2,450/t.
Copper ended 2017 with its biggest quarterly price increase since the second quarter of 2013, finishing at USD 7,118/t. Refined copper supply increased by just 1.3% in 2017, the slowest level of growth since 2009, as major mine supply disruptions reduced the availability of concentrates. Chinese smelters managed to keep output growth elevated, sucking in scrap and concentrate from the rest of the world, while output ex-China shrank. Demand also increased moderately helping support the price.
As economic growth gathered momentum in 2017, global monetary policy became slightly less accommodative with rising interest rates tempering any gains from geopolitical tensions. Gold and Silver both finished the year relatively unchanged.
Prices have been rising across the board, with the increase in the sulphur price supporting increased acid prices. The North West European acid price increased fourfold over the course of 2017, with spot prices finishing the year at USD 26.50/t, from USD 7/t during January 2017.
The annual benchmark treatment charge for zinc concentrates in 2017 was settled at USD 172 per tonne of concentrate, a decrease of 15% from the previous year. Despite several miners continuing to keep mines on care and maintenance, mine production increased by 6% to 13.8 million tonnes in 2017 according to Wood Mackenenzie.
The annual treatment charge terms for high silver lead concentrates in 2017 were concluded at USD 125 per tonne of concentrate with a silver refining charge of USD 1.00 per troy ounce.
Nyrstar's results continue to be significantly affected during the course of 2017 by changes in metal prices, exchange rates and treatment charges. Sensitivities to variations in these parameters are depicted in the below table, which sets out the estimated impact of a change in each of the parameters on Nyrstar's 2017 underlying EBITDA based on the actual results and production profile for the year ending 31 December 2017.
| ESTIMATED ANNUAL 2017 UNDERLYING EBITDA IMPACT, EXCLUDING HEDGE IMPACT (EURM) | |||||
|---|---|---|---|---|---|
| PARAMETER | 2017 ANNUAL AVERAGE PRICE/RATE | VARIABLE | METALS PROCESSING | MINING | GROUP |
| Zinc price | \$2,896/t | -/+ 10% | (36)/+44 | (22)/+22 | (60)/+66 |
| Lead price | \$2,317/t | -/+ 10% | (1)/+1 | - | (1)/+1 |
| Copper price | \$6,166/t | -/+ 10% | (2)/+2 | (1)/+1 | (3)+3 |
| Silver Price | \$17.05/oz | -/+ 10% | (4)/+4 | (1)/+1 | (5)+5 |
| Gold Price | \$1,257/oz | -/+ 10% | (1)/+1 | - | (1)+1 |
| EUR:USD | 1.13 | -/+ 10% | +83/(68) | +23/(18) | +106/(87) |
| EUR:AUD | 1.47 | -/+ 10% | (31)/+25 | - | (31)/+25 |
| EUR:CHF | 1.11 | -/+ 10% | - | - | (6)/+5 |
| Zinc TC | \$172/dmt | -/+ 10% | (23)/+23 | +3/(3) | (20)/+20 |
| Lead TC | \$120/dmt | -/+ 10% | (3)/+3 | - | (3)/+3 |
The above sensitivities were calculated by modelling Nyrstar's 2017 underlying operating performance. Each parameter is based on an average value observed during that period and is varied in isolation to determine the full-year underlying EBITDA impact. Sensitivities are:
During the implementation of the transformation and turnaround strategy, Nyrstar has taken prudent measures to mitigate downside risk on zinc prices and key currencies by placing zero cost hedging collars whereby Nyrstar buys put options and sells call options on zinc price and sells put options and buys call options on foreign exchange. In 2017, the strategic foreign exchange hedging contributed EUR 12 million to EBITDA whilst the strategic zinc price hedging reduced EBITDA by EUR 53 million.
In Q1 2017, Nyrstar had in place zinc price collar hedges to protect 70% of total free metal produced at the zinc smelters and North American mines within a price range of USD 2,127 and USD 2,496 with full upside from USD 2,800; and for Q2 2017 to Q4 2017, a collar of USD 2,172 to USD 2,543 (plus a call at USD 3,117). During the entirety of 2017, the zinc production at Langlois has been hedged with a fixed forward position of USD 2,280 per tonne on a payable volume of 2,000 tonnes per month.
During the course of 2017 and the start of 2018, Nyrstar has further placed protective zinc hedges on certain volumes of the total free metal produced by Nyrstar's zinc smelters and mines. Nyrstar has put in place hedges for approximately 70% of the total free metal produced by Nyrstar's zinc smelters and mines for H1 2018 and approximately 50% of the total free metal produced in H2 2018. The H1 2018 hedges result in full exposure to the zinc price for 100% of the production volume in H1 2018 between a floating zinc price of USD 2,300/t and USD 3,094/t. Above and below these prices, Nyrstar's exposure is limited to 30% of the total free metal produced. The H2 2018 hedges result in full exposure to the floating zinc price within a price range of USD 2,600/t and USD 3,842/t. Above and below these prices, Nyrstar's exposure is reduced to 50% of the total free metal produced. Nyrstar has also placed fixed forward hedges to protect the profitability of the Myra Falls Mine during its restart and ramp-up. The Myra Falls fixed forward commodity price hedging has been placed at USD 2,760 and USD 2,685 per tonne for zinc in 2018 and 2019 respectively; USD 1,281 and USD 1,296 per troy ounce in 2018 and 2019 respectively; USD 6,461 and USD 6,415 per tonne for copper in 2018 and 2019 respectively; and USD 17.41 per troy ounce for silver in both 2018 and 2019.
Since H1 2016, Nyrstar has entered into a series of foreign exchange options to hedge the Company's monthly exposure related to the direct operating costs denominated in Australian dollars (AUD), Canadian Dollars (CAD) and in Euro (EUR) utilising put and call collar structures. For the EUR/USD transactional exposure, various collars were executed resulting in a weighted average collar of 1.05 to 1.14 for approximately 100% of the total transactional expenses in H1 2017; and a weighted average collar of 1.00 to 1.10 for approximately 100% of the total transactional expenses in H2 2017. For the AUD/USD transactional exposure, various collars were executed resulting in a weighted average collar of 0.62 to 0.81 for approximately 100% of the total transactional expenses for H1 2017; a weighted average collar of 0.68 to 0.81 for approximately 100% of H2 2017; and a weighted average collar of 0.70 to 0.80 for approximately 100% of 2018. For the CAD/USD transactional exposure on Langlois, various collars have been executed resulting in a weighted average collar of 1.28 to 1.35 for approximately 70% of 2017 and a weighted average collar of 1.32 to 1.36 for approximately 100% of 2018. Nyrstar has not undertaken hedging of EUR/USD transactional exposure for 2018.
| EUR MILLION (UNLESS OTHERWISE INDICATED) | FY | FY | % | H1 | H2 | % |
|---|---|---|---|---|---|---|
| 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE | |
| INCOME STATEMENT SUMMARY | ||||||
| Revenue | 2,763 | 3,530 | 28% | 1,806 | 1,724 | (5%) |
| Gross Profit | 981 | 1,074 | 9% | 555 | 520 | (6%) |
| Direct operating costs | (788) | (875) | 11% | 445 | 430 | (3%) |
| Non-operating and other | 2 | 6 | 289% | 2 | 5 | 216% |
| Metal Processing U. EBITDA | 222 | 206 | 7% | 117 | 88 | (25%) |
| Mining U. EBITDA | 8 | 47 | 496% | 15 | 32 | 110% |
| Other and Eliminations U. EBITDA | (35) | (48) | 37% | (22) | (26) | 21% |
| Group Underlying EBITDA | 195 | 205 | 5% | 111 | 94 | (15%) |
| Underlying EBITDA margin | 7% | 6% | (17%) | 6% | 5% | (12%) |
| Embedded derivatives | (5) | (3) | (49%) | (2) | (3) | (88%) |
| Restructuring expense | (8) | (4) | (51%) | (1) | (3) | 76% |
| M&A related transaction expense | (5) | (0) | - | 0 | (1) | - |
| Other income | 0 | 9 | - | 7 | 1 | (84%) |
| Profit / (Loss) on disposal of investments | - | 3 | - | (2) | 4 | 369% |
| Underlying adjustments | (18) | 5 | (127%) | 2 | 2 | (20%) |
| Depreciation, depletion, amortisation | (177) | (156) | (13%) | (77) | (79) | 3% |
| Impairment gain / (loss) | (126) | 126 | (200%) | 0 | 126 | - |
| Result from operating activities | (126) | 180 | (243%) | 37 | 144 | 285% |
| Net finance expense (excluding fx) | (116) | (147) | 27% | (65) | (82) | 25% |
| Income tax (expense) / benefit | (16) | 37 | (331%) | 9 | 28 | 211% |
| Profit / (Loss) from continuing operations | (264) | 10 | (103%) | (54) | 65 | (220%) |
| Profit / (Loss) from discontinued operations | (150) | 37 | (111%) | 35 | 2 | (94%) |
| Profit / Loss for the period | (414) | 47 | (107%) | (21) | 67 | (419%) |
| Basic Profit / Loss per share from continuing operations (EUR) | (2.59) | 0.10 | (104%) | (0.22) | 0.10 | (145%) |
| CAPEX (CONTINUING AND DISCONTINUING OPS) | ||||||
| Metals Processing | 237 | 303 | 28% | 140 | 163 | 16% |
| Mining | 40 | 58 | 45% | 19 | 39 | 105% |
| Other | 3 | 3 | (3%) | 2 | 1 | (50%) |
| Group Capex | 280 | 364 | 30% | 161 | 203 | 25% |
| CASH FLOW | ||||||
| Cash flow from operating activities before working capital changes | 113 | 88 | (22%) | 48 | 403 | (17%) |
| Working capital and other changes | (195) | (49) | (75%) | 19 | (68) | (458%) |
| Net Debt Exclusive of Zinc Prepay and Perpetual Securities | 865 | 1,102 | 27% | 986 | 1,102 | 12% |
| Net Debt Inclusive of Zinc Prepay and Perpetual Securities | 1,164 | 1,363 | 17% | 1,243 | 1,363 | 10% |
| EUR MILLION | FY | FY | % | H1 | H2 | % |
|---|---|---|---|---|---|---|
| (UNLESS OTHERWISE INDICATED) | 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE |
| METALS PROCESSING PRODUCTION | ||||||
| Zinc metal ('000 tonnes) | 1,015 | 1,019 | - | 518 | 500 | (3%) |
| Lead metal ('000 tonnes) | 187 | 171 | (8%) | 84 | 87 | 3% |
| MINING PRODUCTION | ||||||
| Zinc in concentrate ('000 tonnes) | 96 | 123 | 28% | 53 | 70 | 30% |
| Copper in concentrate ('000 tonnes) | 2.1 | 2.1 | 1% | 0.9 | 1.2 | 42% |
| Silver ('000 troy ounces) | 554 | 553 | - | 271 | 282 | 4% |
| Gold ('000 troy ounces) | 1.8 | 1.9 | 7% | 0.8 | 1.1 | 40% |
| MARKET4 | ||||||
| Zinc price (USD/t) | 2,095 | 2,896 | 38% | 2,690 | 3,098 | 15% |
| Lead price (USD/t) | 1,872 | 2,317 | 24% | 2,221 | 2,413 | 9% |
| Silver price (USD/t.oz) | 17.14 | 17.05 | (1%) | 17.32 | 16.78 | (3%) |
| Gold price (USD/t.oz) | 1,250 | 1,257 | 1% | 1,238 | 1,278 | 3% |
| EUR/USD average exchange rate | 1.11 | 1.13 | 2% | 1.08 | 1.18 | 9% |
| EUR/AUD average exchange rate | 1.49 | 1.47 | (1%) | 1.44 | 1.51 | 5% |
1 FY 2016 & FY 2017 numbers were adjusted to exclude El Toqui, El Mochito, Contonga, Campo Morado and Coricancha as the mines are sold or reclassified as discontinued operations.
2 Underlying EBITDA is a non-IFRS measure of earnings, which is used by management to assess the underlying performance of Nyrstar's operations and is reported by Nyrstar to provide additional understanding of the underlying business performance of its operations. Nyrstar defines "Underlying EBITDA" as profit or loss for the period adjusted to exclude loss from discontinued operations (net of income tax), income tax (expense)/benefit, share of loss of equity-accounted investees, gain on the disposal of equity-accounted investees, net finance expense, impairment losses and reversals, restructuring expense, M&A related transaction expenses, depreciation, depletion and amortization, income or expenses arising from embedded derivatives recognised under IAS 39 "Financial Instruments: Recognition and Measurement" and other items arising from events or transactions clearly distinct from the ordinary activities of Nyrstar. For a definition of other terms used in this document, please see Nyrstar's glossary of key terms available at: http://www.nyrstar.com or at the back of this document.
3 The notional cash flows from the repayment of zinc prepayment presented at H1 2017 as a part of cash flow from financing activities have been reclassified and are presented as a part of the cash flow from operating activities.
4 Zinc, lead and copper prices are averages of LME daily cash settlement prices. Silver/Gold price is average of LBMA daily fixing / daily PM fixing, respectively.
Group gross profit for 2017 of EUR 1,074 million was up 9% on 2016, driven by higher production volumes in Mining and higher zinc, lead and gold prices which were up 38%, 24% and 1% respectively, partially offset by deteriorating benchmark zinc treatment charge terms and strategic zinc price hedging.
Direct operating costs for 2017 of EUR 875 million increased 11% on 2016, due to higher production volumes in Mining, increased mining costs as a result of the restart of operations at Middle Tennessee and an increase in consultancy service fees with the completion in 2017 of the mining and smelting optimization reviews.
Group underlying EBITDA (continuing operations) of EUR 205 million in 2017, an increase of 5% on 2016, due to higher commodity prices and production Mining, partially offset by lower treatment charges. Underlying adjustments in 2017 were a total of EUR 4 million, comprising EUR (3) million of embedded derivatives, EUR (4) million of restructuring expense and EUR 3 million of profit on disposal of investments. This compares to a total of EUR (19) million in 2016, comprising of EUR (5) million embedded derivatives, EUR (9) million restructuring expenses and EUR (5) million of M&A related transaction expense.
Depreciation, depletion and amortisation expense for 2017 of EUR 156 million was down 13% year-on-year.
In 2017 the Company recognised a non-cash, pre-tax impairment reversal of EUR 126 million related to its continuing operations (2016: impairment loss of EUR 126 million). This impairment gain (2016: impairment loss) relates fully to pre-tax impairment reversals on Nyrstar's Mining assets at Middle Tennessee and Myra Falls.
At the end of 2017, the carrying values of the continuing operations in Mining were EUR 144 million at Myra Falls, EUR 63 million at Middle Tennessee Mines, EUR 86 million at East Tennessee Mines and EUR 79 million at Langlois.
Net finance expense (excluding foreign exchange) for 2017 of EUR 147 million was up EUR 31 million on 2016 primarily due to net debt exclusive of zinc prepay and perpetual securities increasing by 27% and net debt inclusive of zinc prepay and perpetual securities increasing by 17%. During 2017, EUR 55 million of perpetual securities were drawn compared to EUR 110 million drawn in 2016. At the end of 2017, an aggregate total net of debt issue costs of EUR 186 million (AUD 286 million) of perpetual securities had been drawn for the Port Pirie Redevelopment funding.
Nyrstar recognised an income tax benefit from continued and discontinued operations for the year ended 31 December 2017 of EUR 38.5 million (2016: income tax expense of EUR 39.5 million) representing an effective income tax rate of -481.3% (for the year ended 31 December 2016: -10.6%). The tax rate is impacted by changes in the expected profitability of group entities in Canada and Australia during the period and the associated recognition of previously unrecognised deferred tax assets. Further, the tax rate is impacted by changes in the net deferred tax position due to the change in the corporate income tax rates in both Belgium (reduction of net deferred tax liabilities by EUR 7.9 million) and the USA (reduction of net deferred tax assets by EUR 10.5 million), together with losses incurred by the Group, including the discontinued operations, for which no tax benefit has been recognised.
Profit after tax of EUR 47 million in 2017, compared to a net loss of EUR 414 million in 2016, mainly as a result of the impairment reversals related to the Mining segment assets in 2017 and impairment charges related to Mining segment asset in 2016, respectively. In 2017 the Group recognized pre-tax net impairment reversal of EUR 142 million comprised of EUR 126 million for continuing operations and EUR 16 million for discontinued operations (2016: impairment loss of EUR 266 million comprised of EUR 126 million for continuing operations and EUR 140 million for discontinued operations).
Capital expenditure (continuing operations) was EUR 364 million in 2017, representing an increase of 30% year-on-year driven by a EUR 18 million capex increase in Mining with the restart of the Middle Tennessee Mines and the commencement of restart activities at the Myra Falls Mine, completion of the Port Pirie Redevelopment project and a relatively large number of planned and unplanned maintenance outages across the zinc smelters.
Cash flow from operating activities before working capital changes of EUR 88 million in 2017 was down 22% compared to EUR 113 million in 2016 and cash out-flow from changes in working capital and other balance sheet movements in 2017 of EUR 49 million was down EUR 146 million compared to an out-flow of EUR 195 million in 2016, resulting in total cash inflow from operating activities for 2017 of EUR 38 million compared to EUR 81 million outflow for 2016. The increase in net working capital levels was driven primarily by an increase in inventory valuation due to higher commodity prices, including the effect on inventory balance from zinc price increases of approximately EUR 173 million for 2017.
Net debt at the end of 2017 at EUR 1,102 million, excluding the zinc metal prepay and perpetual securities, was 27% higher compared to the end of 2016 (EUR 865 million at the end of 2016). The net debt inclusive of the zinc metal prepay and perpetual securities at the end of 2017 was EUR 1,363 million, up 17% compared to the end of 2016. Cash balance at the end of 2017 was EUR 67 million compared to EUR 127 million at the end of 2016.
| EUR MILLION | FY | FY | % | H1 | H2 | % |
|---|---|---|---|---|---|---|
| (UNLESS OTHERWISE INDICATED) | 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE |
| Treatment charges | 370 | 286 | (23%) | 171 | 115 | (33%) |
| Free metal contribution | 263 | 351 | 33% | 182 | 169 | (7%) |
| Premiums | 156 | 152 | (2%) | 79 | 73 | (8%) |
| By-Products | 143 | 166 | 16% | 79 | 87 | 10% |
| Other | (89) | (99) | 11% | (56) | (43) | (22%) |
| Gross Profit | 843 | 856 | 2% | 456 | 400 | (12%) |
| Employee expenses | (219) | (220) | 1% | (112) | (109) | (3%) |
| Energy expenses | (195) | (227) | 16% | (117) | (110) | (6%) |
| Other expenses /income | (205) | (202) | (1%) | (110) | (92) | (12%) |
| Direct Operating Costs5 | (619) | (649) | (5%) | (339) | (311) | (8%) |
| Non-operating and other | (2) | (1) | (59%) | (0) | 1 | (463%) |
| Underlying EBITDA | 222 | 206 | (7%) | 117 | 88 | (25%) |
| Sustaining | 97 | 146 | 52% | 59 | 87 | 47% |
| Growth | 45 | 53 | 18% | 17 | 36 | 109% |
| Port Pirie Redevelopment | 95 | 104 | 9% | 64 | 40 | (38%) |
| Metal Processing Capex | 237 | 303 | 28% | 140 | 163 | 16% |
5 In 2015 Nyrstar changed its internal allocation of certain operating costs to its operating segments. This changed the composition of the allocation of the direct operating costs between the segments.
Metals Processing delivered an underlying EBITDA result of EUR 206 million in 2017, a decrease of 7% over 2016 due to lower treatment charges and lower lead metal and by-product production at Port Pirie and unplanned production outages at Budel and Hobart in H2 2017, partially offset by higher commodity prices which were constrained due to reduced free metal price exposure with the call option price in the zinc price collar hedging structure. The opportunity loss in 2017 due to the zinc collar hedging in Metals Processing was EUR 21 million.
Marginally stronger year-over-year gross profit (up 2%) at EUR 856 million in 2017 was mainly driven by higher zinc and by-product prices that were to some extent constrained by the zinc price collar hedging in place during 2017 and largely offset by a 23% decrease in zinc and lead treatment charge income. Annual 2017 zinc benchmark treatment charge terms were settled at the end of Q1 2017 at approximately 15% below the 2016 terms at USD 172 per tonne of concentrate. The vast majority of Nyrstar's concentrate requirements are priced at benchmark terms or by reference to the benchmark with a discount applied. Spot treatment charge exposure for Nyrstar is typically only in the range of 5-10% of the concentrate feed book. In 2017, the discount realized by Nyrstar against the benchmark base zinc treatment charge was approximately USD 40 per tonne.
The total Premium gross profit contributions were relatively flat compared to 2017 (down 2%), driven by marginally higher volumes and relatively flat average realised premia rates.
By-product gross profit contributions were positively impacted by higher gold, silver and copper prices and higher production volumes of gold, offset by lower production volumes of copper, silver and sulphuric acid compared to 2016. There was no indium production included in Metals Processing By-Products gross profit in 2016 due to the fire at the indium cement plant that occurred in Q4 2015. The indium plant was re-built in 2016 and resumed production by the end of Q1 2017 with 29.8 tonnes of indium metal produced in 2017.
Direct Operating Costs were increased in 2017 (up 6% compared to 2016) at EUR 649 million due to increased energy prices, marginally higher zinc metal production and consulting expenses related to the optimisation review which was competed in Q3 2017, partially offset by ongoing efficiency improvements across the Metals Processing sites.
Sustaining capital spend in 2017 increased by 52% on 2016 due to a number of large planned maintenance shuts occurring during the year and the various unplanned outages that occurred during H2 2017, predominantly at Budel and Hobart. Growth capex in 2017 was EUR 53 million, an increase of EUR 8 million on 2016, primarily due to the completion of a number of smelting optimization review projects and the completion of ancillary capex initiatives at Port Pirie which are complimentary to the redevelopment project. The Port Pirie Redevelopment project was completed at the end of 2017 with total capex incurred in 2017 of EUR 104 million compared to EUR 95 million in 2016.
| EUR | FY | FY | % | H1 | H2 | % |
|---|---|---|---|---|---|---|
| DOC/TONNE | 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE |
| Auby | 442 | 448 | 1% | 460 | 436 | (5%) |
| Balen/Overpelt | 483 | 501 | 4% | 514 | 490 | (5%) |
| Budel | 361 | 407 | 13% | 377 | 445 | 18% |
| Clarksville | 501 | 481 | (4%) | 514 | 449 | (13%) |
| Hobart | 448 | 467 | 4% | 478 | 457 | (4%) |
| Port Pirie6 | 681 | 810 | 19% | 849 | 773 | (9%) |
| DOC/tonne7 | 515 | 546 | 6% | 562 | 529 | (6%) |
6 Per tonne of lead metal and zinc contained in fume
7 DOC/tonne calculated based on segmental direct operating costs and total production of Zinc and Lead Market Metal
| FY | FY | % | H1 | H2 | % | |
|---|---|---|---|---|---|---|
| 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE | |
| ZINC METAL ('000 TONNES) | ||||||
| Auby | 149 | 166 | 11% | 82 | 84 | 1% |
| Balen/Overpelt | 236 | 249 | 6% | 117 | 133 | 13% |
| Budel | 283 | 248 | (13%) | 140 | 108 | (23%) |
| Clarksville | 111 | 117 | 6% | 59 | 59 | – |
| Hobart | 236 | 238 | 1% | 121 | 118 | (2%) |
| Total | 1,015 | 1,019 | – | 518 | 500 | (3%) |
| LEAD METAL ('000 TONNES) | ||||||
| Port Pirie | 187 | 171 | (8%) | 84 | 87 | 3% |
| OTHER PRODUCTS | ||||||
| Copper cathode ('000 tonnes) | 4.9 | 4.2 | (14%) | 2.0 | 2.2 | 10% |
| Silver (million troy ounces) | 14.8 | 13.6 | (9%) | 6.4 | 7.1 | 8% |
| Gold ('000 troy ounces) | 46.2 | 72.6 | 57% | 35.3 | 37.4 | 6% |
| Indium metal (tonnes) | - | 29.8 | - | 9.7 | 20.1 | 107% |
| Sulphuric acid ('000 tonnes) | 1,356 | 1,266 | (7%) | 652 | 614 | (6%) |
Metals Processing produced approximately 1,019,000 tonnes of zinc metal in 2017, in-line with the lower end of full year 2017 guidance (1.0 to 1.1 million tonnes).
Flat zinc metal production year-over-year was due to the planned maintenance shuts at Balen and Budel in Q2 2017 which negatively impacted production by approximately 11,000 tonnes and 6,500 tonnes of zinc metal respectively; the planned maintenance shuts at Hobart and Clarksville in Q3 2017; unplanned outages experienced in Budel in Q3 2017; and unplanned outages at Hobart in Q4 2017.
During Q3 2017, production at Budel was down by 19% compared to the same period in 2016, predominantly due to three roaster defluidisations during August 2017 with a production impact of approximately 16,000 tonnes of zinc metal. In October 2017, Budel experienced a further unplanned production outage of approximately 15 days due to a hydrogen explosion in a leaching department vessel. This outage resulted in lost production of approximately 11,500 tonnes of zinc metal.
Hobart commenced its planned maintenance shut of its roasting and acid departments at the end of June 2017. The Hobart planned maintenance shut was completed by the end of July 2017, having been extended from a 28 day to a 41 day shut to allow repairs to the upper vertical wall of the number 6 roaster, with a production impact of approximately 5,500 tonnes of zinc metal. In December 2017, Hobart experienced a pressurisation incident in its roaster department during the restart of Roaster No. 6 which was caused by a build-up of diesel in the roaster bed from an aborted restart in the previous days. The incident caused a roaster outage which lasted 12 days and resulted in lost production of approximately 10,000 tonnes of zinc metal.
Zinc metal production at Auby was up 11% in 2017 compared to 2016 as a result of a planned cell house maintenance shutdown in Q1 2016; Balen was up 6% despite a planned 21 day cell house shutdown in May 2017 which improved production rates; and Clarksville was up 6% primarily due to a higher proportion of feed being sourced from the East Tennessee mines. The Auby smelter successfully completed its planned roaster maintenance shutdown in September 2017.
Lead market metal production at Port Pirie of 171kt in 2017 was 8% lower compared to 2016 due to two unplanned blast furnace stops to repair damaged water cooled jackets, heat exchanger failures in the old acid plant and operational issues in the sinter plant that have negatively affected sinter quality. These issues were largely resolved in Q3 2017 with the selective use of concentrates based on rankings, replacement of the acid plant cold heat exchanger and addressing some significant mechanical issues in the old sinter plant. Copper and silver production was lower in 2017 by 14% and 9% respectively whilst gold production was up 57%. The variance in the production of copper, silver and gold is mainly due to a different feed mix consumed with lower copper and silver and higher gold contained.
| EUR MILLION | FY | FY | % | H1 | H2 | % |
|---|---|---|---|---|---|---|
| (UNLESS OTHERWISE INDICATED) | 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE |
| Treatment charges | (31) | (23) | (26%) | (10) | (13) | 22% |
| Payable metal contribution | 160 | 230 | 44% | 105 | 125 | 19% |
| By-Products | 17 | 18 | 6% | 9 | 9 | - |
| Other | (10) | (7) | (30%) | (6) | (2) | (64%) |
| Gross Profit | 136 | 218 | 60% | 98 | 120 | 22% |
| Employee expenses | (63) | (77) | 23% | (38) | (39) | - |
| Energy expenses | (14) | (20) | 42% | (10) | (11) | 9% |
| Other expenses | (54) | (80) | (48%) | (36) | (43) | 19% |
| Direct Operating Costs | (131) | (177) | (35%) | (85) | (92) | 8% |
| Non-operating and other | 3 | 6 | 133% | 2 | 5 | 206% |
| Underlying EBITDA | 8 | 47 | 496% | 15 | 32 | 110% |
| Sustaining | 18 | 33 | 83% | 8 | 25 | 213% |
| Exploration and development | 22 | 18 | (18%) | 11 | 7 | (36%) |
| Growth | - | 7 | - | - | 7 | - |
| Mining Capex9 | 40 | 58 | 45% | 19 | 39 | 105% |
8 FY 2016 & FY 2017 numbers were adjusted to exclude El Toqui, El Mochito, Contonga, Campo Morado and Coricancha as the mines are sold and reclassified as discontinued operations 9 Mining capex includes the capex incurred at both continuing and discontinued operations
Mining underlying EBITDA of EUR 47 million in 2017 was EUR 39 million higher than in 2016 due to the higher zinc price, lower zinc treatment charge terms, operational improvements and the successful restart of operations at the Middle Tennessee Mines. Mining segment EBITDA was constrained during 2017 due to the zinc price hedging collars in place for Q2 to Q4 2017 being placed below the realised floating spot price during this period. The Mining result excludes the underlying EBITDA impact of the Latin American mines which have been eliminated as discontinued operations due to their announced divestment. Myra Falls being on restart since August 2017, contributed EBITDA of negative EUR 16 million in 2017 (compared to negative EUR 14 million in 2016). The opportunity loss in 2017 due to the zinc collar hedging in Mining was EUR 32 million.
Mining capital expenditure in 2017 was EUR 58 million, up 18 million year-on-year, primarily due to the restart of the Middle Tennessee Mines during 2017 and the commencement of restart activities at the Myra Falls Mine since August 2017. In 2016, across the mining operations, all non-essential sustaining capital projects across non-committed growth capex was postponed or cancelled due to the sales process that was ongoing at that time.
| FY | FY | % | H1 | H2 | % | |
|---|---|---|---|---|---|---|
| DOC USD/TONNE ORE MILLED | 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE |
| Langlois | 93 | 111 | 19% | 130 | 97 | (26%) |
| East Tennessee | 38 | 40 | 4% | 42 | 38 | (10%) |
| Middle Tennessee | - | 60 | - | 77 | 54 | (30%) |
| Average DOC/tonne ore milled | 49 | 55 | 13% | 60 | 51 | (26%) |
| '000 TONNES | FY | FY | % | H1 | H2 | % |
|---|---|---|---|---|---|---|
| UNLESS OTHERWISE INDICATED | 2016 | 2017 | CHANGE | 2017 | 2017 | CHANGE |
| TOTAL ORE MILLED10 | 2,253 | 3,238 | 44% | 1,366 | 1,872 | 37% |
| ZINC IN CONCENTRATE | ||||||
| Langlois | 34 | 34 | 2% | 16 | 18 | 13% |
| Myra Falls | - | - | - | - | - | - |
| East Tennessee | 62 | 66 | 6% | 32 | 34 | 7% |
| Middle Tennessee | - | 22 | - | 5 | 17 | 231% |
| Total | 96 | 123 | 28% | 53 | 70 | 30% |
| OTHER METALS | ||||||
| Copper in concentrate | 2.1 | 2.1 | 1% | 0.9 | 1.2 | 42% |
| Silver ('000 troy oz) | 554 | 553 | - | 271 | 282 | 4% |
| Gold ('000 troy oz) | 1.8 | 1.9 | 7% | 0.8 | 1.1 | 40% |
10 Mining production for both years was adjusted to exclude El Toqui, El Mochito, Campo Morado, Contonga and Coricancha production volumes as they are reclassified as discontinued operations.
The Middle Tennessee Mines were placed on care and maintenance throughout 2016 and were re-started in December 2016 with first mill production achieved in Q2 2017. Production of 22kt of zinc in concentrate from the Middle Tennessee Mines in the period of May to December 2017 is in-line with management's expectations. The Middle Tennessee Mines have ramped-up to an operating level of approximately 50kt per annum of zinc in concentrate by the end of 2017. The East Tennessee Mines have performed well over the course of 2017, with production of 66kt of zinc in concentrate being an improvement of 6% comparted to 2016. Production improvements at East Tennessee are due to increased development work to provide access to more mining areas and improved underground equipment availability, in part due to the replacement of some of the older units.
Production of 34kt of zinc in concentrate at Langlois in 2017 represents an increase of 2% over 2016 and was mainly due to an improvement in ground conditions in 2017 and an improved mine plan due to greater infill drilling completed during 2017.
| ZINC (%) LEAD (%) COPPER (%) GOLD (G/T) SILVER (G/T) ZINC (%) LEAD (%) COPPER (%) GOLD (%) SILVER (%) ZINC (KT) LEAD (KT) COPPER (KT) ZINC (KT) LEAD (KT) COPPER (KT) GOLD (K'TOZ) SILVER (M'TOZ) PRODUCTION ORE MILLED PERIOD KPI BY SITE ('000 TONNES) Langlois 424 8.40% - 0.68% 0.17 48.15 95.0% - 71.5% 76.4% 84.5% 64 - 8.2 33.8 - 2.1 1.8 554 Myra Falls - - - - - - - - - - - - - - - - - - - FY East Tennessee 2016 1,829 3.61% - - - - 94.3% - - - - 101 - - 62.3 - - - - Middle Tennessee - - - - - - - - - - - - - - - - - - - Mining Total 2,253 4.51% - 0.68% 0.17 48.15 94.4% - 71.5% 76.4% 84.5% 165 - 8.2 96.1 - 2.1 1.8 554 Langlois 467 7.77% - 0.58% 0.16 43.31 95.0% - 77.5% 78.9% 85.0% 65 - 9.0 34.5 - 2.1 1.9 553 Myra Falls - - - - - - - - - - - - - - - - - - - FY East Tennessee 2,003 3.48% - - - - 95.1% - - - - 107 - - 66.3 - - - - 2017 Middle Tennessee 769 3.11% - - - - 92.8% - - - - 34 - - 22.2 - - - - Mining Total 3,238 4.01% - 0.58% 0.16 43.31 94.5% - 77.5% 78.9% 85.0% 206 - 9.0 122.9 - 2.1 1.9 553 Langlois 10% (8)% - (15)% (6)% (10)% - - 8% 3% 1% 2% - 13% - - - - - MyraFalls - - - - - - - - - - - - - - - - - - - % East Tennessee 10% (4)% - - - - 1% - - - - 6% - - 6% - - - - CHANGE Middle Tennessee - - - - - - - - - - - - - - - - - - - Mining Total 44% (11)% - (15)% (6)% (10)% - - 8% 3% 1% 25% - 13% 28% - - - - |
MILL HEAD GRADE | RECOVERY | CONCENTRATE | METAL IN CONCENTRATE | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| MILL HEAD GRADE | RECOVERY | CONCENTRATE | METAL IN CONCENTRATE | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PERIOD | PRODUCTION KPI BY SITE |
ORE MILLED ('000 TONNES) |
ZINC (%) | LEAD (%) | COPPER (%) | GOLD (G/T) | SILVER (G/T) | ZINC (%) | LEAD (%) | COPPER (%) | GOLD (%) | SILVER (%) | ZINC (KT) | LEAD (KT) | COPPER (KT) | ZINC (KT) | LEAD (KT) | COPPER (KT) | GOLD (K'TOZ) | SILVER (M'TOZ) |
| Langlois | 202 | 8.41% | - | 0.56% | 0.16 | 47.89 | 95.0% | - | 76.2% 78.5% 87.0% | 30 | - | 3.6 | 16.2 | - | 0.9 | 0.8 | 271 | |||
| Myra Falls | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |
| H1 2017 |
East Tennessee | 964 | 3.48% | - | - | - | - | 95.5% | - | - | - | - | 52 | - | - | 32.1 | - | - | - | - |
| Middle Tennessee | 200 | 2.82% | - | - | - | - | 91.0% | - | - | - | - | 8 | - | - | 5.1 | - | - | - | - | |
| Mining Total | 1,366 | 4.12% | - | 0.56% 0.16 47.89 | 94.8% | - | 76.2% 78.5% 87.0% | 89 | - | 3.6 | 53.4 | - | 0.9 | 0.8 | 271 | |||||
| Langlois | 265 | 7.27% | - | 0.59% | 0.17 | 39.80 | 95.0% | - | 78.4% 79.2% 83.3% | 35 | - | 5.4 | 18.3 | - | 1.2 | 1.1 | 282 | |||
| Myra Falls | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |
| H2 2017 |
East Tennessee | 1,039 | 3.48% | - | - | - | - | 94.7% | - | - | - | - | 55 | - | - | 34.2 | - | - | - | - |
| Middle Tennessee | 568 | 3.21% | - | - | - | - | 93.4% | - | - | - | - | 26 | - | - | 17.0 | - | - | - | - | |
| Mining Total | 1,872 | 3.93% | - | 0.59% 0.17 39.80 | 94.3% | - | 78.4% 79.2% 83.3% | 117 | - | 5.4 | 69.5 | - | 1.2 | 1.1 | 282 | |||||
| Langlois | 31% | (14)% | - | 5% | 6% | (17)% | - | - | 3% | 1% | (4)% | 17% | - | 25% | 13% | - | - | - | 4% | |
| MyraFalls | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |
| % CHANGE |
East Tennessee | 8% | - | - | - | - | - | (1)% | - | - | - | - | 6% | - | - | 6% | - | - | - | - |
| Middle Tennessee | 184% | 14% | - | - | - | - | 3% | - | - | - | - | 225% | - | - | 240% | - | - | - | - | |
| Mining Total | 8% | - | - | - | - | - | (1)% | - | - | - | - | 6% | - | - | 6% | - | - | - | - |
Nyrstar expects to produce approximately 1.05 – 1.1 million tonnes of zinc metal in 2018. This level of production is based on maximising underlying EBITDA and free cash flow generation in Metals Processing by targeting the optimal balance between production and sustaining capital expenditure.
| PRODUCTION | 2018 GUIDANCE |
|---|---|
| METALS PROCESSING | |
| Zinc (kt) | 1,050 – 1,100 |
| MINING - METAL IN CONCENTRATE | |
| Zinc (kt) | 160 – 180 |
Capital expenditure guidance for 2018 across Nyrstar's assets is as per the table below.
| Metals Processing 130 – 150 |
|
|---|---|
| Mining | 70 – 90 |
| GROUP CAPEX 200 – 240 |
During 2018 there are a number of scheduled maintenance shuts at the smelters, which will have an impact on production. These shuts will enable the smelters to continue to operate within internal safety and environmental standards, comply with external regulations/ standards and improve the reliability and efficiency of the production process, and will allow the sites to make improvements to critical production steps. All efforts are made to reduce the production impact of these shuts by building intermediate stocks prior to the shut and managing the shut in a timely and effective manner. The estimated impact of these shuts on 2018 production, which has been taken into account when determining zinc metal guidance for 2018, is listed in the table below.
| SMELTER & PRODUCTION STEP IMPACTED | TIMING AND DURATION | ESTIMATED IMPACT |
|---|---|---|
| Auby – roaster Q2: |
2 weeks | Nil |
| Balen – roaster #5 Q2: |
1 week | Nil |
| Balen – roaster #4 Q4: |
4 weeks | Nil |
| Budel – roaster #1 Q4: |
2 weeks | Nil |
| Clarksville – roaster Q3: |
4 weeks | 8,000 tonnes |
| Hobart – roaster #5 Q2: |
3 weeks | Nil |
| Port Pirie – blast furnace & slag fumer Q2: |
6 weeks | 21,000 tonnes |
| Port Pirie – TSL furnace Q4: |
1 week | Nil |
Nyrstar is committed to responsible and sustainable business practices. This protects and enhances our global license to operate and helps to make our business more resilient and competitive. Nyrstar's approach to managing sustainability issues and risks focuses on integrating sustainability considerations into company values, business strategies and day-to-day operational management decisions.
The following text provides an introduction to key sustainability topics relevant to the financial condition and operating performance of Nyrstar. Further information on sustainability risks of importance to Nyrstar's operations, the strategies we deploy to manage those risks, and our performance throughout the year are provided in Nyrstar's Sustainability Report which can be downloaded at: http://www.nyrstar.com/sustainability.
Nyrstar's employees are the foundation of everything we do and providing a workplace that is safe, engaging and rewarding is at the heart of our success as a company.
The value proposition to employees centers around four key pillars, namely: A Value-Based Culture; A Safe and Healthy Work Environment; Providing Opportunities for Training and Development; and Recognising and Rewarding Performance. Supporting the value proposition, in 2017, Nyrstar continued the implementation of its People Strategy focused on talent identification, succession planning, strategic workforce planning, organisation structure development, top leadership assessment, and performance & reward management.
In addition, in March 2017, Nyrstar launched an organizational review across the corporation. The main objectives of the review were to align the structure of the organisation with the Company's operating model, to clarify roles and responsibilities, and to ensure Nyrstar has the right people in the right roles.
At the end of 2017, Nyrstar's worldwide workforce totalled 4,071 employees which compares to the 4,100 employed at the start of the year. Reductions achieved through the organisational review and the sale of the Peruvian operations were offset by the restart of operations at the Myra Falls and Middle Tennessee sites.
Safety and health is the first priority at Nyrstar. Nyrstar believes that every work-related illness and injury is preventable and the Company's ambition is for every employee to return home safe and healthy at the end of their shift, every day. Maintaining the safety and health of Nyrstar's people is not only a moral obligation but also helps to improve productivity and attract a talented workforce.
Nyrstar's health and safety strategy is built around four focus areas which together form a roadmap on our journey towards zero harm. Everything Nyrstar's does to improve the safety and health of its people fits into one of these focus areas which include: Fatality Prevention, Safety Maturity, Health and Safety Management Systems, and Health & Wellness.
In 2017, Nyrstar achieved its best safety performance since Nyrstar was founded with further improvements in two main lagging indicators. The frequency rate of Lost Time and Restricted Work Injuries (DART) was 3.9, an improvement of 25% compared to a rate of 5.2 in 2016. The frequency rate of cases requiring at least a medical treatment (RIR) was 6.4, an improvement of 11% compared to 7.2 in 2016.
The Port Pirie Redevelopment project was completed with an outstanding safety performance. Over the last three years, more than 2.8 million working hours were completed without permanent disability injuries and a DART frequency rate of 2.8.
In 2017, Nyrstar continued to develop its safety culture and make safety part of everything the Company does. During the year, 25% of the workforce were able to identify, stop and report 4,847 unsafe acts, and 50% reported 18,286 unsafe conditions.
Despite this great performance, Nyrstar had 25 critical incidents across its sites which are a reminder of the importance to continue developing and strengthening the Company's culture, systems and processes.
The metals Nyrstar produces are essential to modern life and to a sustainable development of society. As responsible environmental stewards, Nyrstar is committed to conducting its mining and smelting operations in a way that minimises natural resource use, prevents environmental damage and meets society's expectations on responsible resource development. From a strategic perspective, Nyrstar's approach to improving environmental performance and reducing impacts is focused on: maintaining and driving operational excellence, underpinned by effective management systems, clear accountabilities and purposeful performance tracking; investing in environmental abatement technologies, such as air emission control equipment and effluent treatment plants; and engaging with key stakeholders to understand their perspectives and develop a shared understanding of environmental objectives and priorities.
In 2017, Nyrstar's operations continued to exercise operational control with few significant incidents and upsets causing environmental impacts. No events qualifying as Critical Environmental Incidents under Nyrstar definitions were recorded in 2017, continuing the performance trend established in 2015 and 2016. Notwithstanding this achievement, Nyrstar's measure of regulatory compliance – Notifiable Non-Compliances – deteriorated notably in comparison with prior year results. The number of Notifiable Non-Compliances recorded in 2017 increased to 50 from the 35 excursions documented in 2016. While most of the recorded non-compliances were relatively minor in nature, the 2017 compliance outcomes deviate from Nyrstar's expectations and point to weaknesses in operational and environmental compliance practices. Priority sites for corrective actions and strengthened compliance controls include the Balen smelter, where commissioning of a new effluent treatment plant caused several minor non-compliance events in 2017, and the Myra Falls Mine which also experienced effluent violations in preparation for the restart of site operations.
Two environmental fines totalling around USD 23,000 were paid in 2017, representing a significant reduction relative to the USD 900,000 paid in 2016. Several projects involving investments in environmental abatement and improvement technologies were advanced during the year. Of most significance to Nyrstar's overall environmental footprint, construction of the Port Pirie Redevelopment project was completed and the new installations commissioned. The new processing and environmental control equipment provided by the project are designed to deliver a step change reduction in the emission of lead and SO2 to air and will also allow for increased reprocessing of residue materials. In combination with the community lead exposure reduction activities delivered through the Targeted Lead Abatement Program (TLAP), the emission reductions will help achieve further improvements in community health in terms of blood lead levels amongst the local population, especially children.
During the year Nyrstar continued to implement its stakeholder engagement plans and to develop productive relationships with local communities and other stakeholders. Proactively engaging with and listening to stakeholders with an interest in Nyrstar's operations allows the Company to shape operational strategies and activities with a view to protecting Nyrstar's social license to operate and delivering shared value.
The Nyrstar share price decreased during 2017 by 13%, compared to a 30% increase in the MSCI World Metals and Mining Index, over the same period, and a 38% increase in the average annual zinc price. The average traded daily volume was approximately 404,377 shares in 2017 compared to 339,710 in 2016, an increase of 19%.
Nyrstar ordinary shares have been admitted to trading on Euronext® Brussels (symbol NYR BB) since 29 October 2007. As at 31 December 2017, the registered share capital amounted to EUR 113,262,734.08 represented by 109,033,545 ordinary shares. The Company's shares do not have a nominal value.
As at 31 December 2017, the Company had on issue EUR 29 million of senior unsecured convertible bonds due 2018 and EUR 115 million of senior unsecured convertible bonds due 2022.
The bonds due in 2018 were issued in September 2013 at 100 percent of their principal amount (EUR 100,000 per bond) and have a coupon of 4.25% per annum. The conversion price as at 31 December 2017 was EUR 21.28 per share with EUR 29 million of senior unsecured convertible 2018 bonds outstanding and, if all of the bonds were to be converted into new ordinary shares at the above conversion price, 1,362,782 new ordinary shares would be issued. The bonds are listed and admitted to trading on the Frankfurt Stock Exchange's Open Market segment.
The bonds due in 2022 were issued in November 2016 at 100 % of their principal amount (EUR 100,000 per bond) and have a coupon of 5.00% per annum. The conversion price as at 31 December 2017 was EUR 9.44 per share with EUR 115 million of senior unsecured convertible 2022 bonds outstanding and, if all of the bonds were to be converted into new ordinary shares at the above conversion price, 12,182,203 new ordinary shares would be issued. The bonds are listed and admitted to trading on the Frankfurt Stock Exchange's Open Market segment.
Pursuant to applicable Belgian legislation on the disclosure of significant shareholdings and the Company's articles of association, any person who acquires at least 3% of the total existing voting rights of the Company must notify both the Company and the Belgian Financial Services and Markets Authority (the FSMA, which is the successor to the Banking, Finance and Insurance Commission, the CBFA, since April 1, 2011).
A notification is also required when a person acquires at least 5%, 7.5%, 10%, 15%, 20% or any further multiple of 5% of the total existing voting rights of the Company, or when, due to disposals of securities, the number of voting rights falls below one of these thresholds. A list as well as a copy of such notifications can be obtained from the Company's website (www.nyrstar.com). As at 31 December 2017, on the basis of the notifications received by the Company, the major shareholders of the Company (i.e. holding more than 3% of the total voting rights) were:
| SHAREHOLDER'S NAME | SHAREHOLDER'S ADDRESS | DATE OF NOTIFICATION | NUMBER OF VOTING RIGHTS | SHAREHOLDING |
|---|---|---|---|---|
| Urion Holdings (Malta) Ltd., a subsidiary of Trafigura B.V. | Leicester Court, Suite 2, Edgar Bernard Street, Griza GZR 1702, Malta |
1 September 2015 | 23,055,662 | 24.61% |
The Company has a wide shareholder base, mainly composed of institutional investors in the United Kingdom, the United States, Belgium and other European countries, but also comprising Belgian retail investors. Retail shareholders represent approximately 30 percent of the Nyrstar shareholder base.
| FOR THE YEAR-ENDED 31 DECEMBER | 2016 | 2017 |
|---|---|---|
| Number of issued ordinary shares | 93,563,960 | 109,033,545 |
| Number of treasury shares | Nil | Nil |
| Market capitalisation (as at 31/12) | EUR 729,331,068 | EUR 731,724,121 |
| Earnings/(Loss) per Share (12 months to 31/12) | EUR (2.59) | EUR 0.10 |
| Gross Capital Distribution (proposed) | EUR 0 | EUR 0 |
| Share price (closing as at 31/12) | EUR 7.79 | EUR 6.71 |
| Year high (intra-day) | EUR 9.59 | EUR 8.09 |
| Year low (intra-day) | EUR 4.64 | EUR 4.75 |
| Average volume traded shares per day (12 months to 31/12) | 339,711 | 404,377 |
| Free float (as at 31/12) | 72% | 76% |
The Board reviewed the Company's dividend policy in 2009 and concluded that, in light of the Company strategy, a dividend policy with a fixed pay-out ratio was no longer appropriate. The Company's revised dividend policy aims to maximise total shareholder return through a combination of share price appreciation and dividends, whilst maintaining adequate cash flows for growth and the successful execution of the Company's strategy.
As a Belgian listed company and with a view to ensuring that investors in Nyrstar shares have all information necessary to ensure the transparency, integrity and good functioning of the market, Nyrstar has established an information disclosure policy.
This policy is aimed at ensuring that material information of which Nyrstar is aware is immediately disclosed to the public. In addition, the policy is aimed at ensuring that information which is disclosed is fair and accurate, and so will enable the holders of shares in Nyrstar, and the public, to assess the impact of the information on Nyrstar's position, business and results.
Nyrstar's reputation is greatly influenced by its ability to communicate in a consistent and professional manner with all our stakeholders.
A core Nyrstar value is to be open and honest and accordingly we strive to provide clear, open and transparent communications to all our stakeholders. Nyrstar regularly organises presentations to investors, analysts and the media to provide strategic, operational and financial updates, and to build strong relationships.
To provide financial analysts, investors and media with a greater insight into our business, we organised or participated in several events during the year.
To engage with its institutional shareholders Nyrstar presented the Company at events organised by Bank of America Merrill Lynch, BMO Capital Markets, Citi, Deutsche Bank, Exane BNP Paribas, Goldman Sachs, HSBC, ING, J.P. Morgan, KBC Securities, Macquarie, Morgan Stanley, Bank Degroof Petercam, Oddo Securities, Royal Bank of Canada (RBC) and Societe Generale. In addition Nyrstar also participated in numerous investor roadshows in Europe and North America.
The following brokerages published research on Nyrstar in 2017:
| ABN Amro | Citi | KBC Securities |
|---|---|---|
| Bank Degroof Petercam | Deutsche Bank | Macquarie |
| Bank of America Merrill Lynch | Exane BNP Paribas | Morgan Stanley |
| Berenberg | Goldman Sachs | Oddo Securities |
| Barclays | ING | RBC |
The Board of Directors has decided not to propose to shareholders a distribution for the financial year 2017.
Nyrstar NV (the 'Company') has prepared this Corporate Governance Statement in accordance with the Belgian Code on Corporate Governance of 12 March 2009. This Corporate Governance Statement is included in the Company's report of Board of Directors on the statutory accounts for the financial year ended on 31 December 2017 dated 21 February 2018 in accordance with article 96 of the Belgian Companies Code.
The Company adopted a Corporate Governance Charter in line with the Belgian Code on Corporate Governance of 12 March 2009. The Company applies the nine corporate governance principles contained in the Belgian Code on Corporate Governance. The Company also complies with the corporate governance provisions set forth in the Belgian Code on Corporate Governance.
As an exception to the foregoing, the general shareholders' meeting held on 20 April 2017 approved that certain Non-Executive Directors would be remunerated fully or partly in deferred share units, and not in cash (see further information in the Remuneration Report). This is a deviation from the provisions of section 7.7 of the Belgian Code on Corporate Governance, which provides that Non-Executive Directors should not be entitled to performance-related remuneration such as bonuses, stock related long-term incentive schemes, fringe benefits or pension benefits. The Board of Directors sought the approval from the general shareholders' meeting for such remuneration in deferred shares, as it believes that granting Non-Executive Directors the opportunity to be remunerated in whole or in part in deferred shares of the Company rather than in cash enables the Non-Executive Directors to link their effective remuneration to the future performance of Nyrstar and to strengthen the alignment of their interest with the interest of the Company's shareholders. The Board of Directors seeks a similar resolution by the general shareholders' meeting to be held on 19 April 2018.
The Corporate Governance Charter describes the main aspects of the corporate governance of the Company including its governance structure, the terms of reference of the Board of Directors and its Committees and other important topics.
What constitutes good corporate governance will evolve with the changing circumstances of a company and with the standards of corporate governance globally and must be tailored to meet those changing circumstances. The Board of Directors intends to update the Corporate Governance Charter as often as required to reflect changes to the Company's corporate governance.
The Corporate Governance Charter is available, together with the articles of association, on the Company's website, within the section About us (http://www.nyrstar.com/en/about-us/corporategovernance.aspx). The Board of Directors approved the initial charter on 5 October 2007. There were updated versions approved on several occasions. The current version was approved by the Board of Directors on 13 December 2016. A copy of the Belgian Code on Corporate Governance can be found on www.corporategovernancecommittee.be.
Nyrstar has adopted a code of business conduct for all of Nyrstar's personnel and sites. The code of business conduct is based on the Nyrstar Way. The code also provides a frame of reference for Nyrstar sites to establish more specific guidelines to address local and territorial issues. Nyrstar also introduced a code of business conduct development program which supports the code of business conduct and aims to increase awareness in relation to some key risks to Nyrstar's business. The development program includes specially designed training modules for Nyrstar employees. The training modules are conducted by Nyrstar's Compliance Officer with the assistance of local expertise (where required). If employees have issues or concerns (for example, they are concerned that others are not complying
with the letter and the spirit of the code of business conduct), they may raise the issue or concern with their supervisor or manager or Nyrstar's Compliance Officer. The code of business conduct is available on Nyrstar's website (www.nyrstar.com).
The table below gives an overview of the current members of the Company's Board of Directors and their terms of office:
| NAME | PRINCIPAL FUNCTION WITHIN THE COMPANY |
NATURE OF DIRECTORSHIP | START OF TERM | END OF TERM | |
|---|---|---|---|---|---|
| Martyn Konig | Chairman | Non-Executive, Independent | 2015 | 2019 | |
| Hilmar Rode | Chief Executive Officer, Director | Executive | 2017 | 2021 | |
| Carole Cable | Director | Non-Executive, Independent | 2017 | 2021 | |
| Christopher Cox | Director | Non-Executive | 2015 | 2019 | |
| Anne Fahy | Director | Non-Executive, Independent | 2016 | 2020 | |
| Jesús Fernandez | Director | Non-Executive | 2016 | 2020 |
Martyn Konig, Non-Executive Chairman, was appointed Chairman in April 2016. He is also Non-Executive Chairman of Euromax Resources (since 2013) and an Independent Director of TSX-listed New Gold (since 2009), sitting on both the Audit and Corporate Governance Committees. He is a Consultant Chief Investment Officer for T Wealth Management, a private multi-family office for partners and senior management of the Trafigura Group based in Geneva. Previously, from 2008, he was Executive Chairman and President of European Goldfields until its friendly takeover by Eldorado Gold Corp for US\$ 2.5 billion in 2012. He has also been a main Board Director of NM Rothschild and Sons Ltd. for 15 years and held senior positions at Goldman Sachs and UBS. Mr. Konig is a barrister and also a Fellow of the Chartered Institute of Bankers.
Hilmar Rode, Chief Executive Officer, was appointed Chief Executive Officer and Executive Director in December 2016. Prior to Nyrstar, he has worked at BHP Billiton, Glencore, Mondi, Anglo American and Praxair in senior management roles spanning operations, strategy, business development and R&D. At Glencore and Anglo American he accumulated extensive experience in zinc and lead mining and smelting. Most recently, he led the successful transformation of Minera Escondida, the largest copper mining and processing project in Chile operated by BHP Billiton. Prior to BHP Billiton, Hilmar led a restructuring and business optimization project at Glencore's Kazzinc operation in Kazakhstan for two years. While at Anglo American, Mr. Rode worked on the Skorpion zinc project in Namibia for four years from pre-feasibility through to commissioning. He holds a PhD in Chemical Engineering and a Masters in Environmental Engineering from the State University of New York in Buffalo, United States, and a first-class degree in Chemical Engineering from the University of Stellenbosch, South Africa. He also completed the Advanced Management Programme at Harvard Business School.
Carole Cable, Non-Executive Director, is currently a Partner of the Brunswick Group, an international communications firm, where she is the Joint Head of the energy and resources practice specialising in the metals and mining sector. Prior to her current position, she worked at Credit Suisse and JPMorgan where she was a Mining Analyst and then moved into institutional equity sales covering the global mining sector as well as Asia ex Japan. Before that, she worked for an Australian listed mining company. She is a member of the Nomination and Remuneration Committee and the Health, Safety, Environment and Community Committee. Ms. Cable holds a Bachelor of Science degree from the University of New South Wales, Australia and is currently on the Board of Women in Mining UK.
Christopher Cox, Non-Executive Director, currently serves on the Trafigura Supervisory Committee. He was also formerly the Head of the non-ferrous and bulk trading division at Trafigura and a member of the Trafigura Management Board between March 2004 and December 2011 as well as a member of the Trafigura Board of Directors from October 2013 until early September 2014. Prior to working for Trafigura, he was employed by Gold Fields of South Africa holding positions in mine and project evaluations and marketing of base metal concentrates and refined metals. He is a member of the Nomination and Remuneration Committee and the Health, Safety, Environment and Community Committee. Mr. Cox was educated in South Africa and holds a Bachelor of Science degree (Hons) in Geology and an MBA from University of Cape Town Graduate School of Business, South Africa.
Anne Fahy, Non-Executive Director, currently sits on the Boards of Interserve Plc and SThree Plc, and chairs the Audit Committees of both companies. Furthermore, she sits on the Board, the Audit and Risk Committee, and the Nomination Committee of Coats Group Plc (effective 1 March 2018). She is also a Trustee of Save the Children. Previously, she was Chief Financial Officer of BP's Aviation Fuels business, having worked in a variety of finance and finance-related roles in her 27 years at BP. She is a Fellow of the Institute of Chartered Accountants in Ireland and worked at KPMG in Ireland and Australia prior to joining BP in 1988. She holds a Bachelor of Commerce from the University College Galway, Ireland.
Jesús Fernandez, Non-Executive Director, is currently Head of M&A at Trafigura Group Pte. Ltd. and sits on the Board of their mining division. He is a Board member of a number of companies including Bowie, Atalaya Mining, Terrafame Group Ltd. and TM Ventures and is a principal of the Galena Private Equity Resources Fund. He has more than 15 years of experience in corporate finance, having previously worked for International Power PLC in its project finance division. He holds a Masters in Finance and Investment from Exeter University, and an Honours Degree in Economics from the University of Cantabria, Spain.
Virginie Lietaer was appointed Company Secretary to the Company effective 10 March 2008.
The business address of each of the Directors is for the purpose of their Directors' mandate, Zinkstraat 1, 2490 Balen, Belgium.
The Company's Management Committee consists of five members (including the Chief Executive Officer), as further set forth hereinafter:
| NAME | TITLE |
|---|---|
| Hilmar Rode | Chief Executive Officer |
| Christopher Eger | Chief Financial Officer |
| Frank Rittner | Chief Operating Officer |
| Sebastião Balbino | Chief Commercial Officer |
| Willie Smit | Chief HR Officer, HR& SHE |
Hilmar Rode is the Chief Executive Officer of the Company. See his biography above under "—Board of Directors".
Christopher Eger, Chief Financial Officer, was appointed in November 2015. Prior to Nyrstar, he was at Trafigura where he was a senior member of the mergers and acquisitions team. Prior to that he was a member of the investment banking group of Bank of America Merrill Lynch, where he worked with metals and mining companies on debt and equity financing and M&A. He also worked as a Director in the global metals and mining group at BMO Capital Markets. He holds an MBA from Kellogg School of Management at Northwestern University, United States.
Frank Rittner, Chief Operating Officer, was appointed in January 2017. In his role as Chief Operating Officer, Frank is responsible for Nyrstar's Metals Processing and Mining operations and production value chains. Mr. Rittner has almost two decades of experience in the metals and mining sector, holding senior positions in the industry as well as international consulting companies, such as PwC and McKinsey & Co. Prior to joining Nyrstar, he was Chief Operating Officer at Glencore's Kazzinc operations in Kazakhstan. Before this, he was a partner at PwC, leading Advisory Services for Metals and Mining clients in Middle and Eastern Europe.
He was also a Management Board Member at Interpipe Group, a vertically integrated producer of steel and steel pipes, responsible for strategic development and the implementation of continuous improvement in production. At McKinsey & Co, he was part of the global mining leadership team, specializing in profitability improvement and operations. Mr. Rittner received a PhD in Physical Chemistry from the Technical University of Dortmund, Germany and was a Feodor-Lynen research fellow at Columbia University, New York, United States.
Sebastião Balbino, Chief Commercial Officer, was appointed in January 2017. In his role as Chief Commercial Officer, Sebastião focuses on Nyrstar's concentrate procurement strategy and oversees the commercial sales and marketing teams. He has 35 years of experience in the metals and mining sector, holding senior commercial and management positions in the industry. Mr. Balbino joined Nyrstar in May 2016 as Vice President Commercial. Before this, he was the Country Manager for Angola for DT Group, a joint venture between Trafigura and Cochan Ltd. he spent over two decades in senior commercial roles, including General Manager Commercial at Votorantim Metais Zinco, a global metals and mining company and one of the largest conglomerates in Latin America. He was also the Production Manager for Companhia Paraibuna de Metais. Sebastião started his career as a Petroleum Drilling Engineer for Petrobras. Mr. Balbino holds a degree in Metallurgical Engineering from the UFF, Brazil as well as an MBA from the FDC, Brazil.
Willie Smit, Chief HR Officer, HR and SHE, was appointed in January 2016. Prior to joining Nyrstar, he was the Senior Vice-President and Global Head of HR at Swiss-based cement producer Holcim Ltd. Before that, he held a number of increasingly senior positions with ArcelorMittal, including Executive Vice President and Head of HR, where he was in charge of the global HR function for the Group. Before joining Mittal Steel in 2005, he worked for the Siberian-Urals Aluminium Company (SUAL) as Vice President HR Europe and Africa. He started his career in South Africa where he first worked as an HR graduate trainee at East Rand Proprietary Mines (ERPM Ltd.) and then joined the construction and infrastructure company Group Five. He holds a Bachelor of Educational Science Degree in Clinical Psychology from the University of Johannesburg, South Africa (formerly Rand Afrikaans University).
The business address of the Management Committee is Tessinerplatz 7, 8002 Zurich, Switzerland.
No Director or member of the Management Committee has:
Other than set out in the table below, no Director or member of the Management Committee has, at any time in the previous five years, been a member of the administrative, management or supervisory body or partner of any companies or partnerships. Over the five years preceding the date of this report, the Directors and members of the Management Committee hold or have held in addition to their function within Nyrstar, the following main Directorships or memberships of administrative, management or supervisory bodies and/or partnerships:
| NAME | CURRENT | PAST |
|---|---|---|
| Martyn Konig | Euromax Resources Newgold |
European Goldfields |
| Carole Cable | Brunswick Group Women in Mining UK City Natural Resources High Yield Trust |
N/A |
| Christopher Cox | Trafigura Beheer B.V. | N/A |
| Anne Fahy | Interserve Plc SThree Plc Save The Children Coats Group Plc (effective 1 March 2018) |
Air BP Ltd. |
| Jesús Fernandez | Atalaya Mining PLC Bowie Resource Partners TM Ventures Terrafame Ltd. Various subsidiaries of Trafigura |
Anvil Mining Limited Tiger Resources LimitedVarious subsidiaries of Trafigura Cadillac Ventures Co Mawson West Ltd. |
| Hilmar Rode | N/A | Consejo Minero de Chile AG Minera Escondida Ltda. Fundación Minera Escondida Centro de Entrenamiento Industrial y Minero – CEIM |
| Sebastião Balbino | N/A | AEMR S.A. Angobetume, Lda Angofret, Lda Angorecycling, Lda DT Agro, Lda DT Fundação DTS Imobiliária, Lda DTS Serviços, Lda Errangol, Lda Freemine, Lda Pumangol Bunkering Pumangol Industrial Pumangol Lda Transfuel, Lda Transpuma, Lda DT Ferrovias, Lda |
| Christopher Eger | N/A | Mawson West |
| Frank Rittner | N/A | N/A |
| Willie Smit | Tenon Engineering | Subsidiaries of ArcelorMittal |
The Company has opted for a "one-tier" governance structure whereby the Board of Directors is the ultimate decision-making body, with the overall responsibility for the management and control of the Company, and is authorised to carry out all actions that are considered necessary or useful to achieve the Company's purpose. The Board of Directors has all powers except for those reserved to the shareholders' meeting by law or the Company's articles of association.
Pursuant to Section 1.1 of the Company's Corporate Governance Charter, the role of the Board of Directors is to pursue the long-term success of the Company by providing entrepreneurial leadership and enabling risks to be assessed and managed. The Board of Directors decides on the Company's values and strategy, its risk appetite and key policies.
The Board of Directors is assisted by a number of Committees to analyse specific issues. The Committees advise the Board of Directors on these issues, but the decision-making remains with the Board of Directors as a whole (see also "—Committees of the Board of Directors" below).
The Board of Directors appoints and removes the Chief Executive Officer. The role of the Chief Executive Officer is to implement the mission, strategy and targets set by the Board of Directors and to assume responsibility for the day-to-day management of the Company. The Chief Executive Officer reports directly to the Board of Directors.
In order to provide a group-wide support structure, the Company has corporate offices in Balen, Belgium and Zurich, Switzerland. These offices provide a number of corporate and support functions including finance, treasury, human resources, safety and environment, legal, tax, information technology, corporate development, investor relations and communications.
Pursuant to the Company's articles of association, the Board of Directors must consist of at least three Directors. The Company's Corporate Governance Charter provides that the composition of the Board of Directors should ensure that decisions are made in the corporate interest. It should be determined on the basis of diversity, as well as complementary skills, experience and knowledge. Pursuant to the Belgian Code on Corporate Governance, at least half of the Directors must be Non-Executive and at least three Directors must be independent in accordance with the criteria set out in the Belgian Companies Code and in the Belgian Code on Corporate Governance. At least one third of the members of the Board of Directors is of the opposite gender.
The Directors are appointed for a term of no more than four years by the general shareholders' meeting. They may be re-elected for a new term. Proposals by the Board of Directors for the appointment or re-election of any Director must be based on a recommendation by the Nomination and Remuneration Committee. In the event the office of a Director becomes vacant, the remaining Directors can appoint a successor temporarily filling the vacancy until the next general shareholders' meeting. The shareholders' meeting can dismiss the Directors at any time.
On 9 November 2015, the Company entered into a Relationship Agreement with Trafigura Group Pte. Ltd., Urion's 100% parent company, to govern Nyrstar's relationship with Trafigura. The Relationship Agreement provides amongst other things that Trafigura will be able to nominate or propose the nomination of such number of Directors to the Company's Board of Directors as it determines, but limited to a number that does not constitute a majority of the Company's Board of Directors (such Directors being "Trafigura Directors"). The Director appointed upon proposal of Trafigura, who is Mr. Martyn Konig, prior to the date of the Relationship Agreement who is an "Independent Director" shall not for these purposes be considered as a Trafigura Director. No Independent Director will be nominated or proposed for nomination unless with the approval of a majority of the Directors other than the Trafigura Directors. On the date of this report, only Christopher Cox and Jesús Fernandez are Trafigura Directors. Furthermore, the Relationship Agreement provides that the attendance quorum for a board meeting includes at least one Independent Director and one Trafigura Director, but if this attendance quorum is not met, a subsequent meeting can be held with the same agenda if at least any two Directors are present. The Relationship Agreement will have effect for as long as Trafigura holds at least 20% or more but less than 50% of the shares in the Company. Trafigura may decide to terminate the Relationship Agreement if the Trafigura Commercial Agreements that it entered into with the Company are terminated by the Company other than due to material breach by Trafigura or the expiry or non-renewal of the agreed upon term.
The Board of Directors elects a Chairman from among its Non-Executive members on the basis of his knowledge, skills, experience and mediation strength. If the Board of Directors envisages appointing a former Chief Executive Officer as Chairman, it should carefully consider the positive and negative aspects in favour of such a decision and disclose why such appointment is in the best interest of the Company. The Chairman is responsible for the leadership and the proper and efficient functioning of the Board of Directors.
The Board of Directors meets whenever the interests of the Company so require or at the request of one or more Directors. In principle, the Board of Directors will meet sufficiently regularly and at least six times per year. The decisions of the Board of Directors are made by a simple majority of the votes cast. The Chairman of the Board of Directors has a casting vote. The Relationship Agreement provides that in case a Trafigura Director is Chairman of the Board of Directors or chairs a meeting of the Board of Directors, he or she shall not have a casting vote.
During 2017, 16 meetings of the Board of Directors were held.
The Board of Directors has set up an Audit Committee, a Nomination and Remuneration Committee and a Health, Safety, Environment and Community Committee.
The Audit Committee consists of at least three Directors. All members of the Audit Committee are Non-Executive Directors. According to the Belgian Companies Code, all members of the Audit Committee must be Non-Executive Directors, and at least one member must be independent within the meaning of article 526ter of the Belgian Companies Code. The current members of the Audit Committee are Anne Fahy (Chairman), Martyn Konig and Jesús Fernandez. The current composition of the Audit Committee complies with the Belgian Code on Corporate Governance which requires that a majority of the members of the Audit Committee are independent.
The members of the Audit Committee must have a collective competence in the business activities of the Company as well as accounting, auditing and finance. The current Chairman of the Audit Committee is competent in accounting and auditing as evidenced by her previous role as Chief Financial Officer of BP's Aviation Fuels business. According to the Board of Directors, the other members of the Audit Committee also satisfy this requirement, as evidenced by the different senior management and Director mandates that they have held in the past and currently hold (see also "—Other mandates").
The role of the Audit Committee is to:
The Audit Committee regularly reports to the Board of Directors on the exercise of its missions, including when preparing the financial statements.
In principle, the Audit Committee meets as frequently as necessary for the efficiency of the operation of the Audit Committee, but at least four times a year. The members of the Audit Committee must have full access to the Chief Financial Officer and to any other employee to whom they may require access in order to carry out their responsibilities.
During 2017, four Audit Committee meetings were held.
The Nomination and Remuneration Committee consists of at least three Directors. All members of the Nomination and Remuneration Committee are Non-Executive Directors. In line with the Belgian Companies Code, the Nomination and Remuneration Committee consists of a majority of Independent Directors. The Nomination and Remuneration Committee is chaired by the Chairman of the Board of Directors or another Non-Executive Director appointed by the Committee. The following Directors are currently members of the Nomination and Remuneration Committee: Martyn Konig (Chairman), Carole Cable, Anne Fahy and Jesús Fernandez. Pursuant to the Belgian Companies Code, the Nomination and Remuneration Committee must have the necessary expertise on remuneration policy, which is evidenced by the experience and previous roles of its current members. The Chief Executive Officer participates to the meetings of the Nomination and Remuneration Committee in an advisory capacity each time the remuneration of another member of the Management Committee is being discussed.
The role of the Nomination and Remuneration Committee is to make recommendations to the Board of Directors with regard to the appointment of Directors, make proposals to the Board of Directors on the remuneration policy and individual remuneration for Directors and members of the Management Committee and to submit a remuneration report to the Board of Directors. In addition, the Nomination and Remuneration Committee each year submits the remuneration report to the annual general shareholders' meeting.
In principle, the Nomination and Remuneration Committee meets as frequently as necessary for the efficiency of the operation of the Committee, but at least twice a year.
During 2017, four Nomination and Remuneration Committee meetings were held.
The Health, Safety, Environment and Community Committee consists of at least three Directors. All members of the Health, Safety, Environment and Community Committee are Non-Executive Directors, with at least one Independent Director. The Health, Safety, Environment and Community Committee is chaired by the Chairman of the Board of Directors or another Non-Executive Director appointed by the Committee. The current members of the Health, Safety, Environment and Community Committee are Christopher Cox (Chairman), Carole Cable and Jesús Fernandez.
The role of the Health, Safety, Environment and Community Committee is to assist the Board of Directors in respect of health, safety, environment and community matters. In particular, its role is to ensure that the Company adopts and maintains appropriate health, safety, environment and community policies and procedures, as well as effective health, safety, environment and community internal control and risk management systems, and to make appropriate recommendations to the Board of Directors.
In principle, the Health, Safety, Environment and Community Committee meets as frequently as necessary for the efficiency of the operation of the Committee, but at least twice a year.
During 2017, three Health, Safety, Environment and Community Committee meetings were held.
The table summarises the attendance of meetings of the Board of Directors and the respective committees of the Board of Directors by their members in person or by conference call. It does not take into account attendance via representation by proxy.
| NAME | BOARD MEETING ATTENDED | AUDIT | NOMINATION AND REMUNERATION |
HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY |
|---|---|---|---|---|
| Carole Cable | 14 of 16 | N/A | 4 of 4 | 3 of 3 |
| Christopher Cox | 14 of 16 | N/A | N/A | 3 of 3 |
| Martyn Konig | 14 of 16 | 4 of 4 | 4 of 4 | N/A |
| Anne Fahy | 16 of 16 | 4 of 4 | 4 of 4 | N/A |
| Jesús Fernandez | 11 of 16 | 4 of 4 | 4 of 4 | 3 of 3 |
| Hilmar Rode | 16 of 16 | 4 of 4 | 4 of 4 | 3 of 3 |
The topics discussed at the Board and Committee Meetings are in line with the role and responsibilities of the Board and its Committees as set out in the Corporate Governance Charter, such as for example, the determination of the Company's principal objectives and strategy and the approval of all major investments, divestments, business plans and annual budgets.
A Director will only qualify as an Independent Director if he or she meets at least the criteria set out in Article 526ter of the Belgian Companies Code, which can be summarised as follows:
The resolution appointing the Director must mention the reasons on the basis of which the capacity of Independent Director is granted.
In the absence of guidance in the law or case law, the Board of Directors has not further quantified or specified the aforementioned criteria set out in Article 526ter of the Belgian Companies Code. The Company discloses in its annual report which Directors are Independent Directors. An Independent Director who ceases to satisfy the requirements of independence must immediately inform the Board of Directors.
The shareholders meeting of the Company has appointed Martyn Konig, Carole Cable and Anne Fahy as Independent Directors.
The Relationship Agreement between the Company and Trafigura provides that the proposal for appointment of any new Independent Director requires the approval of a majority of the Directors other than the Trafigura Directors, it being understood however, that the Relationship Agreement in no way restricts the Trafigura group as shareholder to vote in favour of or against any proposed Independent Directors. See also "—Board of Directors".
The Board of Directors evaluates its own size, composition, performance and interaction with executive management and that of its Committees on a continuous basis.
The evaluation assesses how the Board and its Committees operate, checks that important issues are effectively prepared and discussed, evaluate each Director's contribution and constructive involvement, and assesses the present composition of the Board and its Committees against the desired composition. This evaluation takes into account the members' general role as Director, and specific roles as Chairman, Chairman or member of a Board Committee, as well as their relevant responsibilities and time commitment.
Non-Executive Directors assess their interaction with the Executive Management on a continuous basis.
The Company's Executive Management is composed of the Chief Executive Officer and the other members of the Management Committee, as detailed above in "—Management Committee".
The Chief Executive Officer is a member of the Board. He leads and chairs the Management Committee and is accountable to the Board of Directors for the Management Committee's performance.
The role of the Chief Executive Officer is to implement the mission, strategy and targets set by the Board of Directors and to assume responsibility for the day-to-day management of the Company. The Chief Executive Officer reports directly to the Board of Directors.
The Board of Directors has delegated the day-to-day management of the Company as well as certain management and operational powers to the Chief Executive Officer. The Chief Executive Officer is assisted by the Management Committee.
The Management Committee is composed of at least four members and includes the Chief Executive Officer. Its members are appointed by the Board of Directors on the basis of a recommendation by the Nomination and Remuneration Committee. The Company's Management Committee does not qualify as a "directiecomité"/"comité de direction" within the meaning of Article 524bis of the Belgian Companies Code. The Management Committee is responsible and accountable to the Board of Directors for the discharge of its responsibilities.
The Management Committee is responsible for assisting the Chief Executive Officer in relation to:
Directors are expected to arrange their personal and business affairs so as to avoid conflicts of interest with the Company. Any Director with a conflicting financial interest (as contemplated by Article 523 of the Belgian Companies Code) on any matter before the Board of Directors must bring it to the attention of both the Statutory Auditor and fellow Directors, and take no part in any deliberations or voting related thereto.
Section 1.4 of the Corporate Governance Charter sets out the procedure for transactions and other contractual relationships between Nyrstar, on the one hand, and the Directors or related parties of Directors, on the other hand, irrespective of whether or not falling within the scope of the legal provisions on conflicts of interest with Directors or related parties of Nyrstar. Notably, such transactions or contractual relationships can only be entered into at market conditions, and the Director concerned may only participate in the deliberation and decision-making process with regard to such transactions or contractual relationships if the Board of Directors votes to request or permit such participation and if permitted by law. Furthermore, if a Director believes that such a conflict arises in respect of any material decision, operation or transaction, he or she must see to it that the Board of Directors is fully informed at the start of the meeting of the potential or perceived conflict of interest. Where applicable, the rules and procedures of articles 523 or 524 of the Belgian Companies Code need to be complied with. For the purpose of the aforementioned rules, the following entities will qualify as a "related party" of a Director: (a) a legal entity in which the Director acts as a Director, as a Senior Executive or in a similar capacity, and (b) a legal entity that is directly or indirectly under the control of the Director concerned.
Section 3.2.4 of the Corporate Governance Charter contains a separate procedure for transactions between Nyrstar and members of the Management Committee (other than the Chief Executive Officer). Notably, any transaction or other contractual relationship between Nyrstar, on the one hand, and any member of the Management Committee or a related party of such Management Committee member, on the other hand, requires the prior approval of the CEO, which needs to be fully informed by the Management Committee member concerned of the terms and conditions of the transaction or contractual relationship, as well as of the corresponding interest of Nyrstar. Such transaction or contractual relationship can only be entered into at market conditions. For the purpose of the aforementioned rules, the following entities will qualify as a "related party" of a Management Committee member: (a) a legal entity in which the Management Committee member acts as a Director, as a Senior Executive or in a similar capacity, and (b) a legal entity that is directly or indirectly under the control of the Management Committee member.
There are no outstanding loans granted by the Company to any of the persons mentioned in "—Board of Directors" and in "—Management Committee", nor are there any guarantees provided by the Company for the benefit of any of the persons mentioned in "—Board of Directors" and in "—Management Committee".
None of the persons mentioned in "—Board of Directors" and in "—Management Committee" has a family relationship with any other of the persons mentioned in "—Board of Directors" and in "—Management Committee".
With a view to preventing market abuse (insider dealing and market manipulation), the Board of Directors has established a dealing code. The dealing code describes the declaration and conduct obligations of Directors, members of the Management Committee, certain other employees and certain other persons with respect to transactions in shares or other financial instruments of the Company. The dealing code sets limits on carrying out transactions in shares of the Company and allows dealing by the above-mentioned persons only during certain windows. A copy of the dealing code is available on the Company's website.
As a Belgian listed company and with a view to ensuring investors in shares of the Company have available all information necessary to ensure the transparency, integrity and good functioning of the market, the Board of Directors has established an information disclosure policy. The information disclosure policy is aimed at ensuring that inside information of which the Company is aware is immediately disclosed to the public. In addition, the information disclosure policy is aimed at ensuring information that is disclosed is fair, precise and sincere, and will enable the holders of shares in the Company and the public to assess the influence of the information on the Company's position, business and results.
The Nyrstar Board of Directors is responsible for the assessment of the effectiveness of Nyrstar's Risk Management Framework and internal controls. The Company takes a proactive approach to risk management. The Board of Directors is responsible for ensuring that nature and extent of risks are identified on a timely basis with alignment to the Group's strategic objectives and activities.
The Audit Committee plays a key role in monitoring the effectiveness of the Risk Management Framework and is an important medium for bringing risks to the attention of the Board of Directors. If a critical risk or issue is identified by the Board or Management, it may be appropriate for all Directors to be a part of the relevant risk management process, and as such the Board of Directors will convene a sub-committee comprised of a mix of members Board of Directors and Senior Management. Each respective sub-committee further examines issues identified and reports back to the Board of Directors.
The Company's Risk Management Framework requires regular evaluation of the effectiveness of internal controls to ensure the Group's risks are being adequately managed. The Risk Management Framework is designed to achieving the Company's objectives. The Company acknowledges that risk is not just about losses and harm. Risk can have positive consequences too.
Effective risk management enables the Company to achieve an appropriate balance between realising opportunities while minimising adverse impacts.
This section gives an overview of the main features of the Company's internal control and risk management systems, in accordance with the Belgian Corporate Governance Code and the Belgian Companies Code.
The Risk Management Framework is integrated in the management process and focuses on the following key principles.
The key elements of Risk Management Framework are:
1 Understanding the External and Internal Environment
Understanding the internal and external business environment and the effect this has on Nyrstar's business strategy and plans. This informs the Company's overall tolerance to risk.
2 Consistent Methods for Risk Identification and Analysis of Risks, Existing Controls and Control Effectiveness
Implementing systems and processes for the consistent identification and analysis of risks, existing controls and control effectiveness. Evaluating whether the level of risk being accepted is consistent with levels of risk acceptable to the Audit Committee.
Regularly monitoring and reviewing our risk management framework, our risks and control effectiveness.
The guideline for the Risk Management Framework has been written to comply with ISO 31000; 2009. Compliance with the guideline is mandatory within Nyrstar.
The following is a summary of Nyrstar's critical internal controls:
There is a sound organizational structure with clear procedures, delegation and accountabilities for both the business side and the support and control functions, such as human resources, legal, finance, internal audit, etc.
The organizational structure is monitored on an ongoing basis, e.g. through benchmarking the organizational structure with industry standards and competitors. Responsibilities are delegated to business units, by business plans and accompanying budgets approved by management and the Board of Directors within set authorization levels.
The Company has established internal policies and procedures to manage various risks across the Group. These policies and procedures are available on the Company's intranet, and distributed for application across the whole Group. Every policy has an owner, who periodically reviews and updates if necessary.
The Board of Directors has approved a Corporate Governance Charter and a Code of Business Conduct, including a framework for ethical decision making. All employees must perform their daily activities and their business objectives according to the strictest ethical standards and principles. The Code of Business Conduct is available on Nyrstar's website (www.nyrstar.com) and sets out principles how to conduct business and behave in respect of:
The Board of Directors regularly monitors compliance with applicable policies and procedures of the Group.
Nyrstar also has a whistleblower procedure in place, allowing staff to confidentially raise concerns about any irregularities in financial reporting, possible fraudulent actions, bribery and other areas.
Nyrstar is ISO 9001 certified for the smelting and refining of zinc and zinc alloys, lead and lead alloys, silver, gold and other by-products. All of its major processes and the controls that they encompass are formalized and published on the Company's intranet.
Nyrstar applies a comprehensive Group standard for financial reporting. The standard is in accordance with applicable International Accounting Standards. These include International Financial Reporting Standards (IFRS) and the related interpretations issued by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC) as adopted by the European Union. The effectiveness and compliance with the Group standard for financial reporting is consistently reviewed and monitored by the Audit Committee.
In order to ensure adequate financial planning and follow up, a financial budgeting procedure describing the planning, quantification, the implementation and the review of the budget in alignment with forecasts, is closely followed. Nyrstar conducts Group wide budgeting process, which is centrally coordinated and consists of the following steps:
Various Management Committees are established as a control to manage various risks Nyrstar is exposed to:
The Treasury Committee comprises the Chief Financial Officer, the Group Treasurer and the Group Controller. The role of the Treasury Committee is to recommend to the Chief Executive Officer and to the Board of Directors amendments to the treasury policy. This considers all treasury transactions being reviewed before they are recommended to the Chief Executive Officer for review and approval by the Board of Directors.
The Treasury Committee meets at least quarterly.
The Metal Price Risk Committee comprises the Chief Financial Officer, the Group Treasurer, the Group Controller and the Group Manager Financial Planning & Analysis. Nyrstar's Metal Price Risk Committee establishes policies and procedures how Nyrstar manages its exposure to the commodity prices and foreign exchange rates.
The Group's performance against plan is monitored internally and relevant action is taken throughout the year. This includes, weekly and monthly reporting of key performance indicators for the current period together with information on critical risk areas.
Comprehensive monthly Board reports that include detailed consolidated management accounts for the period together with an executive summary from the Chief Financial Officer are prepared and circulated to the Board of Directors by the Company Secretary on a monthly basis.
Management is responsible for evaluating existing controls and the control effectiveness and determines whether the level of risk being accepted is consistent with the level of risk approved by the Board of Directors. Management takes action where it is determined
that the Company is being exposed to unacceptable levels of risk and actively encourages all Nyrstar employees to communicate freely risks and opportunities identified.
Internal audit is an important element in the overall process of evaluating the effectiveness of the Risk Management Framework and internal controls. The internal audits are based on risk based plans, approved by the Audit Committee. The internal audit findings are presented to the Audit Committee and management, identifying areas of improvement. Progress of implementation of the actions is monitored by the Audit Committee on a regular basis. The Group internal audit function is managed internally. The Audit Committee supervises the internal audit function.
The Board of Directors pays specific attention to the oversight of risk and internal controls. On a yearly basis, the Board of Directors reviews the effectiveness of the Group's risk management and internal controls. The Audit Committee assists the Board of Directors in this assessment. The Audit Committee also reviews the declarations relating to internal supervision and risk management included in the annual report of the Company. The Audit Committee reviews the specific arrangements to enable staff to express concerns in confidence about any irregularities in financial reporting and other areas e.g., whistleblower arrangements.
To support the protocols described above, both internal resources and external contractors are engaged to perform compliance checks, and reports are provided to the Audit Committee.
The Company is committed to the ongoing review and improvement of its policies, systems and processes.
The Company has a wide shareholder base, mainly composed of institutional investors in the United Kingdom, the United States, Belgium and other European countries, but also comprising Belgian retail investors. The free float of the Company as at 31 December 2017 was 72.71%.
The table below provides an overview of the shareholders that notified the Company pursuant to applicable transparency disclosure rules, up to the date of this report. Although the applicable transparency disclosure rules require that a disclosure be made by each person passing or falling under one of the relevant thresholds, it is possible that the information below in relation to a shareholder is no longer up-to-date.
| Date of Notification | % of the voting rights attached to shares before dilution(1) |
% of the voting rights attached to shares on a fully diluted basis(2) |
|
|---|---|---|---|
| Urion Holdings (Malta) Ltd. (3) | — | 24.61% | 21.92% |
(1) The percentage of voting rights is calculated on the basis of the 109,033,545 outstanding shares, taking into account the share subscription by Urion Holdings (Malta) Ltd. in the accelerated book build that was completed in November 2017 whereby Nyrstar issued 15,384,616 new shares. The calculation does not take into account the number of shares issuable upon conversion of the 2018 Convertible Bonds and the 2022 Convertible Bonds. For further information on the number of shares issuable upon conversion of the 2018 Convertible Bonds and 2022 Convertible Bonds, see "—Share Capital and Shares" on next page.
(2) The percentage of voting rights is calculated on the basis of 122,578,530 outstanding shares, assuming that all 2018 Convertible Bonds have been converted into 1,362,782 new shares at a conversion price of EUR 21.28 per share, and all 2022 Convertible Bonds have been converted into 12,182,203 new shares at a conversion price of € 9.44 per share. For further information on the number of shares issuable upon conversion of the 2018 Convertible Bonds and 2022 Convertible Bonds, see "—Share Capital and Shares" on next page.
(3) Urion Holdings (Malta) Ltd. is an indirect subsidiary of Trafigura Group Pte. Ltd. and is ultimately controlled by Farringford N.V. According to the latest available information received by the Company, at 31 December 2017 Urion held 26,830,622 shares representing 24.61% of the voting rights.
No other shareholders, alone or in concert with other shareholders, notified the Company of a participation or an agreement to act in concert in relation to 3% or more of the current total existing voting rights attached to the voting securities of the Company.
On the date of this report, the share capital of the Company amounts to EUR 113,262,734.08 and is fully paid-up. It is represented by 109,033,545 ordinary shares, each representing a fractional value of (rounded) EUR 1.04 and representing one 109,033,545th of the share capital. The Company's shares do not have a nominal value.
On 25 September 2013, the Company issued 4.25% senior unsecured convertible bonds due 2018 (the "2018 Convertible Bonds") for an aggregate principal amount of EUR 120,000,000. The possibility to convert the 2018 Convertible Bonds into new shares of the Company was approved by the extraordinary general shareholders' meeting of the Company held on 23 December 2013. The 2018 Convertible Bonds can be converted into new or existing shares of the Company at any time. During the course of 2017 Nyrstar conducted two buybacks of the 2018 Convertible Bonds.
To date, EUR 29 million of the 2018 Convertible Bonds remain outstanding with third parties. The conversion price of the 2018 Convertible Bonds can be adjusted downwards in a number of circumstances, including in the event of an issue of new shares, whereby the new shares are issued at a price that is lower than the applicable market price of the Company's shares at the time of the issue. The current conversion price of the 2018 Convertible Bonds (which is subject to adjustment under clause 5(b) of the terms and conditions of the 2018 Convertible Bonds) is EUR 21.63 per share. Based on a conversion price of EUR 21.63 per share, if all 2018 Convertible Bonds were converted into new shares in their entirety, 5,547,850 new shares would be issued. If the conversion price is adjusted downwards, this would lead to the issuance of more than 5,547,850 new shares if all of the 2018 Convertible Bonds were to be converted in their entirety.
On 11 July 2016, Nyrstar issued 5% senior guaranteed unsecured convertible bonds due 2022 (the "2022 Convertible Bonds") for an aggregate principal amount of EUR 115,000,000. The possibility to convert the 2022 Convertible Bonds into new shares of the Company was approved by the extraordinary general shareholders' meeting of the Company held on 17 November 2016. The 2022 Convertible Bonds can be converted into new or existing shares of the Company at any time. To date, none of the 2022 Convertible Bonds have been converted, and all remain outstanding. The conversion price of the 2022 Convertible Bonds can be adjusted downwards in a number of circumstances, including in the event of an issue of new shares, whereby the new shares are issued at a price that is lower than the applicable market price of the Company's shares at the time of the issue. The current conversion price of the 2022 Convertible Bonds (which is subject to adjustment under clause 5(b) of the terms and conditions of the 2022 Convertible Bonds) is EUR 9.60 per share. Based on a conversion price of EUR 9.60 per share, if all 2022 Convertible Bonds were converted into new shares in their entirety, 11,979,166 new shares would be issued. If the conversion price is adjusted downwards, this would lead to the issuance of more than 11,979,166 new shares if all of the 2022 Convertible Bonds were to be converted in their entirety.
On 14 November 2017, Nyrstar raised EUR 100 million through the issuance of 15,384,616 new shares with institutional investors and such other investors as permitted under applicable private placement exemptions at a price of EUR 6.50 per share.
The shares of the Company can take the form of registered shares and dematerialized shares. All the Company's shares are fully paidup and are freely transferable.
The Company's shares do not have a nominal value, but reflect the same fraction of the Company's share capital, which is denominated in euro.
Each shareholder of the Company is entitled to one vote per share. Shareholders may vote by proxy, subject to the rules described in the Company's articles of association.
Voting rights can be mainly suspended in relation to shares:
Pursuant to the Belgian Companies Code, the voting rights attached to shares owned by the Company are suspended.
All shares are entitled to an equal right to participate in the Company's profits (if any). Pursuant to the Belgian Companies Code, the shareholders can in principle decide on the distribution of profits with a simple majority vote at the occasion of the annual shareholders' meeting, based on the most recent statutory audited financial statements, prepared in accordance with the generally accepted accounting principles in Belgium and based on a (non-binding) proposal of the Company's Board of Directors. The Company's articles of association also authorise the Board of Directors to declare interim dividends subject to the terms and conditions of the Belgian Companies Code.
The Company's ability to distribute dividends is subject to availability of sufficient distributable profits as defined under Belgian law on the basis of the Company's statutory unconsolidated financial statements rather than its consolidated financial statements. In particular dividends can only be distributed if following the declaration and issuance of the dividends the amount of the Company's net assets on the date of the closing of the last financial year as follows from the statutory (non-consolidated) financial statements (i.e., summarized, the amount of the assets as shown in the balance sheet, decreased with provisions and liabilities, all as summarized in accordance with Belgian accounting rules), decreased with the non-amortized costs of incorporation and extension and the nonamortized costs for research and development, does not fall below the amount of the paid-up capital (or, if higher, the issued capital), increased with the amount of non-distributable reserves. In addition, prior to distributing dividends, 5% of the net profits must be allotted to a legal reserve, until the legal reserve amounts to 10% of the Company's share capital. The Company's legal reserve currently meets this requirement.
The Board of Directors have taken the decision not to propose to shareholders a distribution for the financial year 2017. This reflects the Board's commitment to maintain a sustainable capital structure.
The diversity in our Board is in line with the provisions of law and the Company is currently working on a diversity policy for NMC and Senior Management.
The Company provides the following information in accordance with Article 34 of the Royal Decree dated 14 November 2007:
(viii) The powers of the Board of Directors, more specifically with regard to the power to issue or redeem shares are set out in the Company's articles of association. The Board of Directors was not granted the authorization to purchase its own shares "to avoid imminent and serious danger to the Company" (i.e., to defend against public takeover bids). The Company's articles of association of association do not provide for any other specific protective mechanisms against public takeover bids.
(ix) At the date of the report, the Company is a party to the following significant agreements which, upon a change of control of the Company or following a takeover bid can enter into force or, subject to certain conditions, as the case may be, can be amended, be terminated by the other parties thereto or give the other parties thereto (or beneficial holders with respect to bonds) a right to an accelerated repayment of outstanding debt obligations of the Company under such agreements:
No takeover bid has been instigated by third parties in respect of the Company's equity during the previous financial year and the current financial year.
The Annual General Meeting of Shareholders will take place in Brussels (Bluepoint, A. Reyerslaan 80, 1030 Brussels) on the third Thursday of April, i.e. 19 April 2018 at 10.30 am. At this meeting shareholders will be asked to consider and, where applicable, approve amongst others the following matters:
Other proposed resolutions may be added to the agenda.
On 19 April 2018, the Annual General Meeting shall be shortly suspended in order to be continued as an Extraordinary General Meeting before a Notary Public. At this meeting the shareholders will be asked to consider and, where applicable, approve amongst others the following matters:
The Company prepares a remuneration report relating to the remuneration of the Directors and the members of the Management Committee. This remuneration report is part of the Corporate Governance Statement, which is a part of the Annual Report. The remuneration report will be submitted to the annual general shareholders' meeting on 19 April 2018 for approval.
Nyrstar's remuneration policy is designed to:
Nyrstar obtains independent advice from external professionals to ensure the remuneration structure represents industry best practice, and achieves the twin goals of retaining talented employees and meeting shareholder expectations.
The remuneration policy that has been determined in relation to the Directors and members of the Management Committee is further described below.
While there are no plans to amend the remuneration policy and remuneration over the next two years, the remuneration policy and remuneration is reviewed from time to time and monitored to be in line with market practice. In addition, the Board of Directors will submit proposals to the general shareholders' meeting to be held on 19 April 2018 to (i) remunerate certain Non-Executive Directors in whole or partly in deferred share units instead of cash and to (ii) renew the powers of the Board of Directors to pay out entitlements to beneficiaries (including members of the Management Committee and Directors, where applicable) under the Annual Incetive Plan (AIP) in the form of shares instead of cash.
Upon recommendation and proposal of the Nomination and Remuneration Committee, the Board of Directors determines the remuneration of the Directors to be proposed to the general shareholders' meeting.
The proposed remuneration that the Board of Directors submits to the general shareholders' meeting is in principle benchmarked against the remuneration of similar positions in companies included in the Bel20® Index. The Bel20® Index is an index composed of the 20 companies with the highest free float market capitalization having shares trading on the continuous trading segment of the regulated market of Euronext Brussels. The remuneration is set to attract, retain and motivate Directors who have the profile determined by the Nomination and Remuneration Committee.
Pursuant to Belgian law, the general shareholders' meeting approves the remuneration of the Directors, including inter alia, each time as relevant, (i) in relation to the remuneration of Executive and Non-Executive Directors, the exemption from the rule that share based awards can only vest after a period of at least three years as of the grant of the awards; (ii) in relation to the remuneration of Executive Directors, the exemption from the rule that (unless the variable remuneration is less than a quarter of the annual remuneration) at least one quarter of the variable remuneration must be based on performance criteria that have been determined in advance and that can be measured objectively over a period of at least two years and that at least another quarter of the variable remuneration must be based on performance criteria that have been determined in advance and that can be measured objectively over a period of at least three years; (iii) in relation to the remuneration of Non-Executive Directors, any variable part of the remuneration; and (iv) any provision of service agreements to be entered into with Executive Directors providing for severance payments exceeding twelve months' remuneration (or, subject to a motivated opinion by the Nomination and Remuneration Committee, eighteen months' remuneration). The general shareholders' meeting of the Company has not approved any of the matters referred to in paragraphs (i) to (iv) with respect to the remuneration of the Directors of the Company, except that the annual general shareholders' meeting held on 20 April 2017 approved a deviation from the principles referred to in paragraphs (i) and (iii) with respect to the remuneration of certain Non-Executive Directors in deferred shares units instead of cash (see also below). The Board of Directors is seeking a similar approval by the general shareholders' meeting to be held on 19 April 2018.
The Directors of the Company (excluding the Chief Executive Officer) receive a fixed remuneration in consideration for their membership of the Board of Directors. In addition, the Directors (excluding the Chief Executive Officer) receive fixed fees for their membership and/ or Chairmanship of any Board Committees. No attendance fees are paid. The Chief Executive Officer is also a member of the Board but he does not receive any additional remuneration in his capacity of Board member.
Non-Executive Directors do not receive any performance related remuneration. The remuneration of Non-Executive Directors takes into account their general role as Director, and specific roles as Chairman, Chairman or member of a Board Committee, as well as their relevant responsibilities and time commitment and is set as follows:
The Board believes that granting the Non-Executive Directors the opportunity to be remunerated in whole or in part in deferred shares of the Company rather than in cash enables the Non-Executive Directors to link their effective remuneration to the future performance of Nyrstar and to strengthen the alignment of their interest with the interest of the Company's shareholders. In view hereof, the Board received on 20 April 2017 the approval of the general shareholders' meeting to have the option to remunerate certain Directors fully or partly in deferred share units, and not in cash.
On 20 April 2017, the general shareholders' meeting approved that each of the Non-Executive Directors referred to below (the "Eligible Directors") will be remunerated for his or her Director's mandate for the period as of this general shareholders' meeting until the annual general shareholders' meeting of 2018 in the form of "deferred share units" of the Company, and not in cash, subject to the conditions set out below. The remuneration in shares is for each Eligible Director limited to the portion set out next to his or her name below (the "Eligible Share Remuneration") of the aggregate remuneration that applies to the Director's mandate of the relevant Eligible Director in accordance with the principles that have been determined by the annual general shareholders' meeting of the Company held on 27 April 2011 and that otherwise would have been payable in cash (the "Eligible Remuneration"). The shares will not vest immediately, but will effectively vest and be delivered on the earlier of (i) the end of the Director's mandate of the Eligible Director, or (ii) a change of control over the Company. The shares are granted for free (i.e. for no additional consideration). The number of shares to be granted to an Eligible Director shall be equal to (i) the amount of the Eligible Share Remuneration that would otherwise have been paid in cash (save for this decision by the general shareholders' meeting), divided by (ii) the average closing price of the Company's shares during the ten trading days preceding the date of this general shareholders' meeting, whereby the result is rounded down to the nearest whole number. The Eligible Directors and their respective Eligible Share Remuneration that will be payable in deferred shares are as follows: (i) Ms. Anne Fahy: EUR 10,000 of her Eligible Remuneration; (ii) Ms. Carole Cable: 50% of her Eligible Remuneration; (iii) Mr. Martyn Konig: 100% of his Eligible Remuneration; and (iv) Mr. Christopher Cox: 100% of his Eligible Remuneration. The general shareholders' meeting approved that the shares can be definitively and fully acquired by an Eligible Director prior to the end of the third year referred to in Article 520ter of the Belgian Companies Code. The general shareholders' meeting also approved, as far as needed and applicable in accordance with Article 556 of the Belgian Companies Code, that the shares can be delivered upon the occurrence of a change of control over the Company. As far as needed and applicable, the general shareholders' meeting acknowledged that the shares shall not be considered as "variable remuneration" pursuant to Article 554, seventh paragraph, of the Belgian Companies Code and Provision 7.7 of the Belgian Corporate Governance Code of 12 March 2009. The Company's Nomination and Remuneration Committee was authorised to further document the grant and to determine the terms and conditions of the grant, which contain customary adjustment clauses to take into account and mitigate the effect of corporate actions, dilutive transactions and similar events, such as (but not limited to) stock splits, reverse stock splits, mergers and de-mergers, dividend payments, other distributions on shares, rights offerings, and share buy-backs.
The Board of Directors intends to submit a similar resolution for approval by the general shareholders' meeting on 19 April 2018.
The annual shareholders' meeting dated 20 April 2017 approved to remunerate the mandate of certain Non-Executive Directors for the period as of the 2017 annual meeting until the 2018 annual meeting in whole or in part in deferred share units.
During 2017 the following gross remuneration was paid to the directors (excluding the CEO):
| REMUNERATION COST (EUR) | PAID IN CASH | PAID IN DEFERRED SHARES | |
|---|---|---|---|
| Martyn Konig | 200,000 | - | 37,282 |
| Carole Cable | 70,000 | 34,993 | 6,524 |
| Christopher Cox | 70,000 | - | 13,049 |
| Jesús Fernandez | 80,000 | 80,000 | - |
| Anne Fahy | 90,000 | 90,000 | 1,864 |
The remuneration of the Chief Executive Officer and the other members of the Management Committee is based on recommendations made by the Nomination and Remuneration Committee. The Chief Executive Officer participates to the meetings of the Nomination and Remuneration Committee in an advisory capacity each time the remuneration of another member of the Management Committee is being discussed.
The remuneration is determined by the Board of Directors. As an exception to the foregoing rule, pursuant to Belgian law the general shareholders' meeting must approve, as relevant: (i) in relation to the remuneration of members of the Management Committee and other executives, an exemption from the rule that share based awards can only vest after a period of at least three years as of the grant of the awards; (ii) in relation to the remuneration of members of the Management Committee and other Executives, an exemption from the rule that (unless the variable remuneration is less than a quarter of the annual remuneration) at least one quarter of the variable remuneration must be based on performance criteria that have been determined in advance and that can be measured objectively over a period of at least two years and that at least another quarter of the variable remuneration must be based on performance criteria that have been determined in advance and that can be measured objectively over a period of at least three years; and (iii) any provisions of service agreements to be entered into with members of the Management Committee and other Executives providing (as the case may be) for severance payments exceeding twelve months' remuneration (or, subject to a motivated opinion by the Nomination and Remuneration Committee, eighteen months' remuneration). The general shareholders' meeting of the Company has not approved any of the matters referred to in paragraphs (i) to (iii) with respect to the outstanding remuneration of the members of the Management Committee of the Company, except that in previous years, the approval by the general shareholders' meeting was obtained with respect to:
An appropriate portion of the remuneration is linked to corporate and individual performance. The remuneration is set to attract, retain and motivate Executive Management who have the profile determined by the Nomination and Remuneration Committee.
The remuneration of the Executive Management consists of the following main remuneration components:
The Board of Directors intends to submit a proposal to the general shareholders' meeting to be held on 19 April 2018 to renew the powers of the Board of Directors to pay out entitlements to beneficiaries (including members of the Management committee and directors, where applicable) under the AIP in the form of Shares of the Company instead of cash.
In 2017, two new members were appointed to the Management Committee and two members left.
The respective elements of the remuneration package are further described below. There is no provision for claw back of variable remuneration due to incorrect financial information.
The Annual Base Salary constitutes a fixed remuneration. The reference base salary structures are determined with the support of external market data and analysis of economic trends for the different countries. Included in this analysis are the base salaries for various job descriptions paid by a group of peer companies of Nyrstar in several countries. On the basis of this survey, a number of grades are determined. The midpoint for each grade is the 50% percentile to reflect an optimal alignment with the market.
Nyrstar's policy is to pay senior staff members at 100% of the midpoint for their grade, subject to continued above average performance. However, there is discretion to set the fixed remuneration between 80% and 120% of the midpoint, based on experience, job, location, industry demand, unique technical skills, performance, etc.
The annual incentive is a variable part of the remuneration in function of individual performance below, at or above average standard during a given year. The terms and conditions are reflected in the Annual Incentive Plan (AIP), which is subject to revision on an annual basis.
The AIP aims to attract and retain talented employees, to make a connection between performance and reward, to reward achievement in line with Nyrstar's financial success, to reward employees for adhering to the Nyrstar's values, and to reward employees in a similar manner to the Company's shareholders.
The AIP is designed around delivering and exceeding the Nyrstar annual plan and budget. The relevant performance year for eligibility under the AIP is 1 January to 31 December, and payments, if any, are usually made in March of the following year.
In order to be eligible under the AIP, the beneficiary must be employed on 31 December of the relevant performance year. The respective criteria and their relative weight to determine eligibility under the AIP are:
Every year, the Board of Directors revises and approves the performance criteria both for Nyrstar on a group level and the members of the Management Committee.
The AIP performance criteria for the members of the Management Committee includes:
The incentive under the AIP only becomes available if Nyrstar meets the performance threshold as approved by the Board in the beginning of the performance year.
The eligibility under the AIP is assessed and determined by the Nomination and Remuneration Committee, and any payment of the annual incentive is subject to final Board approval.
For further information on the AIP and other share plans, please see "Description of Share Plans".
The members of the Management Committee participate in a pension scheme. The contributions by Nyrstar to the pension scheme amount to 20% of the Annual Base Salary (capped at a maximum annual base salary of CHF 846'000).
The Management Committee members participate in a medical benefit plan that includes amongst other things private hospital and dental medical care. They also receive a representation allowance, a car allowance and benefit from statutory accident and health insurance. In addition, some Management Committee members receive housing assistance and dependent schooling support.
The following remuneration and compensation other than share based awards that are mentioned further was paid to the Chief Executive Officer and other members of the Management Committee in 2017:
| CHIEF EXECUTIVE OFFICER(6) (EUR) |
MEMBERS OF THE MANAGEMENT COMMITTEE OTHER THAN THE CHIEF EXECUTIVE OFFICER (ON AN AGGREGATE BASIS) (EUR) |
|
|---|---|---|
| Annual Base Salary | 899,361 | 2,052,669 |
| Incentives (1) | — | 358,629 |
| Pension Benefits (2) | 162,317 | 438,016 |
| LTIP (Cash Payment) (3) | — | 182,956 |
| Other Components of the Remuneration (4) | 62,174 | 611,087 |
| Severance Payments (5) | — | 1,593,312 |
| Total | 1,123,852 | 5,236,668 |
The members of the Management Committee did not receive an annual incentive payment pertaining to the previous year's performance, with the exception of Sebastião Balbino and Chris Eger.
Includes a contribution of up to 20% of reported Annual Base Salary (capped at a maximum salary of CHF 846'000) as savings contributions as well as risks contributions.
The settlement of the three year long term incentive plan vesting in December 2016 was settled in cash during 2017.
Includes representation allowance, car allowance (also where exists car benefit), housing (net), health insurance (net), and schooling support.
During 2017 severance payments were made to Bill Scotting (€ 1'349'042), calculated in line with the 12 months annual base salary and to John Galassini (€ 244'269) as negotiated.
This refers to Hilmar Rode only.
Each member of the Management Committee is entitled to a severance payment equivalent to twelve months of Annual Base Salary (inclusive of any contractual notice period) in case of termination of his agreement by Nyrstar. In addition, the agreement with the Chief Executive Officer provides that upon a change of control, his agreement with Nyrstar will be terminated. In that event, the Chief Executive Officer is entitled to a severance payment equivalent to twelve months of Annual Base Salary (inclusive of any contractual notice period). The above applies to all current and former members of the Management Committee and current and former Chief Executive Officers.
As permitted by the Company's articles of association, the Company has entered into a customary liability indemnification arrangements with the Directors and relevant members of the Management Committee and has implemented Directors' and Officers' insurance coverage.
In 2017, the Company had a Long Term Incentive Plan (LTIP) with a view to align shareholder and senior management objectives as well as attracting, retaining and motivating the employees and Executive Management of the Company and its wholly owned subsidiaries.
The key terms of the LTIP are described below. For further information on the manner in which awards under the LTIP are treated in Nyrstar's consolidated financial statements, refer to note 33 to the audited consolidated financial statements for the financial year ended on 31 December 2017.
Under the LTIP, the Executives selected by the Board of Directors may be granted conditional awards to receive ordinary shares in the Company at a future date ("Executive Share Awards") or their equivalent in cash ("Executive Phantom Awards") (Executive Share Awards and Executive Phantom Awards together referred to as "Executive Awards").
The terms of the LTIP may vary from country to country to take into account local tax and other regulations and requirements in the jurisdictions where eligible Executives are employed or resident.
The Nomination and Remuneration Committee makes recommendations to the Board of Directors in relation to the operation and administration of the LTIP.
The current LTIP rules were approved by a general shareholders' meeting of the Company held on 20 April 2017.
The Board of Directors determines which Executives are eligible to participate in the LTIP (the "Participating Executives").
The value of the conditional Executive Awards under the LTIP varies, depending on the role, responsibility and seniority of the relevant Participating Executive. The maximum value of the conditional Executive Awards granted to any Participating Executive in any financial year of the Company will not exceed 150% of his or her base salary at the time of the grant.
Executive Awards will cliff vest after a three-year rolling performance period.
In the event of cessation of employment before the normal vesting due to retirement or death, the Board of Directors may determine that a number of Executive Awards will vest, taking into account such factors as the Board of Directors determines, including the proportion of the performance period which has elapsed and the extent that performance conditions have been satisfied up to the date of leaving.
The Board of Directors determines the LTIP performance conditions and whether they have been met. Executive Awards are made to the extent that predetermined scaling thresholds for each of the performance conditions are met.
For the Executive Awards to vest under the grants made in 2015 (Grant 8), the Nyrstar average share price for the 3 year performance period must outperform:
For the Executive Awards to vest under the grants made in 2016 (Grant 9) and 2017 (Grant 10), the two following performance measurements must be achieved:
A volume weighted average out-performance is calculated for each year. These are averaged over the performance period and compared to the vesting schedule.
Since April 2008, grants have been made annually in accordance with the rules and conditions of the LTIP. Grants in place during 2017 are shown below:
| GRANT 8 | GRANT 9 | GRANT 10 | |
|---|---|---|---|
| Effective grant date | 30 June 2015 | 2 November 2016 | 30 April 2017 |
| Performance period | 1 January 2015 to 31 December 2017 | 1 January 2016 to 31 December 2018 | 1 January 2017 to 31 December 2019 |
| Performance criteria | —Zinc price 50% —MSCI 50% —Executive remains in service to 31 December 2017 |
—Nyrstar EBITDA 70% —MSCI 30% —Executive remains in service to 31 December 2018 |
Nyrstar EBITDA 70% —MSCI 30% —Executive remains in service to 31 December 2019 |
| Vesting date | 31 December 2017 | 31 December 2018 | 31 December 2019 |
During the period between the satisfaction of the performance conditions and when the participating employee receives the relevant payment, the employee will be entitled to a payment equal to the cash equivalent of any dividends paid.
The following table sets out the movement in the number of equity instruments granted during the specified periods in relation to the LTIP (including all participants):
| GRANT 7 | GRANT 8 | GRANT 9 | GRANT 10 | TOTAL | |
|---|---|---|---|---|---|
| As at 1 Jan 2017 | 717,174 | 475,223 | 871,000 | - | 2,063,397 |
| Initial allocation 2 Nov 2017 | - | - | - | 1,155,536 | 1,155,536 |
| Dilutive impact / adjustment | - | 42,754 | 127,135 | 194,166 | 364,055 |
| Forfeitures | - | (231,807) | (415,703) | (89,545) | (737,055) |
| Additions | - | 16,848 | 318,562 | 115,934 | 451,344 |
| Expired | - | - | - | - | - |
| Settlements | (717,174) | - | - | - | (717,174) |
| As at 31 Dec 2017 | - | 303,018 | 900,994 | 1,376,091 | 2,580,103 |
The Company's general shareholders' meeting held on 20 April 2017 granted the Board of Directors the power to pay out entitlements to beneficiaries (including members of the Management Committee and Directors, where applicable) under the AIP in relation to the performance by such beneficiaries during the years 2016, 2017 and 2018 in the form of shares of the Company instead of cash, subject to the following terms: (a) up to the maximum AIP entitlement in relation to a performance year can be paid in the form of shares instead of cash; (b) the shares to be delivered as payment of an AIP entitlement are granted for no additional consideration payable by the beneficiary concerned; (c) the shares to be delivered as payment of an AIP entitlement in relation to a relevant performance year will be delivered in the second calendar year following the relevant performance year (i.e. early 2018 with respect to the AIP for performance year 2016, early 2019 with respect to the AIP for performance year 2017, and early 2020 with respect to the AIP for performance year 2018), rather than in the beginning of the first year following the respective performance year (which is the case if the entitlements are paid out in cash), and subject to the condition that the beneficiary is still employed by Nyrstar or its subsidiaries at that time. Subject to applicable legal provisions, the Board of Directors can decide that the shares to be delivered in accordance with the foregoing rules can be existing shares and/or new shares to be issued in consideration of a contribution in kind of a receivable with respect to the relevant entitlements concerned. The general shareholders' meeting also approved that the shares that are delivered as pay out of an entitlement under the AIP as aforementioned can be definitively and fully acquired by the beneficiary concerned prior to the end of the third year referred to in Article 520ter of the Belgian Companies Code. Subject to the foregoing, the Board of Directors can further document and determine the terms and conditions of the delivery of shares to the beneficiaries (included, but not limited to, the number of shares to be delivered).
The table below reflects the share awards that during 2017 have been granted or delivered under the LTIP to the members of the Management Committee, and those that have expired:
| LTIP (AS OF 31 DECEMBER 2017) | |||||
|---|---|---|---|---|---|
| NAME | TITLE | SHARE AWARDS DELIVERED IN 2017 UNDER THE LTIP OF WHICH THE PERFORMANCE CONDITIONS HAVE BEEN MET (1) |
SHARE AWARDS GRANTED, BUT LAPSED IN 2017 (2) |
SHARE AWARDS GRANTED IN 2017 OR IN PRIOR YEARS UNDER LTIP OF WHICH THE PERFORMANCE CONDITIONS HAVE NOT BEEN MET (3) |
|
| Hilmar Rode (4) | Chief Executive Officer | — | — | — | |
| Christopher Eger | Chief Financial Officer | 14'252 | — | — | |
| Willie Smit | SVP Corporate Services | 14'252 | — | — | |
| Frank Rittner | Chief Operating Officer | — | — | — | |
| Sebastião Balbino | Chief Commercial Officer | 9'713 | — | — | |
| Bill Scotting (5) | Chief Executive Officer | — | 273'661 | — | |
| John Galassini (6) | SVP Mining | — | — | — | |
| Michael Morley (7) | SVP Metals Processing | — | 107'893 | — | |
These share awards refer to the cash payment of Grant 7 (LTIP 2014).
Share awards include adjusted forfeitures under other grants related to end of employment. Awards have been adjusted for the Accelerated Book Build conducted in November 2017.
Vesting is subject to performance conditions.
Hilmar Rode was appointed as CEO in December 2016.
Bill Scotting left the Nyrstar Management Committee in December 2016.
John Galassini was serving notice of termination effective October 2016 and left Nyrstar in March 2017.
Michael Morley left the Nyrstar Management Committee in January 2017.
During 2016 and 2017 the following was granted to the Directors in deferred shares (excluding the CEO):
| AGM 2016 | AGM 2017 | TOTAL | |
|---|---|---|---|
| Martyn Konig | 27,285 | 37,282 | 64,567 |
| Carole Cable | 4,774 | 6,524 | 11,298 |
| Christopher Cox | 9,549 | 13,049 | 22,598 |
| Jesús Fernandez | - | - | - |
| Anne Fahy | 1,364 | 1,864 | 3,228 |
During 2017, no share awards were delivered nor granted under the AIP to the members of the Management Committee at that time.
The following number of shares are held by members of Nyrstar's Management Committee as of 31 December 2017:
| NAME | TITLE | SHARES |
|---|---|---|
| Hilmar Rode | Chief Executive Officer | 526,923 |
| Christopher Eger | Chief Financial Officer | 18,142 |
| Willie Smit | Chief HR Officer, HR & SHE | 13,044 |
| Frank Rittner | Chief Operating Officer | 500,000 |
| Sebastião Balbino | Chief Commercial Officer | 24,421 |
With the exception of the Chief Executive Officer (as listed in the table above), none of the Directors of the Company hold Shares. However, certain Non-Executive Directors will receive their remuneration fully or partly in deferred shares of the Company.
Pursuant to Article 119 of the Company Code, the Board of Directors reports on the operations of the Nyrstar Group with respect to the financial year ended on 31 December 2017.
The information provided in this report is regulated information in accordance with Article 36 of the Royal Decree of 14 November 2007.
A free copy of the annual report of the Board of Directors on the statutory accounts of Nyrstar NV in accordance with Article 96 of the Belgian Company Code can be requested at the Company's registered office at Zinkstraat 1, 2490 Balen.
Nyrstar's consolidated financial statements as at and for the year ended 31 December 2017 comprise Nyrstar NV (the "Company") and its subsidiaries (together referred to as "Nyrstar" or the "Group" and individually as "Group entities") and the Group's interest in associates and jointly controlled entities.
The consolidated financial statements of Nyrstar were prepared in accordance with International Financial Reporting Standards as adopted by the European Union. These include International Financial Reporting Standards (IFRS) and the related interpretations issued by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC), effective at the reporting date and adopted by the European Union. The consolidated financial statements have been prepared on the going concern basis.
The Company has assessed that, taking into account its available cash, cash equivalents and undrawn committed facilities available at the date of the consolidated financial statements, its cash flow projections for 2018 based on the approved budgets, it has sufficient liquidity to meet its present obligations and cover working capital needs for 2018 and will remain in compliance with its financial covenants throughout this period.
The cash flow projections for 2018 incorporate the following key assumptions:
Commodity prices and foreign exchange rates were developed from externally available sources from a number of different market commentators
Based on historical results unless definitive plans are in place which are expected to have a significant effect on operations
Treatment charges were developed from externally available forecasts and recent historical rates
The cash flow projections for 2018 include management's best estimate of the revenue from the project
The Company has undertaken a sensitivity analysis of its going concern assessment through independently adjusting the cash flow projections for 2018 for zinc prices, treatment charges, smelter production output and unfavourable movements in the USD. Each of the scenarios below were modelled independent of each other.
In all cases the sensitivity analysis indicated that the Company would have sufficient liquidity to meet its present obligations and cover working capital needs for 2018 and remain in compliance with its financial covenants throughout 2018.
Adverse movements in currency rates, commodity prices and/or operational results will affect the Company's liquidity or lower the Company's equity, and if these adverse movements persist for an extended period of time, the Company may have to take mitigating actions to maintain liquidity or equity headroom. A sustained and material impact on the Company's liquidity or equity will also impact the Company's ability to comply with financial covenants under its credit facilities.
The consolidated financial statements are presented in Euros which is the Company's functional and presentation currency. All financial information has been rounded to the nearest hundred thousand Euro.
Please refer to the relevant pages in the 2017 annual report for the consolidated financial statements.
Metals Processing underlying EBITDA1 of EUR 206 million, down EUR 16 million year-on-year, driven by lower zinc treatment charges, reduced lead and by-product production and unplanned product outages at Budel and Hobart, partially offset by higher commodity prices net of strategic hedges.
Mining underlying EBITDA of EUR 47 million, up EUR 39 million year-on-year, driven by higher commodity prices, lower treatment charges, a positive contribution from the successful restart of the Middle Tennessee Mines, partially offset by the negative EBITDA contribution of the Myra Falls Mine which commenced re-start activities in August 2017.
1 Underlying EBITDA is a non-IFRS measure of earnings, which is used by management to assess the underlying performance of Nyrstar's operations and is reported by Nyrstar to provide additional understanding of the underlying business performance of its operations. Nyrstar defines "Underlying EBITDA" as profit or loss for the period adjusted to exclude loss from discontinued operations (net of income tax), income tax (expense)/benefit, share of loss of equity-accounted investees, gain on the disposal of equity-accounted investees, net finance expense, impairment losses and reversals, restructuring expense, M&A related transaction expenses, depreciation, depletion and amortization, income or expenses arising from embedded derivatives recognised under IAS 39 "Financial Instruments: Recognition and Measurement" and other items arising from events or transactions clearly distinct from the ordinary activities of Nyrstar. For a definition of other terms used in this document, please see Nyrstar's glossary of key terms at the end of this Annual Report or go to http://www.nyrstar.com/investors/en/Pages/investorsmaterials.aspx
Group underlying EBITDA of EUR 205 million for 2017, an increase of 5% on 2016, primarily due to a 38% increase in the average zinc price (USD 2,095 per tonne to USD 2,896 per tonne), and a substantial earnings increase in Mining, largely offset by lower treatment charge terms, reduced production at Port Pirie and reduced free metal price exposure due to the call option price in the zinc price collar hedging structure.
In 2017 the Group achieved the best safety performance since Nyrstar was founded. The frequency rate of cases with time lost or under restricted duties (DART) for the Company was 3.9, an improvement of 25% compared to a rate of 5.2 in 2016. The frequency rate of cases requiring at least a medical treatment (RIR) was 6.4, an improvement of 11% compared to 7.2 in 2016.
No environmental events with material business consequences or long-term environmental impacts occurred during the period.
| FINANCIAL YEAR | FINANCIAL YEAR | |
|---|---|---|
| 2016 | 2017 | |
| MINING PRODUCTION | ||
| Zinc in concentrate ('000 tonnes) | 96 | 123 |
| Gold ('000 troy ounces) | 1.8 | 1.9 |
| Silver ('000 troy ounces) | 554 | 553 |
| Copper in concentrate ('000 tonnes) | 2.1 | 2.1 |
| SMELTING PRODUCTION | ||
| Zinc metal ('000 tonnes) | 1,015 | 1,019 |
| Lead metal ('000 tonnes) | 187 | 171 |
| Sulphuric acid ('000 tonnes, gross) | 1,356 | 1,266 |
| Silver (million troy ounces) | 14.8 | 13.6 |
| Gold ('000 troy ounces) | 46.2 | 72.6 |
Metals Processing produced approximately 1,019,000 tonnes of zinc metal in 2017.
Flat zinc metal production year-over-year was due to the planned maintenance shuts at Balen and Budel in Q2 2017 which negatively impacted production by approximately 11,000 tonnes and 6,500 tonnes of zinc metal respectively; the planned maintenance shuts at Hobart and Clarksville in Q3 2017; unplanned outages experienced in Budel in Q3 2017; and unplanned outages at Hobart in Q4 2017.
The Middle Tennessee Mines were placed on care and maintenance throughout 2016 and were re-started in December 2016 with first mill production achieved in Q2 2017. Production of 22kt of zinc in concentrate from the Middle Tennessee Mines in the period of May to December 2017 is in-line with management's expectations. The Middle Tennessee Mines have ramped-up to an operating level of approximately 50kt per annum of zinc in concentrate by the end of 2017. The East Tennessee Mines have performed well over the course of 2017, with production of 66kt of zinc in concentrate being an improvement of 6% comparted to 2016. Production improvements at East Tennessee are due to increased development work to provide access to more mining areas and improved underground equipment availability, in part due to the replacement of some of the older units.
Production of 34kt of zinc in concentrate at Langlois in 2017 represents an increase of 2% over 2016 and was mainly due to an improvement in ground conditions in 2017 and an improved mine plan due to greater infill drilling completed during 2017.
The zinc price improvement continued in 2017 with the positive momentum that was seen at the end of 2016. At the start of the year the zinc price opened at USD 2,552 per tonne and moved up throughout the year to close at USD 3,309 per tonne. Over the course of the year, zinc outperformed the rest of the base metals complex and was one of the best performing commodities during 2017. Over the course of 2017, the zinc price averaged USD 2,896 per tonne, up 38% on 2016.
On the back of the tightening availability of zinc concentrate, the annual 2017 benchmark treatment charge terms were settled at the end of Q1 2017 at approximately 15% below the 2016 terms and spot treatment charges over the course of 2017 remained at depressed levels. The average realized zinc treatment charge in 2017, on the basis of the settled benchmark, was USD 172 per tonne of concentrate. This compares favourably to the average spot zinc treatment charge which declined heavily over the course of the year and averaged approximately USD 30-40 per tonne of concentrate. The vast majority of Nyrstar's concentrate requirements are priced at benchmark terms or by reference to the benchmark with a discount applied. 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.
"Prevent Harm" is a core value of Nyrstar. The Company is committed to maintaining safe operations and to proactively managing risks including with respect to people and the environment. At Nyrstar, we work together to create a workplace where all risks are effectively identified and controlled and everyone goes home safe and healthy each day of their working life.
In 2017 the Group achieved the best safety performance since Nyrstar was founded. The frequency rate of cases with time lost or under restricted duties (DART) for the Company was 3.9, an improvement of 25% compared to a rate of 5.2 in 2016. The frequency rate of cases requiring at least a medical treatment (RIR) was 6.4, an improvement of 11% compared to 7.2 in 2016.
No environmental events with material business consequences or long-term environmental impacts occurred during the period.
Group gross profit for 2017 of EUR 1,074 million was up 9% on 2016, driven by higher production volumes in Mining and higher zinc, lead and gold prices which were up 38%, 24% and 1% respectively, partially offset by deteriorating benchmark zinc treatment charge terms and strategic zinc price hedging.
Direct operating costs for 2017 of EUR 875 million increased 11% on 2016, due to higher production volumes in Mining, increased mining costs as a result of the restart of operations at Middle Tennessee and an increase in consultancy service fees with the completion in 2017 of the mining and smelting optimization reviews.
Net finance expense (excluding foreign exchange) for 2017 of EUR 147 million was up EUR 31 million on 2016 primarily due to net debt exclusive of zinc prepay and perpetual securities increasing by 27% and net debt inclusive of zinc prepay and perpetual securities increasing by 17%. During 2017, EUR 55 million of perpetual securities were drawn compared to EUR 110 million drawn in 2016. At the end of 2017, an aggregate total net of debt issue costs of EUR 186 million (AUD 291 million) of perpetual securities had been drawn for the Port Pirie Redevelopment funding.
Nyrstar recognised an income tax benefit for the year ended 31 December 2017 of EUR 38.5 million (2016: income tax expense of EUR 39.5 million) representing an effective income tax rate of -481.3% (for the year ended 31 December 2016: -10.6%). The tax rate is impacted by changes in the expected profitability of Group entities in Canada and Australia during the period and the associated recognition of previously unrecognized deferred tax assets. Further, the tax rate is impacted by changes in the net deferred tax position due to the change in the corporate income tax rates in both Belgium (reduction of net deferred tax liabilities by EUR 7.9 million) and the USA (reduction of net deferred tax assets by EUR 10.5 million), together with losses incurred by the Group, including the discontinued operations, for which no tax benefit has been recognised.
Profit after tax of EUR 47 million in 2017, compared to a net loss of EUR 414 million in 2016, mainly as a result of the impairment reversals related to the Mining segment assets in 2017 and impairment charges related to Mining segment asset in 2016, respectively. In 2017 the Group recognized pre-tax net impairment reversal of EUR 142 million comprised of EUR 126 million for continuing operations and EUR 16 million for discontinued operations (2016: impairment loss of EUR 266 million comprised of EUR 126 million for continuing operations and EUR 140 million for discontinued operations).
Capital expenditure from continuing and discontinued operations was EUR 364 million in 2017, representing an increase of 30% yearon-year driven by a EUR 18 million capex increase in Mining with the restart of the Middle Tennessee Mines and the commencement of restart activities at the Myra Falls Mine, completion of the Port Pirie Redevelopment project and a relatively large number of planned and unplanned maintenance outages across the zinc smelters.
Cash flow from operating activities before working capital changes of EUR 88 million in 2017 was down 22% compared to EUR 113 million in 2016 and cash out-flow from changes in working capital and other balance sheet movements in 2017 of EUR 49 million was down EUR 146 million compared to an out-flow of EUR 195 million in 2016, resulting in total cash inflow from operating activities for 2017 of EUR 38 million compared to EUR 81 million outflow for 2016. The increase in net working capital levels was driven primarily by an increase in inventory valuation due to higher commodity prices, including the effect on inventory balance from zinc price increases of approximately EUR 173 million for 2017.
Net debt at the end of 2017 at EUR 1,102 million, excluding the zinc metal prepay and perpetual securities, was 27% higher compared to the end of 2016 (EUR 865 million at the end of 2016). The net debt inclusive of the zinc metal prepay and perpetual securities at the end of 2017 was EUR 1,363 million, up 17% compared to the end of 2016. Cash balance at the end of 2017 was EUR 68 million compared to EUR 129 million at the end of 2016.
The Nyrstar Board of Directors is responsible for the assessment of the effectiveness of the Risk Management Framework and internal controls. The Group takes a proactive approach to risk management. The Board of Directors is responsible for ensuring that nature and extent of risks are identified on a timely basis with alignment to the Group's strategic objectives and activities.
The Audit Committee plays a key role in monitoring the effectiveness of the Risk Management Framework and is an important medium for bringing risks to the Board's attention. If a critical risk or issue is identified by the Board or management, it may be appropriate for all Directors to be a part of the relevant risk management process, and as such the Board of Directors will convene a sub-committee comprised of a mix of Board Members and Senior Management. Each respective sub-committee further examines issues identified and reports back to the Board of Directors. No such sub-committees were convened in 2017.
The Nyrstar Risk Management Framework requires regular evaluation of the effectiveness of internal controls to ensure the Group's risks are being adequately managed. The Risk Management Framework is designed to achieving the Group's objectives. Effective risk management enables Nyrstar to achieve an appropriate balance between realising opportunities while minimising adverse impacts.
This section gives an overview of the main features of the Company's internal control and risk management systems, in accordance with the Belgian Corporate Governance Code and the Belgian Companies Code.
The Risk Management Framework is integrated in the management process and focuses on the following key principles.
The key elements of Risk Management Framework are:
1 Understanding the external and internal environment
Understanding the internal and external business environment and the effect this has on our business strategy and plans. This informs about Nyrstar's overall tolerance to risk.
2 Consistent methods for risk identification and analysis of risks, existing controls and control effectiveness
Implementing systems and processes for the consistent identification and analysis of risks, existing controls and control effectiveness. Evaluating whether the level of risk being accepted is consistent with levels of risk acceptable to the Audit Committee.
Using innovative and creative thinking in responding to risks and taking action where it is determined that the Group is being exposed to unacceptable levels of risk.
4 Stakeholder engagement and Communication
Involving all Nyrstar employees and relevant stakeholders in managing risks and communicating identified key risks and controls.
Regularly monitoring and reviewing our risk management framework, our risks and control effectiveness.
The guideline for the Risk Management Framework has been written to comply with ISO 31000; 2009. Compliance with the guideline is mandatory within Nyrstar.
The following is a summary of Nyrstar's critical internal controls:
There is a sound organizational structure with clear procedures, delegation and accountabilities for both the business side and the support and control functions, such as human resources, legal, finance, internal audit, etc.
The organizational structure is monitored on an ongoing basis, e.g. through benchmarking the organizational structure with industry standards and competitors. Responsibilities are delegated to business units, by business plans and accompanying budgets approved by management and the Board of Directors within set authorization levels and authorities are delegated to appropriate accountable individuals reflecting seniority, experience and competencies.
The Group has established internal policies and procedures to manage various risks across the Group. These policies and procedures are available on the Nyrstar intranet, and distributed for application across the whole Group. Every policy has an owner, who periodically reviews and updates if necessary. Induction and ongoing training processes are well established and implemented across the Group.
The Board of Directors has approved a Corporate Governance Charter and a Code of Business Conduct, including a framework for ethical decision making. All employees must perform their daily activities and their business objectives according to the strictest ethical standards and principles. The Code of Business Conduct is available on www.nyrstar.com and sets out principles how to conduct business and behave in respect of:
The Board of Directors regularly monitors compliance with applicable policies and procedures of the Nyrstar Group.
Nyrstar also has a whistle-blower procedure in place, allowing staff to confidentially raise concerns about any irregularities in financial reporting, possible fraudulent actions, bribery and other areas including non compliance with Code of Business conduct as well as regulatory and legal compliance.
Nyrstar is ISO 9001 certified for the smelting and refining of zinc and zinc alloys, lead and lead alloys, silver, gold and other by-products. All of its major processes and the controls that they encompass are formalized and published on the Company's intranet.
Nyrstar applies a comprehensive Group standard for financial reporting. The standard is in accordance with applicable International Accounting Standards. These include International Financial Reporting Standards (IFRS) and the related interpretations issued by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC) as adopted by the European Union. The effectiveness and compliance with the Group standard for financial reporting is consistently reviewed and monitored by the Audit Committee.
In order to ensure adequate financial planning and follow up, a financial budgeting procedure describing the planning, quantification, the implementation and the review of the budget in alignment with forecasts, is closely followed. Nyrstar conducts Group wide budgeting process, which is centrally coordinated and consists of the following steps:
Various Management Committees are established as a control to manage various risks Nyrstar is exposed to:
The Treasury Committee comprises the Chief Financial Officer, the Group Treasurer and the Group Controller. The role of the Treasury Committee is to recommend to the Chief Executive Officer and to the Board of Directors amendments to the treasury policy. This includes all treasury transactions being reviewed before they are recommended for approval by the Chief Executive Officer and the Board of Directors.
The Treasury Committee meets at least quarterly.
The Metal Price Risk Committee comprises the Chief Financial Officer, the Group Treasurer, the Group Controller and the Group Manager Financial Planning & Analysis. Nyrstar's metal price risk committee establishes policies and procedures how Nyrstar manages its exposure to the commodity prices and foreign exchange rates.
The Group's performance against plan is monitored internally and relevant action is taken throughout the year. This includes weekly and monthly reporting of key performance indicators for the current period together with information on critical risk areas.
Comprehensive monthly board reports that include detailed consolidated management accounts for the period together with an executive summary from the Chief Financial Officer are prepared and circulated to the Board of Directors by the Company Secretary on a monthly basis. This includes updates on Health, Safety and Environment, operational and financial performance as well as legal disputes and contingent risks.
Management is responsible for evaluating existing controls and the control effectiveness and determines whether the level of risk being accepted is consistent with the level of risk approved by the Board of Directors. Management takes action where it is determined that the Group is being exposed to unacceptable levels of risk and actively encourages all Nyrstar employees to communicate freely risks and opportunities identified.
Internal audit is an important element in the overall process of evaluating the effectiveness of the Risk Management Framework and internal controls. The internal audits are based on risk based plans, approved by the Audit Committee. The internal audit findings are presented to the Audit Committee and management, identifying areas of improvement. Progress of implementation of the actions is monitored by the Audit Committee on a regular basis. The Group internal audit function is managed internally. The Audit Committee supervises the internal audit function.
The Board of Directors pays specific attention to the oversight of risk and internal controls. On a yearly basis, the Board of Directors reviews the effectiveness of the Group's risk management and internal controls. The Audit Committee assists the Board of Directors in this assessment. The Audit Committee also reviews the declarations relating to internal supervision and risk management included
in the annual report of the Company. The Audit Committee reviews the specific arrangements to enable staff to express concerns in confidence about any irregularities in financial reporting and other areas e.g., whistle-blower arrangements.
To support the protocols described above, both internal resources and external contractors are engaged to perform compliance checks, and reports are provided to the Audit Committee.
The Group is committed to the ongoing review and improvement of its policies, systems and processes.
The principal risks and uncertainties, which Nyrstar faces, along with the impact and the procedures implemented to mitigate the risks, are detailed in the tables below:
| DESCRIPTION | IMPACT | MITIGATION |
|---|---|---|
| Commodity price risk | ||
| Nyrstar's results are largely dependent on the market prices of commodities and raw materials, which are cyclical and volatile. |
Profitability will vary with the volatility of metals prices. Nyrstar engages in transactional hedging which means that it will undertake short-term hedging transactions to cover the timing risk between raw material purchases and sales of metal and to cover its exposure on fixed-price forward sales of metal to customers. From time to time, Nyrstar may also decide to enter into certain strategic metal price hedges to lock prices that are considered as favourable and providing price certainty to the Company's operations that may otherwise face difficulties related to their liquidity and profitability in a reasonably possible pricing decline. |
|
| Forward price risk | ||
| Nyrstar is exposed to the shape of the forward price curve for underlying metal prices. |
The volatility in the London Metal Exchange price creates differences between the average price we pay for the contained metal and the price we receive for it. |
Nyrstar engages in transactional hedging which means that it will undertake short-term hedging transactions to cover the timing risk between raw material purchases and sales of metal and to cover its exposure on fixed price forward sales of metal to customers. |
| From time to time, Nyrstar may also decide to enter into certain strategic metal price hedges to lock prices that are considered as favourable and providing price certainty to the Company's operations that may otherwise face difficulties related to their liquidity and profitability in a reasonably possible pricing decline. |
||
| Foreign Currency Exchange rate risk | ||
| Nyrstar is exposed to the effects of exchange rate fluctuations. |
Movement of the U.S. Dollar, the Australian Dollar, Canadian Dollar, Swiss Franc, and other currencies in which Nyrstar's costs are denominated against the Euro could adversely affect Nyrstar's profitability and financial position. |
Nyrstar has entered into strategic foreign exchanges hedges to limit its downside exposure related to the fluctuations between the Euro and the U.S. Dollar, the Euro and the Australian Dollar and between the Euro and the Canadian Dollar. Nyrstar also regularly enters into short-term hedging transactions to cover its transactional foreign exchange exposures. |
| Interest rate risk & leverage risk | ||
|---|---|---|
| Nyrstar is exposed to interest rate risk primarily on loans and borrowings. Nyrstar is exposed to risks inherent with higher leverage and compliance with debt covenants. |
Changes in interest rates may impact primary loans and borrowings by changing the levels of required interest payments. Nyrstar's indebtedness increased significantly since 2011 in order to finance its expansion into mining and later with regard to the expansion of the Port Pirie Lead smelter, as a consequence it is now subject to risks inherent with higher leverage and compliance with debt covenants. Breaches in debt covenants will jeopardize the financing structure of Nyrstar. |
Nyrstar's interest rate risk management policy is to limit the impact of adverse interest rate movements through the use of interest rate management tools. Debt covenants and required head room are monitored by Nyrstar on an on-going basis. Balance sheet strengthening also includes management of the liquidity headroom, longer debt maturities or equity issuance. |
| Credit risk | ||
| Nyrstar is exposed to the risk of non-payment from any counterparty in relation to sales of goods and other transactions. |
Group cash flows and income may be impacted by non-payment. |
Nyrstar has determined a credit policy with credit limit requests, use of credit enhancements such as letters of credit, approval procedures, continuous monitoring of the credit exposure and dunning procedure in case of delays. |
| Liquidity risk | ||
| Nyrstar requires a significant amount of cash to finance its debt, fund its working capital, its capital investments and its growth strategy. Liquidity risk arises from the possibility that Nyrstar will not be able to meet its financial obligations as they fall due. |
Nyrstar may not be able to fund operations, capital investments, the growth strategy and the financial condition of the Company. |
Liquidity risk is addressed by maintaining a sufficient degree of diversification of funding sources as determined by management, detailed, periodic cash flow forecasting and conservatively set limits on permanently available headroom liquidity as well as maintaining ongoing readiness to access financial markets within a short period of time. It also includes an active management of the working capital requirements of the business in line with the increasing working capital requirements in the high metal price environment. |
| Reliance on specific means of funding | ||
| Nyrstar uses different means of funding available to the company. They include equity, bonds, committed and uncommitted trade finance facilities, loans from related parties as well as metal prepayments or a Perpetual Securities and other sources as and when they became available to the Company. |
Different means of funding introduce different risk associated with them. At times, certain means of funding may become unavailable to the Company. Certain means of funding used by the Company, e.g. the Perpetual Securities are accounted based on the IFRS accounting standards that are open to interpretation and require the Company to select and consistently apply its accounting policies. If the accounting standards or their interpretation change or if the interpretation of certain terms and conditions included in the Company's funding arrangements change, the Company may, or may not, be required to change the accounting treatment of some of its funding instruments resulting in their reclassification in the Company's Consolidated Statement of Financial Position. Such reclassifications could have a material adverse impact on Nyrstar's ability to comply with current financial ratios under certain of means of funding. |
Management aims to diversify the sources of funding to spread the risk that one of the sources become unavailable to the Company. |
| Treatment charge (TC) risk | ||
| Nyrstar's results remain correlated to the levels of TCs that it charges zinc miners to refine their zinc concentrates and lead miners to refine their lead concentrates. TCs are cyclical in nature. |
A decrease in TCs can be expected to have a material adverse effect on Nyrstar's business, results of operations and financial condition. |
TCs are negotiated on an annual basis. The impact of TC levels is expected to further decrease in the future in line with the implementation of the transformation projects and the Port Pirie Redevelopment and in line with the increasing Nyrstar mining production. |
| Energy price risk | ||
| Nyrstar's operating sites, particularly its smelters, are energy intensive, with energy costs accounting for a significant part of its operating costs. Electricity in particular represents a very significant part of its production costs. |
Increases in energy, particularly electricity, prices would significantly increase Nyrstar's costs and reduce its margins. |
Nyrstar attempts to limit its exposure to short term energy price fluctuations through forward purchases, long term contracts and participation in energy purchasing consortia. |
| DESCRIPTION | IMPACT | MITIGATION |
|---|---|---|
| Operational risks | ||
| In operating mines, smelters and other production facilities, Nyrstar is required to obtain and comply with licenses to operate. In addition Nyrstar is subject to many risks and hazards, some of which are out of its control, including: unusual or unexpected geological or climatic events; natural catastrophes; interruptions to power supplies; congestion at commodities transport terminals; industrial action or disputes; civil unrest, strikes, workforce limitations, technical failures, fires, explosions and other accidents; delays and other problems in major investment projects (such as the ramping-up of mining assets). |
Nyrstar's business could be adversely affected if Nyrstar fails to obtain, maintain or renew necessary licenses and permits, or fails to comply with the terms of its licenses or permits. The impact of these risks could result in damage to, or destruction of, properties or processing or production facilities, may reduce or cause production to cease at those properties or production facilities. The risks may further result in personal injury or death, environmental damage, business interruption, monetary losses and possible legal litigation and liability. Negative publicity, including that generated by non- governmental bodies, may further harm Nyrstar's operations. Nyrstar may become subject to liability against which Nyrstar has not insured or cannot insure, including those in respect of past activities. Should Nyrstar suffer a major uninsured loss, future earnings could be materially adversely affected. |
Nyrstar's process risk management system incorporating assessment of safety, environment, production and quality risks, which includes the identification of risk control measures, such as preventative maintenance, critical spares inventory and operational procedures. Corporate Social Responsibility and the Nyrstar Foundation projects enable Nyrstar to work closely with local communities to maintain a good relationship. Nyrstar currently has insurance coverage for its operating risks associated with its zinc and lead smelters and mining operations which includes all risk property damage (including certain aspects of business interruption), operational and product liability, marine stock and transit and directors' and officers' liability. |
| Supply risk | ||
| Nyrstar is dependent on a limited number of suppliers for zinc and lead concentrate. Nyrstar is partially dependent on the supply of zinc and lead secondary feed materials. |
A disruption in supply could have a material adverse effect on Nyrstar's production levels and financial results. Unreliable energy supply at any of the mining and smelting operations requires appropriate emergency supply or will result in significant ramp up costs after a major power outage. |
Nyrstar management is taking steps to secure raw materials from other sources, increase its flexibility to treat varying qualities of raw material and secondary materials. Nyrstar is continuously monitoring the energy market worldwide. This includes also considering alternate energy supply, e.g. wind power at mine sites. |
| Environmental, health & safety risks | ||
| Nyrstar operations are subject to stringent environmental and health laws and regulations, which are subject to change from time to time. Nyrstar's operations are also subject to climate change legislation. |
If Nyrstar breaches such laws and regulations, it may incur fines or penalties, be required to curtail or cease operations, or be subject to significantly increased compliance costs or significant costs for rehabilitation or rectification works. |
Safety is one of the core values of Nyrstar, and currently it is implementing common safety policies across all sites along with corresponding health and safety audits. Nyrstar pro-actively monitors changes to environmental, health and safety laws and regulations. |
| International operations risk | ||
| Nyrstar's mining and smelting operations are located in jurisdictions that have varying political, economic, security and other risks. In addition, Nyrstar is exposed to nationalism and tax risks by virtue of the international nature of its activities. |
These risks include, amongst others, the destruction of property, injury to personnel and the cessation or curtailment of operations, civil disturbances and activities of governments which limit or disrupt markets. Political officials may be prone to corruption or bribery, which violates Company policy and adversely affects operations. |
Nyrstar performs a thorough risk assessment on a country-by-country basis when considering its investment activities. In addition Nyrstar attempts to conduct its business and financial affairs focusing to minimize to the extent reasonably practicable the political, legal, regulatory and economic risks applicable to operations in the countries where Nyrstar operates. |
| Reserves and resource risk | ||
| Nyrstar's future profitability and operating margins depend partly upon Nyrstar's ability to access mineral reserves that have geological characteristics enabling mining at competitive costs. This is done by either conducting successful exploration and development activities or by acquiring properties containing economically recoverable reserves. |
Replacement reserves may not be available when required or, if available, may not be of a quality capable of being mined at costs comparable to existing mines. |
Nyrstar utilises the services of appropriately qualified experts to ascertain and verify the quantum of reserves and resources including ore grade and other geological characteristics under relevant global standards for measurement of mineral resources. |
| Project execution risk | ||
| Nyrstar's growth strategy relies in part on the ramp-up of the Port Pirie Redevelopment and the restart of the Myra Falls and the Middle Tennessee Mines. |
Delay, technical issues or cost overruns in these projects could adversely impact the original business cases which justified these projects |
These risks are being carefully managed by a dedicated technical/project team in smelting (including external resources where needed) and mining segments. All |
and impact Nyrstar's financial position.
investments leverage internal know how "off the shelf" technology or a different application of an existing
technology.
Please refer to Note 42 (subsequent events) in the IFRS Financial Statements.
No information regarding the circumstances that could significantly affect the development of the Company are to be mentioned. The principal risks and uncertainties facing the Group are covered in section 2 of this report.
The Group undertakes research and development through a number of activities at various production sites of the Group.
Please refer to Note 3 (Significant accounting policies), Note 5 (Financial risk management) and Note 35 (Financial instruments) in the IFRS Financial Statements.
The extraordinary general shareholders' meeting held on 18 January 2016 approved the cancellation of all 12,571,225 treasury shares held by the Company.
The treasury shares reserve comprises the par value of the Company's share held by the Group. The Group held no Company's shares as at 31 December 2017 and 2016.
| ISSUED SHARES 2016 |
2017 |
|---|---|
| Shares outstanding 93,563,960 |
109,033,545 |
| Treasury shares - |
- |
| As at 31 Dec 93,563,960 |
109,033,545 |
| MOVEMENT IN SHARES OUTSTANDING 2016 |
2017 |
| As at 1 Jan 327,473,863 |
93,563,960 |
| Capital increase 608,165,740 |
15,469,585 |
| Reverse stock split (842,075,643) |
- |
| Employee shared based payment plan - |
- |
| As at 31 Dec 93,563,960 |
109,033,545 |
| MOVEMENT IN TREASURY SHARES | 2016 | 2017 |
|---|---|---|
| As at 1 Jan | 12,571,225 | - |
| Cancellation of treasury shares | (12,571,225) | - |
| Employee shared based payment plan | - | - |
| As at 31 Dec | - | - |
Non-financial information, including descriptions of policies, risks and performance related to environmental, social and governance ("ESG") significant matters for Nyrstar, will be disclosed in the annual Sustainability Report. The Sustainability Report will be made available on Nyrstar's website in Q2 2018.
The Audit Committee consists of three Non-Executive members of the Board, of which two are independent members of the Board of Directors and one is non-independent. The members of the Audit Committee have sufficient expertise in financial matters to discharge their functions. The Chairman of the Audit Committee is competent in accounting and auditing as evidenced by her previous role as Chief Financial Officer of BP's Aviation Fuels.
The Company provides the following information in accordance with article 34 of the Royal Decree dated 14 November 2007:
(viii) The powers of the Board of Directors, more specifically with regard to the power to issue or redeem shares are set out in the Company's articles of association. The Board of Directors was not granted the authorization to purchase its own shares "to avoid imminent and serious danger to the Company" (i.e. to defend against public takeover bids). The Company's articles of association of association do not provide for any other specific protective mechanisms against public takeover bids.
(ix) At the date of the report, the Company is a party to the following significant agreements which, upon a change of control of the Company or following a takeover bid can enter into force or, subject to certain conditions, as the case may be, can be amended, terminated by the other parties thereto or give the other parties thereto (or beneficial holders with respect to bonds) a right to an accelerated repayment of outstanding debt obligations of the Company under such agreements:
No takeover bid has been instigated by third parties in respect of the Company's equity during the previous financial year and the current financial year.
Done at Brussels on 21 February 2018. On behalf of the Board of Directors,
Martyn Konig Hilmar Rode Director Director
The undersigned, Hilmar Rode, Chief Executive Officer and Christopher Eger, Chief Financial Officer, declare that, to the best of their knowledge:
Brussels, 21 February 2018
Hilmar Rode Christopher Eger Chief Executive Officer Chief Financial Officer
| EUR MILLION | NOTE | 2016* | 2017 |
|---|---|---|---|
| CONTINUING OPERATIONS | |||
| Revenue | 7 | 2,763.2 | 3,530.5 |
| Raw materials used | (1,728.6) | (2,405.9) | |
| Freight expense | (53.3) | (50.3) | |
| Gross profit | 981.3 | 1,074.3 | |
| Other income | 6.0 | 13.3 | |
| Employee benefits expense | 11 | (302.3) | (318.2) |
| Energy expenses | (215.3) | (249.9) | |
| Stores and consumables used | (112.4) | (126.7) | |
| Contracting and consulting expense | (118.2) | (146.1) | |
| Other expense | 14 | (49.2) | (35.5) |
| Depreciation, depletion and amortisation | 15,16 | (177.1) | (155.8) |
| M&A related transaction expense | 10 | (5.3) | (0.2) |
| Restructuring expense | 29 | (8.4) | (4.1) |
| Impairment loss | 17 | (125.5) | - |
| Impairment reversal | 17 | - | 126.1 |
| Gain on the disposal of subsidiaries | - | 2.6 | |
| Result from operating activities | (126.4) | 179.8 | |
| Finance income | 12 | 1.6 | 4.2 |
| Finance expense | 12 | (118.0) | (151.4) |
| Net foreign exchange loss | 12 | (5.4) | (59.9) |
| Net finance expense | (121.8) | (207.1) | |
| Loss before income tax | (248.2) | (27.3) | |
| Income tax benefit / (expense) | 13 | (15.5) | 36.9 |
| Profit / (loss) for the year from continuing operations | (263.7) | 9.6 | |
| DISCONTINUED OPERATIONS | |||
| Profit / (loss) from discontinued operations, net of income taxes | 9 | (150.1) | 36.9 |
| Profit / (loss) for the year | (413.8) | 46.5 | |
| Attributable to: | |||
| Equity holders of the parent | (413.8) | 46.5 | |
| Non-controlling interest | - | - | |
| Earnings / (loss) per share for profit / (loss) from continuing operations during the period (expressed in EUR per share) |
|||
| Basic | 34 | (2.59) | 0.10 |
| Diluted | 34 | (2.59) | 0.10 |
* Prior year amounts have been re-presented for the impact of the discontinued operations (note 9)
| EUR MILLION | NOTE | 2016* | 2017 |
|---|---|---|---|
| Profit / (loss) for the year | (413.8) | 46.5 | |
| CONTINUING OPERATIONS | |||
| Other comprehensive income | |||
| ITEMS THAT MAY BE RECLASSIFIED TO PROFIT: | |||
| Foreign currency translation differences | (8.6) | (18.2) | |
| Losses on cash flow hedges | 27 | (3.7) | (5.6) |
| Transfers to the income statement | 27 | (11.2) | (14.7) |
| Income tax benefit | 13,27 | 0.9 | 1.0 |
| Change in fair value of investments in equity securities | 19,27 | 0.3 | (0.2) |
| Transfers to the income statement | - | - | |
| ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT: | |||
| Remeasurement (loss) / gain of defined benefit plans | 30 | 10.3 | (5.2) |
| Income tax expense | 13 | (2.5) | (0.8) |
| Other comprehensive loss for the year, from continuing operations net of tax | (14.5) | (42.9) | |
| DISCONTINUED OPERATIONS | |||
| Items that may be reclassified to profit: | |||
| Foreign currency translation differences | (0.2) | (2.5) | |
| Transfers to the income statement | 8 | (56.1) | (28.2) |
| Other comprehensive loss for the year, from discontinued operations net of tax | (56.3) | (30.7) | |
| Other comprehensive loss for the year, net of tax | (70.8) | (73.6) | |
| Total comprehensive loss for the year | (484.6) | (27.1) | |
| Attributable to: | |||
| Equity holders of the parent | (484.6) | (27.1) | |
| Non-controlling interest | - | - | |
| Total comprehensive loss for the year | (484.6) | (27.1) |
* Prior year amounts have been re-presented for the impact of the discontinued operations (note 9)
| EUR MILLION | NOTE | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|---|
| Property, plant and equipment | 15 | 1,416.0 | 1,690.3 |
| Intangible assets | 16 | 6.0 | 3.3 |
| Investments in equity accounted investees | 18 | 3.4 | 3.4 |
| Investments in equity securities | 19 | 22.4 | 19.8 |
| Deferred income tax assets | 13 | 343.0 | 332.1 |
| Other financial assets | 20 | 165.3 | 163.8 |
| Other assets | 22 | 2.0 | 0.7 |
| Total non-current assets | 1,958.1 | 2,213.4 | |
| Inventories | 21 | 720.1 | 965.1 |
| Trade and other receivables | 23 | 219.0 | 223.5 |
| Prepayments and deferred expenses | 9.2 | 10.2 | |
| Current income tax assets | 7.3 | 6.4 | |
| Other financial assets | 20 | 52.8 | 42.0 |
| Other assets | 22 | - | 0.7 |
| Cash and cash equivalents | 24 | 127.1 | 68.4 |
| Assets classified as held for sale | 9 | 41.3 | - |
| Total current assets | 1,176.8 | 1,316.3 | |
| Total assets | 3,134.9 | 3,529.7 | |
| Share capital and share premium | 25 | 2,153.1 | 2,250.7 |
| Perpetual securities | 26 | 131.6 | 186.3 |
| Reserves | 27 | (103.9) | (161.3) |
| Accumulated losses | (1,647.1) | (1,615.9) | |
| Foreign currency translation differences accumulated in equity relating to | |||
| disposal group held for sale | 27 | 10.2 | - |
| Total equity attributable to equity holders of the parent | 543.9 | 659.8 | |
| Total equity | 543.9 | 659.8 | |
| Loans and borrowings | 28 | 565.0 | 948.4 |
| Deferred income tax liabilities | 13 | 87.8 | 67.7 |
| Provisions | 29 | 160.4 | 156.8 |
| Employee benefits | 30 | 74.0 | 73.5 |
| Other financial liabilities | 20 | 85.2 | 15.6 |
| Deferred income | 32 | 52.7 | 79.1 |
| Total non-current liabilities | 1,025.1 | 1,341.1 | |
| Trade and other payables | 31 | 606.9 | 631.9 |
| Current income tax liabilities | 2.9 | 0.4 | |
| Loans and borrowings | 28 | 427.0 | 221.6 |
| Provisions | 29 | 28.2 | 19.1 |
| Employee benefits | 30 | 36.0 | 36.6 |
| Other financial liabilities | 20 | 121.9 | 151.5 |
| Deferred income | 32 | 313.0 | 465.6 |
| Other liabilities | 22 | 1.3 | 2.1 |
| Liabilities classified as held for sale | 9 | 28.7 | - |
| Total current liabilities | 1,565.9 | 1,528.8 | |
| Total liabilities | 2,591.0 | 2,869.9 | |
| Total equity and liabilities | 3,134.9 | 3,529.7 | |
| EUR MILLION | NOTE | SHARE CAPITAL | SHARE PREMIUM | PERPETUAL SECURITIES |
RESERVES AS FAR |
ACCUMULATED LOSSES |
TOTAL AMOUNT ATTRIBUTABLE TO SHAREHOLDERS |
TOTAL EQUITY |
|---|---|---|---|---|---|---|---|---|
| As at 1 Jan 2017 | 1,024.1 | 1,129.0 | 131.6 | (93.7) | (1,647.1) | 543.9 | 543.9 | |
| Profit for the year | - | - | - | - | 46.5 | 46.5 | 46.5 | |
| Other comprehensive loss | - | - | - | (67.6) | (6.0) | (73.6) | (73.6) | |
| Total comprehensive loss | - | - | - | (67.6) | 40.5 | (27.1) | (27.1) | |
| Capital increase | 25 | 16.1 | 81.5 | - | - | - | 97.6 | 97.6 |
| Issuance of perpetual securities | 26 | - | - | 54.7 | - | - | 54.7 | 54.7 |
| Distribution on perpetual | ||||||||
| securities | 26 | - | - | - | - | (7.4) | (7.4) | (7.4) |
| Share-based payments | - | - | - | - | (1.9) | (1.9) | (1.9) | |
| As at 31 Dec 2017 | 1,040.2 | 1,210.5 | 186.3 | (161.3) | (1,615.9) | 659.8 | 659.8 |
| EUR MILLION | NOTE | SHARE CAPITAL | SHARE PREMIUM | PERPETUAL SECURITIES |
RESERVES AS FAR* |
ACCUMULATED LOSSES |
TOTAL AMOUNT ATTRIBUTABLE TO SHARE HOLDERS |
TOTAL EQUITY |
|---|---|---|---|---|---|---|---|---|
| As at 1 Jan 2016 | 960.9 | 931.1 | 21.8 | (31.0) | (1,239.2) | 643.6 | 643.6 | |
| Loss for the year | - | - | - | - | (413.8) | (413.8) | (413.8) | |
| Other comprehensive income / (loss) |
- | - | - | (78.6) | 7.8 | (70.8) | (70.8) | |
| Total comprehensive loss | - | - | - | (78.6) | (406.0) | (484.6) | (484.6) | |
| Capital increase | 63.2 | 199.1 | - | - | - | 262.3 | 262.3 | |
| Change in par value | 25 | 1.2 | (1.2) | - | - | - | - | - |
| Treasury shares | 25 | (1.2) | - | - | 1.2 | - | - | - |
| Issuance of perpetual securities | 26 | - | - | 109.8 | - | - | 109.8 | 109.8 |
| Issuance of convertible bond | 28 | - | - | - | 14.7 | - | 14.7 | 14.7 |
| Distribution on perpetual | ||||||||
| securities | 26 | - | - | - | - | (3.5) | (3.5) | (3.5) |
| Share-based payments | - | - | - | - | 1.6 | 1.6 | 1.6 | |
| As at 31 Dec 2016 | 1,024.1 | 1,129.0 | 131.6 | (93.7) | (1,647.1) | 543.9 | 543.9 |
* Includes foreign currency translation differences relating to disposal group held for sale
| EUR MILLION | NOTE | 2016 | 2017 |
|---|---|---|---|
| Profit / (loss) for the year | (413.8) | 46.5 | |
| Adjustment for: | |||
| Depreciation, depletion and amortisation | 15,14 | 207.5 | 156.6 |
| Income tax (benefit) / expense | 13 | 39.5 | (38.5) |
| Net finance expense | 12 | 127.5 | 209.4 |
| Impairment (reversal) / loss (net) | 17 | 266.3 | (142.2) |
| Equity settled share based payment transactions | 2.8 | 2.5 | |
| Non-cash repayment of zinc prepayment | 20 (g) | - | (79.4) |
| Other non-monetary items | (37.1) | (21.7) | |
| Gain on disposal of subsidiary | 8 | (55.4) | (31.8) |
| Gain on sale of property, plant and equipment | 15 | (1.9) | (1.0) |
| Income tax paid | (22.1) | (12.6) | |
| Cash flow from operating activities before working capital changes | 113.3 | 87.8 | |
| Change in inventories | (234.0) | (346.8) | |
| Change in trade and other receivables | 24.3 | 31.4 | |
| Change in prepayments and deferred expenses | 2.7 | (1.7) | |
| Change in deferred income | 61.3 | 179.1 | |
| Change in trade and other payables | 19.1 | 79.6 | |
| Change in other assets and liabilities | (53.6) | 18.2 | |
| Change in provisions and employee benefits | (14.5) | (9.2) | |
| Cash flow from / (used in) operating activities | (81.4) | 38.4 | |
| Acquisition of property, plant and equipment | 15 | (294.0) | (368.0) |
| Acquisition of intangible assets | 16 | (0.3) | (1.9) |
| Proceeds from sale of property, plant and equipment | 2.4 | 2.7 | |
| Proceeds from sale of intangible assets | 1.2 | 0.9 | |
| Proceeds from sale of subsidiary | 8 | 10.6 | 32.1 |
| Interest received | 1.1 | 2.3 | |
| Cash flow used in investing activities | (279.0) | (331.9) | |
| Capital increase | 25 | 262.3 | 97.6 |
| Issue of perpetual securities | 26 | 109.8 | 54.7 |
| Distribution on perpetual securities | 26 | (3.5) | (7.4) |
| Proceeds from borrowings | 205.0 | 552.7 | |
| Repayment of borrowings | (417.2) | (224.0) | |
| Change in SCTF credit facility | 28 | 316.2 | (115.1) |
| Proceeds from zinc prepayment | 20 (g) | 31.6 | - |
| Interest paid | (115.3) | (115.7) | |
| Cash flow from financing activities | 388.9 | 242.8 | |
| Net (decrease) / increase in cash held | 28.5 | (50.7) | |
| Cash at the beginning of the year | 9,24 | 96.1 | 129.4 |
| Exchange fluctuations | 4.8 | (10.3) | |
| Cash at the end of the year | 9,24 | 129.4 | 68.4 |
| 1. Reporting entity | 95 |
|---|---|
| 2. Basis of preparation | 95 |
| 3. Significant accounting policies | 99 |
| 4. Critical accounting estimates and judgements | 114 |
| 5. Financial risk management | 118 |
| 6. Exchange rates | 121 |
| 7. Segment reporting | 121 |
| 8. Acquisition and disposal of business | 125 |
| 9. Discontinued operations | 126 |
| 10. M&A related transaction expense | 131 |
| 11. Employee benefits expense | 132 |
| 12. Finance income and expense | 132 |
| 13. Income tax | 132 |
| 14.Other expense | 138 |
| 15. Property, plant and equipment | 138 |
| 16. Intangible assets | 139 |
| 17. Impairment | 140 |
| 18. Investments in equity accounted investees | 144 |
| 19. Investments in equity securities | 145 |
| 20. Other financial assets and liabilities | 145 |
| 21. Inventories | 149 |
| 22. Other assets and liabilities | 149 |
| 23. Trade and other receivables | 150 |
|---|---|
| 24. Cash and cash equivalents | 150 |
| 25. Capital | 151 |
| 26. Perpetual securities | 153 |
| 27. Reserves | 156 |
| 28. Loans and borrowings | 157 |
| 29. Provisions | 160 |
| 30. Employee benefits | 161 |
| 31. Trade and other payables | 167 |
| 32. Deferred income | 167 |
| 33. Share-based payments | 169 |
| 34. Earnings per share | 173 |
| 35. Financial instruments | 175 |
| 36. Capital commitments | 186 |
| 37. Operating leases | 186 |
| 38. Contingencies | 187 |
| 39. Related parties | 187 |
| 40. Audit and non-audit services by the Company's statutory auditor |
192 |
| 41. Group entities | 193 |
| 42. Subsequent events | 193 |
Nyrstar NV (the "Company") is an integrated mining and metals business, with market leading positions in zinc and lead, and significant positions in other base and precious metals. Nyrstar has mining, smelting, and other operations located in Europe, Australia, Canada, the United States and Latin America. Nyrstar is incorporated and domiciled in Belgium and has its corporate office in Switzerland. The address of the Company's registered office is Zinkstraat 1, 2490 Balen, Nyrstar is listed on NYSE Euronext Brussels under the symbol NYR. For further information please visit the Nyrstar website, www.nyrstar.com.
The consolidated financial statements of the Company as at and for the year ended 31 December 2017 comprise the Company and its subsidiaries (together referred to as "Nyrstar" or the "Group" and individually as "Group entities") and the Group's interest in associates and joint ventures. The consolidated financial statements were authorised for issue by the Board of Directors of Nyrstar NV on 21 February 2018.
The consolidated financial statements of Nyrstar are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. These include International Financial Reporting Standards (IFRS) and the related interpretations issued by the International Accounting Standards Board (IASB), and the IFRS Interpretations Committee (IFRIC), effective at the reporting date and adopted by the European Union. The consolidated financial statements have been prepared on a going concern basis.
The consolidated financial statements have been prepared under the historical cost basis except for derivative financial instruments (note 20), financial instruments at fair value through profit or loss (note 20), and available-for-sale financial assets (note 19).
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional' currency). The consolidated financial statements are presented in EUR, which is the Company's functional and presentation currency. All financial information has been rounded to the nearest hundred thousand EUR.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgements in the process of applying Nyrstar's accounting policies. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Critical accounting estimates and judgements are disclosed in note 4.
The following new and revised standards and interpretations, effective as of 1 January 2017 and endorsed by the European Union, have been adopted in the preparation of the consolidated financial statements:
• Amendments to IAS 7 – Statement of cash flows: Disclosure initiative
The amendment to IAS 7 requires entities to provide disclosures about changes in their liabilities arising from financing activities, including changes arising from financing cash flows and non-cash changes (such as foreign exchange movements). The Group has included a reconciliation of cash flow movements in borrowings in note 35 (g) to comply with this amendment.
• Amendments to IAS 12 Recognition of Deferred Tax Assets for unrealised Losses - as issued by IASB effective on 1st January 2017. The amendment to IAS 12 clarifies the accounting treatment for deferred tax assets related to debt instruments measured at fair value. The adoption of this amendment has had no material impact on the Group.
The Group has not early adopted any other amendment, standard, or interpretation that has been issued but is not yet effective. It is expected that where applicable, these standards and amendments will be adopted on each respective effective date.
At the date of authorization of these consolidated financial statements, the following new and revised IFRS standards, which are applicable to the Group, were issued but are not yet effective:
IFRS 15 was issued in May 2014 and subsequent amendments, Clarifications to IFRS 15, were issued in April 2016. IFRS 15, as amended, is effective for accounting periods beginning on or after 1 January 2018, although the April 2016 amendments have not yet been endorsed by the EU. For the Group, transition to IFRS 15 will take place on 1 January 2018.
The Group has assessed the impacts of transitioning to IFRS 15. Under IFRS 15 the revenue recognition model will change from one based on the transfer of risk and reward of ownership to the transfer of control of ownership. The Group's revenue is predominantly derived from commodity sales, where the point of recognition is dependent on the contractual sales terms, known as the International Commercial terms (Incoterms). As the time of the transfer of risks and rewards coincides with the transfer of a control, the timing and the amount of revenue recognised is unlikely to be materially affected for the majority of sales.
For the Incoterms Cost, Insurance and Freight ("CIF"), the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. Consequently, the freight service on export commodity contracts with CIF Incoterms will meet the criteria of a separate performance obligation and a portion of the revenue earned under these contracts, representing the obligation to perform freight service, is deferred and recognized over time as this obligation is fulfilled, along with the associated costs.
The Group has assessed the impact of the CIF sales to the year ending 31 December 2017 with the following impact:
The Group will apply IFRS 15 for the annual reporting periods beginning on 1 January 2018, with the cumulative effect of initially applying IFRS 15, recognised at the date of initial application. Apart from providing more extensive disclosures on the Group's revenue transactions, the Directors do not anticipate the application of IFRS 15 to have a significant impact on the financial position and/or financial performance of the Group.
IFRS 9 revised version was issued in July 2014 and become effective for the accounting periods beginning on or after 1 January 2018, which will be the date the Group transitions to IFRS 9. The new standard is applicable to financial assets and financial liabilities, and covers all three aspects of the accounting for financial instruments project: classification and measurement, impairment and derecognition of financial assets and financial liabilities, and a new hedge accounting model.
Based on the analysis of the Group's financial assets and liabilities as at 31 December 2017, the Group has assessed the impact of IFRS 9 to the Group's consolidated financial statements as follows:
The changes to classification and measurement of financial instruments is unchanged on application of the new standard.
The Group financial assets held at amortised cost primarily relate to trade receivables. The impact of the introduction of an 'expected credit loss' model for the assessment of impairment of financial assets held at amortised costs does not have a material impact on the Group's consolidated financial statements. This is on the basis (i) the Group does not have a history of credit losses; and (ii) there has not been a significant change in the mix, credit terms, or credit quality of the underlying counterparties as at 31 December 2017.
The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk management activities have also been introduced.
As the new hedge accounting requirements will align more closely with the Group's risk management policies, the Group has assessed that the existing hedges entered into by the Group will continue to qualify for hedge accounting upon the application of IFRS 9.
Management does not anticipate the application of the hedge accounting requirements of IFRS 9 to have a material impact on the Group's consolidated financial statements.
IFRS 16 was published in January 2016 and will be effective for the Group from 1 January 2019. It replaces IAS 17 leases, subject to EU endorsement. IFRS 16 will primarily change lease accounting for lessees; lease agreements will give rise to the recognition of an asset representing the right to use the leased item and a loan obligation for future lease payables. Lease costs will be recognised in the form of depreciation of the right to use the leased item and a loan obligation for future lease payables. Lessee accounting under IFRS 16 will be similar to existing IAS 17 accounting for finance leases, but will be substantively different for operating leases when rental charges are currently recorded on a straight-line basis and no lease asset or lease loan obligation is recognised. Certain exemptions are available for leases with lease term of 12 months or less or where the underlying asset is of low value and there is an option not to reassess existing arrangements on transition.
As at 31 December 2017, the Group has non-cancellable operating lease commitments of EUR 46.7 million (note 37). IAS 17 does not require the recognition of any right to use asset or liability for future payments for these leases. The Group's assessment indicates that these arrangements will meet the definition of a lease under IFRS 16, and hence the Group will recognise a right to use an asset and a corresponding liability in respect of all these leases unless they qualify for low value or short term leases upon the application of IFRS 16.
In contrast, for finance leases where the Group is a lessee, as the Group has already recognised an asset and a related finance lease liability for these lease arrangements, the application of IFRS 16 will not have a significant impact on the finance leases as they already recognised in the Group's consolidated financial statements.
The amendments to IFRS 2 share-based payments clarify the classification and measurement of share-based payments transactions with respect to accounting for cash-settled share-based payment transactions that include a performance obligation, the classification of share-based payment transactions with net settlement features and the accounting for modifications of share-based payment transactions from cash-settled to equity-settled. The Group has assessed the impact of the change on its consolidated financial statements and it does not expect any material impact.
IFRS 17 – Insurance Contracts – issued on 18 May 2017, IASB effective on 1st January 2021. This standard establishes the principles, measurement, presentation and disclosure of insurance contracts. The objective is to ensure providing relevant information that faithfully represent those contracts. The information should give a basis for users of financial statements to assess effect that insurance contracts have on the entity's financial position, financial performance, and cash flow. Application of IFRS 17 will not have a material impact on the financial statements of the Group.
Other issued standards and amendments that are not yet effective, are listed below:
Clarifications to IFRS 15 Clarifications to IFRS 15 Revenue from Contracts with customers as issued by IASB effective on 1st January 2018. For the impact of IFRS 15 Revenue from Contracts with customers please refer to the paragraphs above.
Amendments to IAS 28 Long-term Interests in associates and Joint Ventures as issued by IASB effective in annual periods beginning on or after 1 January 2019. Not yet endorsed for use in the EU.
The Group uses so called "Alternative Performance Measures" ("APM") in the financial statements and notes. An APM is a financial measure of historical or future financial performance, financial position or cash flows, other than a financial measure defined in the applicable financial reporting framework (IFRS). A glossary describing these can be found on www.nyrstar.com. They are consistently used over time and when a change is needed, the comparable is disclosed.
The accounting policies set out below have been applied consistently in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2017 and 2016 with the exception of a new policy note (note 26) in connection with the perpetual securities. As at 31 December 2016, the perpetual securities were classified as compound financial instruments comprising of both equity and liability components. During the year ended 31 December 2017, the terms of the perpetual securities were amended which resulted in the perpetual securities being classified as equity instruments as at 31 December 2017. The classification of the perpetual securities as equity instruments did not impact the financial statements on the basis the liability portion was insignificant as at 31 December 2016.
Subsidiaries are all entities over which the Group has control. The Group controls another entity, when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When the Company has less than a majority of the voting rights, it has power over another entity when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the other entity unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group's voting rights in the other entity are sufficient to give it power. The Group reassesses whether or not it controls another entity if facts and circumstances indicate there are changes to one or more of the three elements of control. Subsidiaries are consolidated from the date on which control is transferred to the Group until the date the control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries in these consolidated financial statements. The assets, liabilities and contingent liabilities of the acquired entity are measured at their fair values at the date of acquisition. Provisional fair values allocated at a reporting date are finalised within twelve months of the acquisition date. The cost of acquisition is measured as the fair value of assets transferred to, shares issued to or liabilities undertaken on behalf of the previous owners at the date of acquisition. Acquisition-related costs are expensed in the period in which the costs are incurred and the services received.
The excess of the cost of acquisition over Nyrstar's share of the fair value of the net assets of the entity acquired is recorded as goodwill. If Nyrstar's share in the fair value of the net assets exceeds the cost of acquisition, the excess is recognised immediately in the income statement.
Associates are those entities in which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity.
Joint arrangements are those arrangements of which the Group has joint control, established by contractual agreement and requiring unanimous consent for decisions about the relevant activities. Associates and joint ventures are accounted for using the equity method (equity accounted investees) and are initially recorded at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses.
The consolidated financial statements include the Group's share of the income and expense and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.
When the Group's share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent the Group has an obligation to or has made payments on behalf of the investee.
When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in the joint operation: (a) its assets, including its share of any assets held jointly; (b) its liabilities, including its share of any liabilities incurred jointly; (c) its revenue from the sale of its share of the output arising from the joint operation; (d) its share of the revenue from the sale of the output by the joint operation; and (e) its expenses, including its share of any expenses incurred jointly. The accounting treatment for the assets, liabilities, revenues and expenses are accounted for by the Group in accordance with its accounting policies and IFRSs applicable to the particular assets, liabilities, revenues and expenses.
Non-controlling interests (NCI) in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group's equity therein. NCI consist of the amount of those interests at the date of the original business combination (see below) and the NCI's share of changes in equity since the date of the combination.
The consolidated financial statements include the consolidated financial information of the Nyrstar Group entities. All intercompany balances and transactions with consolidated businesses have been eliminated. Unrealised gains and losses arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. The Group accounts for the elimination of the unrealised profits resulting from intercompany transactions between the mining and smelting businesses. These transactions relate to the sales from the mining to the smelting segment which have not been realised externally.
Foreign currency transactions are recognised during the period in the functional currency of each entity at exchange rates prevailing at the date of transaction. The date of a transaction is the date at which the transaction first qualifies for recognition. For practical reasons a rate that approximates the actual rate at the date of the transaction is used at some Group entities, for example, an average rate for the week or the month in which the transactions occur.
Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate at the balance sheet date.
Gains and losses resulting from the settlement of foreign currency transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement.
The income statement and statement of financial position of each Nyrstar operation that has a functional currency different to EUR is translated into the presentation currency as follows:
Exchange differences arising from the translation of the net investment in foreign operations are released into the income statement upon disposal.
Commodity hedging, via the use of metal futures, is undertaken to reduce the Group's exposure to fluctuations in commodity prices in relation to (i) its unrecognised firm commitments arising from fixed price forward sales contracts and (ii) future volatility in cash flows from the sale of metal.
Derivatives are initially recognised at their fair value on the date Nyrstar becomes a party to the contractual conditions of the instrument. The method of recognising the changes in fair value subsequent to initial recognition is dependent upon whether the derivative is designated as a hedging instrument, the nature of the underlying item being hedged and whether the arrangement qualifies for hedge accounting.
Hedge accounting requires the relationship between the hedging instrument and the underlying hedged item, as well as the risk management objective and strategy for undertaking the hedging transaction to be documented at the inception of the hedge. Furthermore, throughout the life of the hedge, the derivative is tested (with results documented) to determine if the hedge has been or will continue to be highly effective in offsetting changes in the fair value or cash flows associated with the underlying hedged item.
A hedge of the fair value of a recognised asset or liability or of a firm commitment is referred to as a fair value hedge. Changes in the fair value of derivatives that are designated and qualify as fair value hedges, are recorded in the income statement, together with changes in the fair value of the underlying hedged item attributable to the risk being hedged.
A hedge of the cash flows to be received or paid relating to a recognised asset or liability or a highly probable forecast transaction is referred to as a cash flow hedge. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised outside of the income statement, directly in other comprehensive income in the hedging reserve. Changes in the fair value of cash flow hedges relating to the ineffective portion are recorded in the income statement. Amounts accumulated in the hedging reserve are recycled through the income statement in the same period that the underlying hedged item is recorded in the income statement. When a hedge no longer meets the criteria for hedge accounting, and the underlying hedged transaction is no longer expected to occur, any cumulative gain or loss recognised in the hedging reserve is transferred to the income statement. When a hedge is sold or terminated, any gain or loss made on termination is only deferred in the hedging reserve where the underlying hedged transaction is still expected to occur.
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement. Where an embedded derivative is identified and the derivative's risks and characteristics are not considered to be closely related to the underlying host contract, the fair value of the derivative is recognised on the consolidated statement of financial position and changes in the fair value of the embedded derivative are recognised in the income statement.
The classification of investments depends on the purpose for which the investments have been acquired. Management determines the classification of investments at initial recognition. These investments are classified as available-for-sale financial assets and are included in non-current assets unless the Group intends to dispose of the investment within 12 months of the balance sheet date.
The fair value of investments in equity securities is determined by reference to their quoted closing bid price at the reporting date. Any impairment charges are recognised in profit or loss, while other changes in fair value are recognised in other comprehensive income. When investments are sold, the accumulated fair value adjustments recognised in other comprehensive income are included in the income statement within 'gain/loss on sale of investments in equity securities'.
Certain commodity prepayment agreements do not qualify for recognition under Nyrstar's normal purchase, sale or usage requirements and are accounted for as financial instruments. These agreements are classified as other financial liabilities and initially recognised at fair value, net of transaction costs incurred, and subsequently carried at amortised cost.
Items of property, plant and equipment are carried at cost less accumulated depreciation and impairment. The cost of self-constructed assets includes the cost of materials, direct labour, and an appropriate proportion of production overheads.
The cost of self-constructed assets and acquired assets include estimates of the costs of closure, dismantling and removing the assets and restoring the site on which they are located and the area disturbed. All items of property, plant and equipment, are depreciated on a straight-line and/or unit of production basis. Freehold land is not depreciated.
Once a mining project has been established as commercially viable, expenditure other than that on land, buildings, plant and equipment is capitalised under 'Mining properties and development' together with any previously capitalised expenditures reclassified from 'Exploration and evaluation (see note 3e).
Useful lives are based on the shorter of the useful life of the asset and the remaining life of the operation, in which the asset is being utilised. Depreciation rates, useful lives and residual values are reviewed regularly and reassessed in light of commercial and technological developments. Changes to the estimated residual values or useful lives are accounted for prospectively in the period in which they are identified.
The expected useful lives are the lesser of the life of the assets or as follows:
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Critical spare parts purchased for particular items of plant, are capitalised and depreciated on the same basis as the plant to which they relate.
During the construction phase, assets under construction are classified as construction in progress within property, plant and equipment. Once commissioned these assets are reclassified to property, plant and equipment at which time they will commence being depreciated over their useful life.
The costs of acquiring mineral reserves and mineral resources are capitalised on the statement of financial position as incurred. Capitalised costs representing mine development costs include costs incurred to bring the mining assets to a condition of being capable of operating as intended by management. Mineral reserves and in some instances mineral resources and capitalised mine development costs are depreciated from the commencement of production using generally the unit of production basis. They are written off if the property is abandoned.
Group entities recognise, in the carrying amount of an item of plant and equipment, the incremental cost of replacing a component part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group entity, the cost incurred is significant in relation to the asset and the cost of the item can be measured reliably. Accordingly, major overhaul expenditure is capitalised and depreciated over the period in which benefits are expected to arise (typically three to four years). All other repairs and maintenance are charged to the income statement during the financial period in which the costs are incurred.
Exploration and evaluation expenditure relates to costs incurred on the exploration and evaluation of potential mineral reserves and resources and includes costs such as exploratory drilling and sample testing and the costs of pre-feasibility studies. Exploration and evaluation expenditure for each area of interest, other than that acquired from the purchase of another mining company, is capitalised as an asset provided that one of the following conditions is met:
Acquired mineral rights comprise identifiable exploration and evaluation assets including mineral reserves and mineral resources, which are acquired as part of a business combination and are recognized at fair value at date of acquisition. The acquired mineral rights are reclassified as "mine property and development" from commencement of development and amortised on a unit of production basis, when commercial production commences.
Capitalised exploration and evaluation assets are transferred to mine development assets once the work completed to date supports the future development of the property and such development receives appropriate approvals.
Software and related internal development costs are carried at historical cost, less accumulated amortisation and impairment losses. They are typically amortised over a period of five years.
CO2 emission rights/Carbon permits are carried at historical cost, less impairment losses: These intangibles are not amortised. The corresponding balance is recognised in provisions.
Leases under which the Group assumes substantially all of the risks and benefits of ownership, are classified as finance leases, while other leases are classified as operating leases. Finance leases are capitalised with a lease asset and liability equal to the present value of the minimum lease payments or fair value, if lower, being recorded at the inception of the lease. Capitalised lease assets are amortised on a straight-line basis over the shorter of the useful life of the asset or the lease term. Each finance lease repayment is allocated between the liability and finance charges based on the effective interest rate implied in the lease contract.
Lease payments made under operating leases are recognised in the income statement over the accounting periods covered by the lease term.
Inventories of finished metals, concentrates and work in progress are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expense. Byproducts inventory obtained as a result of the production process are valued at the lower of cost and net realisable value. Cost includes expenditure incurred in acquiring and bringing the stock to its existing condition and location and includes an appropriate allocation of fixed and variable overhead expense, including depreciation and amortisation. Stores of consumables and spares are valued at cost with allowance for obsolescence. Cost of purchase of all inventories is determined on a FIFO basis. In addition to purchase price, conversion costs are allocated to work-in-progress and finished goods. These conversion costs are based on the actual costs related to the completed production steps.
As the Group applies hedge accounting as referred in note 3c, the hedged items of inventory are adjusted by the fair value movement attributable to the hedged risk. The fair value adjustment remains part of the carrying value of inventory and enters into the determination of earnings when the inventory is sold. This impact is compensated by the hedge derivatives, which are also adjusted for fair value changes.
A financial asset that is not measured at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost, is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
For available for sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. Impairment losses on available for sale equity investments are not reversed.
The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated annually.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit"). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units or groups of cash generating units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss recognised in respect of goodwill cannot be reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Liabilities for wages and salaries, including non-monetary benefits and annual leave are recognised in respect of employees' services up to the reporting date, calculated as undiscounted amounts based on remuneration wage and salary rates that the entity expects to pay at the reporting date including related on-costs, such as payroll tax.
A liability for long-term employee benefits is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of service provided by employees up to the balance sheet date. Consideration is given to expected future wage and salary levels including related on-costs, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national high quality corporate bonds with terms to maturity and currency that match the estimated future cash flows.
Payments to defined contribution retirement plans are recognised as an expense when employees have rendered service entitling them to the contributions.
The Group recognises a net liability in respect of defined benefit superannuation or medical plans in the statement of financial position. The net liability is measured as the present value of the defined benefit obligation at the balance sheet date less the fair value of the plan assets belonging to the plans and represents the actual deficit or surplus in the Group's defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans ("asset ceiling").
The present value of the defined benefit obligations is based on expected future payments that arise from membership of the fund to the balance sheet date. This obligation is calculated annually by independent actuaries using the projected unit credit method. Expected future payments are discounted using market yields at the balance sheet date on high quality corporate bonds with terms to maturity and currency that match the estimated future cash flows. Any future taxes that are funded by the entity and are part of the provision of the defined benefit obligation are taken into account when measuring the net asset or liability.
Defined benefit costs are split into three categories:
The Group presents the first component of defined benefit costs in the line item 'employee benefits expenses' and the second component in the line item 'finance expenses' in its income statement. Curtailments gains and losses are accounted for as past-service cost.
Re-measurement comprises of actuarial gains and losses on the defined benefit obligations, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest income). These are recognised immediately in the statement of financial position with a charge or credit to Other Comprehensive Income ("OCI") in the period in which they occur. Re-measurement recorded in OCI is not recycled. Those amounts recognised in OCI may be reclassified within equity. Past service costs are immediately recognised in profit or loss in the period of plan amendment and are not deferred anymore. Net-interest is calculated by applying the discount rate to the net defined benefit liability or asset.
The Group operates a leveraged employee stock ownership plan and an executive long-term incentive plan, which, at the Group's discretion, are equity-settled or cash-settled share-based compensation plans.
The fair value of equity instruments granted under the equity-settled plans are recognised as an employee benefit expense with a corresponding increase recognised in equity. The fair value is measured at the grant date and recognised over the period during which the eligible employees become entitled to the shares. The amount recognised as an employee benefit expense is the fair value multiplied by the number of equity instruments granted. At each balance sheet date, the amount recognised as an expense is adjusted to reflect the estimate of the number of equity instruments expected to vest, except where forfeiture is only due to the Company's share price not achieving the required target.
For cash-settled share-based payment transactions, the services received and the liability incurred are measured at the fair value of the liability at grant date. The initial measurement of the liability is recognised over the period that services are rendered. At each reporting date, and ultimately at settlement date, the fair value of the liability is re-measured with any changes in fair value recognised in the income statement for the period.
A provision is recognised if, as a result of a past event, when the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are recognised for estimated closure, restoration and environmental rehabilitation costs. These costs include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas in the financial year when the related environmental disturbance occurs. They are based on the estimated future cash flows adjusted for the risk relating to the uncertainty of the amount and timing of the cash flows using information available at each balance sheet date. The provision is discounted using a current market-based pre-tax discount rate that includes a risk free rate reflecting the location of the provision and a credit spread specific to the liability (note 29). The unwinding of the discount is recognised as interest expense. When the provision is established, a corresponding asset is recognised, where it gives rise to a future benefit, and depreciated over future production from the operations to which it relates.
The provision is reviewed on an annual basis for changes to costs, legislation, discount rates or other changes that impact estimated costs or lives of the operations. The carrying value of the related asset (or the income statement when no related asset exists) is adjusted for changes in the provision resulting from changes in the estimated cash flows or discount rate. The adjusted carrying value of the asset is depreciated prospectively.
A constructive obligation for a restructuring arises only when two conditions are fulfilled: (a) there is a formal business plan for the restructuring specifying the business or part of a business concerned, the principal locations affected, the location, function and approximate number of employees whose services will be terminated, the expenditure to be incurred and when the plan will be implemented, (b) the entity has raised a valid expectation in those affected that it will carry out the plan either by starting to implement the plan or announcing its main feature to those affected by it. Restructuring provisions include only incremental costs associated directly with the restructuring.
Other provisions are recognised when the Group has a present obligation (legal or constructive), as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. Where the effect is material, the provision is discounted to net present value using an appropriate current market-based pre-tax discount rate and the unwinding of the discount is included in finance costs.
Compound financial instruments issued by the Group comprise:
• Convertible bonds that can be converted to share capital at the option of the holder, and the number of shares to be issued is fixed.
The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity component. The equity component is recognised initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component, and is included in shareholders' equity. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.
Revenue associated with the sale of commodities is recognised when all significant risks and rewards of ownership of the asset sold are transferred to the customer, usually when insurance risk has passed to the customer and the commodity has been delivered to the shipping agent or the location designated by the customer. At this point Nyrstar retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the commodities and the costs incurred, or to be incurred, in respect of the sale can be reliably measured. Revenue is recognised, at fair value of the consideration receivable, to the extent that it is probable that economic benefits will flow to Nyrstar and the revenue can be reliably measured. Revenue is generally recognised based on incoterms ex-works (EXW) or carriage, insurance and freight (CIF). Revenues from the sale of by-products are also included in sales revenue. Revenue is stated on a gross basis, with freight included in gross profit as a deduction.
For certain commodities the sales price is determined provisionally at the date of sale, with the final price determined within mutually agreed quotation period and the quoted market price at that time. As a result, the invoice price on these sales are mark-to-market at balance sheet date based on the prevailing forward market prices for the relevant quotation period. This ensures that revenue is recorded at the fair value of consideration to be received. Such mark-to-market adjustments are recorded in sales revenue.
When Nyrstar's goods are swapped for goods that are of a similar nature and value, the swap is not regarded as a transaction that generates revenue. The outstanding balances related to these swaps are being recognised as other receivables and other payables until the swaps are fully settled. If any settlement in cash or cash equivalents occurs for value equalisation of such transactions, this settlement amount is recognised in raw materials used. When the goods swapped however are of a dissimilar nature or value from each other, the swap is regarded as a transaction that generates revenue.
Finance income includes:
Interest income is recognised as it accrues in the income statement using the effective interest rate method. Dividend income is recognised in the income statement on the date that the Group's right to receive payment is established.
Finance expenses include:
Finance expenses are calculated using the effective interest rate method. Finance expenses incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other finance expenses are expensed as incurred.
Net finance expenses represent finance expenses net of any interest received on funds invested. Interest income is recognised as it accrues using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
Income tax expense comprises current and deferred income tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or equity.
Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred income tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and joint ventures to the extent that it is probable that they will not reverse in the foreseeable future. In addition, a deferred income tax liability is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current income tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities but they intend to settle current income tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred income tax asset is recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised when the distribution is expected.
Mining taxes and royalties that have the characteristics of an income tax are treated and disclosed as current and deferred income taxes.
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts are repayable on demand and are shown within borrowings in current liabilities on the consolidated statement of financial position. For the purposes of the consolidated statement of balance sheet and cash flows, cash includes cash on hand and deposits at call which are readily convertible to cash and are subject to an insignificant risk of changes in value, net of any outstanding bank overdrafts which are recognised at their principal amounts.
These amounts represent liabilities for goods and services provided to the Group entities prior to the end of the financial year which are unpaid. The amounts are unsecured and are typically paid within 30 days of recognition. These amounts are initially recognized at fair value and are subsequently carried at amortised cost.
Deferred income consists of payments received by the Company in consideration for future physical deliveries of metal inventories and future physical deliveries of metals contained in concentrate at contracted prices. As deliveries are made, the Company recognises sales and decreases the deferred income on the basis of actual physical deliveries of the products. Revenue is recognised based on the nominal value of the future physical deliveries of metal to customers and the financing element to the advance payments is recognised in the Income Statement as interest expense applying the effective interest rate method.
Trade receivables represent amounts owing for goods and services supplied by the Group entities prior to the end of the financial period which remain unpaid. They arise from transactions in the normal operating activities of the Group.
Trade receivables are carried at amortised cost, less any impairment losses for doubtful debts. An impairment loss is recognised for trade receivables when collection of the full nominal amount is no longer certain.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effect(s).
Nyrstar presents basic and diluted earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit for the period attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit for the period attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
Operating segments are components of the Group for which discrete financial information is available and is evaluated regularly by Nyrstar's Management Committee (NMC) in deciding how to allocate resources and assess performance. The NMC has been identified as the chief operating decision maker.
The segment information reported to the NMC is prepared in conformity with the accounting policies consistent with those described in these financial statements and presented in the format outlined in note 7.
Revenues, expenses and assets are allocated to the operating segments to the extent that items of revenue, expense and assets can be directly attributed or reasonably allocated to the operating segments. The interrelated segment costs have been allocated on a reasonable pro rata basis to the operating segments.
When Nyrstar reacquires its own equity instruments, the par value of treasury shares purchased is deducted from reserves. The difference between the par value of the treasury shares purchased and the amount of consideration paid, which includes directly attributable costs, is recognised as a deduction from accumulated losses. Reacquired shares are classified as treasury shares and may be acquired and held by the entity or by other members of the consolidated group. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting gain or loss on the transaction is recognised in accumulated losses.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.
To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets that take more than 12 months to commission. In these circumstances, borrowing costs are capitalised to the cost of the assets and depreciated over the useful life of the assets. Capitalisation is based on the period of time that is required to complete and prepare the asset for its intended use.
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence and may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions that are in the normal course of business and have commercial substance are measured at the exchange amount.
The reverse acquisition reserve recognised in Company's reserves was recognised during the formation of Nyrstar in 2007 when one of the legal acquirees was considered to be the accounting acquirer under the rules of IFRS 3. As one of the accounting acquirees was not a business under IFRS 3, a part of the transaction was outside the scope of IFRS 3. While the concepts of reverse acquisition accounting have been applied as required, their application has not resulted in the recognition of goodwill but instead in the recognition of a 'reverse acquisition reserve' on consolidation related to the capital transaction of the accounting acquiree.
Estimates and judgements used in developing and applying the accounting policies are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. Nyrstar makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and underlying assumptions are reviewed on an ongoing basis.
The critical estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below.
The Company has assessed that, taking into account its available cash, cash equivalents and undrawn committed facilities available at the date of the consolidated financial statements, its cash flow projections for 2018 based on the approved budgets, it has sufficient liquidity to meet its present obligations and cover working capital needs for 2018 and will remain in compliance with its financial covenants throughout this period.
The cash flow projections for 2018 incorporate the following key assumptions:
Commodity prices and foreign exchange rates were developed from externally available sources from a number of different market commentators.
Based on historical results unless definitive plans are in place which are expected to have a significant effect on operations.
Treatment charges were developed from externally available forecasts and recent historical rates.
The cash flow projections for 2018 include management's best estimate of the revenue from the project.
The Company has undertaken a sensitivity analysis of its going concern assessment through independently adjusting the cash flow projections for 2018 for zinc prices, treatment charges, smelter production output and unfavourable movements in the USD. Each of the scenarios below were modelled independent of each other.
In all cases the sensitivity analysis indicated that the Company would have sufficient liquidity to meet its present obligations and cover working capital needs for 2018 and remain in compliance with its financial covenants throughout 2018.
Adverse movements in currency rates, commodity prices and/or operational results will affect the Company's liquidity or lower the Company's equity, and if these adverse movements persist for an extended period of time, the Company may have to take mitigating actions to maintain liquidity or equity headroom. A sustained and material impact on the Company's liquidity or equity will also impact the Company's ability to comply with financial covenants under its credit facilities.
The Group applies the requirements of IFRS 5: Non-current Assets Held for Sale and Discontinued Operations. The non-current assets and liabilities included in disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use, they are available for immediate disposal and the sale is highly probable. Noncurrent assets held for sale are measured at the lower of their carrying amount or fair value less costs of disposal. The classification of the assets and liabilities as held for sale requires judgement, in particular in relation to the assessment whether the sale of the assets can be considered as "highly probable". At 31 December 2017 there have not been any assets and liabilities classified as held for sale following the disposal of the Latin American mining operations in 2016 and 2017.
The recoverable amount of each cash-generating unit is determined as the higher of the asset's fair value less costs to sell and its value in use. These calculations require the use of estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance. For cash-generating units that comprise mining related assets, the estimates and assumptions also relate to the ore reserves and resources estimates (see below).
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable profits are available to utilise those temporary differences and losses, and the tax losses continue to be available having regard to the nature and timing of their origination and compliance with the relevant tax legislation associated with their recovery. In evaluating whether it is probable that taxable profits will be earned in future accounting periods, all available information is considered. The taxable profit forecasts used in this evaluation are consistent with those prepared and used internally for business planning and impairment testing purposes.
The key assumptions included in the assessment of the recoverability of the tax losses include:
The Group applied sensitivity testing by assuming a further conservative scenario (note 13).
The Group has applied estimates and judgments related to the fair value estimates in accounting for discontinued operations (note 9), revenue recognition, impairment testing (note 17), inventories (note 21), share-based payments (note 33) and for its financial assets and liabilities (note 20). Fair value measurements are estimated based on the amounts for which the assets and liabilities could be exchanged at the relevant transaction date or reporting period end, and are therefore not necessarily reflective of the likely cash flow upon actual settlements. Where fair value measurements cannot be derived from publicly available information, they are estimated using models and other valuation methods. To the extent possible, the assumptions and inputs used take into account externally verifiable inputs. However, such information is by nature subject to uncertainty, particularly where comparable market based transactions rarely exist.
Estimated recoverable reserves and resources are used to determine the depreciation of mine production assets (note 15), and in performing impairment testing (note 17). Estimates are prepared by appropriately qualified persons, but will be impacted by forecast commodity prices, exchange rates, production costs and recoveries amongst other factors. Changes in assumptions may impact the carrying value of assets and depreciation and impairment charges recorded in the income statement.
For year ended 31 December 2016, significant judgement was required to classify the perpetual securities (the Securities) as entirely equity or as compound instruments or entirely as financial liabilities (IAS 32 paragraph 25).
During the year ended 31 December 2017, Nyrstar agreed with the holder of the Securities to amend or exclude certain clauses relating to the contingent option for the holder to request redemption (i.e. a contingent settlement provision). Nyrstar can undertake certain actions to prevent a contingent settlement event from occurring. There are no circumstances, where Nyrstar would have to mandatorily redeem the Securities. As such, the Securities have been accounted for as entirely equity financial instruments as at 31 December 2017. This classification did not impact the financial statements as at 31 December 2016 on the basis that the fair value of the financial liability component of the compound financial instrument presented in the 31 December 2016 financial statements was insignificant. The Group has provided additional disclosure about the terms of the Securities in note 26.
In 2016 the Securities had both equity and liability features. The equity features included discretionary coupons which the Group may pay into perpetuity. The liability features included the holder's right to request redemption of the Securities for cash in highly specific circumstances (early redemption events) outside of the control of the Group and the holder of the Securities. In 2016 the Group concluded it appropriate to adopt an accounting policy classifying the Securities as compound instruments.
In 2016 the Group has adopted a policy of initially recognising the liability component at fair value. The Group estimated the fair value of the liability based on the probability of (i) the occurrence of events that must occur before an early redemption event can be triggered which give the holder a right to request redemption of the Securities, (ii) the Group being unable to remedy the event and prevent an early repayment event being triggered, and (iii) it being in the holder's interest to request redemption of the Securities. The Group assessed the likelihood of early redemption to be remote on the basis that all three of the above factors need to occur. Therefore, the fair value of the liability at initial recognition was assessed to be immaterial.
A provision is recognised for estimated closure, restoration and environmental rehabilitation costs. These costs include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas in the financial year when the related environmental disturbance occurs. They are based on the estimated future costs using information available at each balance sheet date. The provision is discounted using a current market-based pre-tax discount rate and the unwinding of the discount is recognised as interest expense. The calculation of these provision estimates requires assumptions such as application of environmental legislation, plant closure dates, available technologies and engineering cost estimates. A change in any of the assumptions used may have a material impact on the carrying value of restoration provisions.
The expected costs of providing pensions and post-employment benefits under defined benefit arrangements relating to employee service during the period are determined based on financial and actuarial assumptions. Nyrstar makes these assumptions in respect to the expected costs in consultation with qualified actuaries. When actual experience differs to these estimates, actuarial gains and losses are recognised in OCI. Refer to note 30 for details on the key assumptions.
In the normal course of business, Nyrstar is exposed to credit risk, liquidity risk and market risk, i.e. fluctuations in commodity prices, exchange rates as well as interest rates, arising from its financial instruments. Listed below is information relating to Nyrstar's exposure to each of these risks and the Group's objectives, policies and processes for measuring and managing risk and measuring capital.
The Board of Directors has overall responsibility for the establishment and oversight of Nyrstar's risk management framework. Nyrstar's risk management policies are established to identify and analyse the risks faced by Nyrstar, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
The Audit Committee is responsible for overseeing how management monitors compliance with Nyrstar's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risk faced by Nyrstar. The Audit Committee is supported in its oversight role by the Group's internal audit function.
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group is primarily exposed to credit risk through the non-payment from any counterparty in relation to sales of goods. In order to manage the credit exposure, Nyrstar has determined a credit policy with credit limit requests, approval procedures, continuous monitoring of the credit exposure and dunning procedure in case of delays.
Nyrstar's exposure to credit risk is influenced mainly by the individual characteristics of each customer. Each new customer is analysed individually for creditworthiness before the standard terms and conditions are offered. Customers that fail to meet Nyrstar's benchmark creditworthiness may transact with Nyrstar only on a prepayment basis.
Nyrstar provides an allowance for trade and other receivables that represents its estimate of incurred losses in respect of trade and other receivables.
Nyrstar's policy is to provide financial guarantees only on behalf of wholly-owned subsidiaries. At 31 December 2017, no guarantees were outstanding to external customers (31 December 2016 : nil).
Liquidity risk arises from the possibility that Nyrstar will not be able to meet its financial obligations as they fall due. Liquidity risk is being addressed by maintaining, what management considers to be, a sufficient degree of diversification of funding sources. These include committed and uncommitted short and medium term bank facilities as well as bonds (e.g. convertible bonds and fixed rate bonds), commodity prepayment agreements and perpetual securities.
Nyrstar uses different means of funding available to the Company. They include equity, bonds, committed and uncommitted trade finance facilities as well as metal prepayments or a Perpetual Securities and other sources as and when they became available to the Company. Different means of funding introduce different risk associated with them. At times, certain means of funding may become unavailable to the Company. Management aims to diversify the sources of funding to spread the risk that one of the sources become unavailable to the Company.
Nyrstar is actively managing the liquidity risk in order to ensure that at all times it has access to sufficient cash resources at a cost in line with market conditions for companies with a similar credit standing. Liquidity risk is measured by comparing projected net debt levels (also including the zinc prepayment (Note 20) and perpetual securities (Note 26)) against total amount of available committed facilities. These forecasts are being produced on a rolling basis and include cash flow forecasts of all operational subsidiaries. Also the average remaining life of the committed funding facilities is monitored, at least on a quarterly basis.
The financial covenants of the existing loan agreements are monitored as appropriate in order to ensure compliance. No breach of covenants has occurred during the year.
The Group's activities expose it primarily to the financial market risks of changes in commodity prices and foreign exchange rates. The objective of market risk management is to manage and control market exposures within acceptable parameters while optimising the return.
In the normal course of its business, Nyrstar is exposed to risk resulting from fluctuations in the market prices of commodities. Nyrstar regularly engages in transactional hedging which means that it undertakes short-term hedging transactions to cover the timing risk between raw material purchases and sales of metal and to cover its exposure on fixed-price forward sales of metal to customers. In addition to the transactional hedging, the Group also undertakes strategic cash flow hedging to limit downside risks related to the commodity price exposures on future production. Nyrstar reviews its hedging policy on a regular basis.
Both transactional and strategic hedging arrangements are accounted for in the "Other Financial Assets" and the "Other Financial Liabilities" line items of the statement of financial position. Any gains or losses realised from hedging arrangements are recorded within the operating result.
Nyrstar's assets, earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly the U.S. Dollar, the Euro, the Australian Dollar, the Canadian Dollar and the Swiss Franc. Nyrstar's reporting currency is the Euro, zinc, lead and other metals are sold throughout the world principally in U.S. Dollars, while Nyrstar's costs are primarily in Euros, Australian Dollars, Canadian Dollars, U.S. Dollars and Swiss Francs. As a result, movement of the currencies in which Nyrstar's costs are denominated against the Euro could adversely affect Nyrstar's profitability and financial position. Until the sale of the El Toqui, the El Mochito, Campo Morado, Contonga and Coricancha Mines (note 8) Nyrstar was also exposed to the movements of the Chilean Peso, Honduran Lempira, Mexican Peso and Peruvian Sol, respectively.
Nyrstar has entered into strategic foreign exchanges hedges to limit its downside exposure related to the fluctuations between the Euro and the U.S. Dollar and between the Euro and the Australian Dollar. Nyrstar also regularly enters into short-term hedging transactions to cover its transactional foreign exchange exposures.
Nyrstar incurs interest rate risk primarily on loans and borrowings. This risk is limited as a result of the interest rate on borrowings such as convertible bond and fixed rate bond being fixed. Nyrstar's current borrowings are split between fixed rate and floating rate basis. All variable interest rate loans and borrowings have EURIBOR or LIBOR based interest rates. The interest rate and terms of repayment of Nyrstar's loans are disclosed in note 35(f). Changes in interest rates may impact primary loans and borrowings by changing the levels of required interest payments.
Nyrstar's interest rate risk management policy is to limit the impact of adverse interest rate movements through the use of interest rate management tools. Interest rate risk is measured by maintaining a schedule of all financial assets, financial liabilities and interest rate hedging instruments. Nyrstar is currently exposed to interest rate movements on the SCTF Credit Facility and the loans from related parties (note 35(f)). Additionally, Nyrstar is also exposed to the interest rate risk on the perpetual securities, including the interest rate step-ups in case the distributions are deferred (note 26). Nyrstar has not entered into interest rate derivatives.
The Board's policy is to maintain an adequate capital base to maintain investor, creditor and market confidence and sustain future development of the business. The Board of Directors monitors the leverage of the Company and the return on capital, which Nyrstar defines as profit after tax divided by total shareholders' equity, excluding non-controlling interests.
The Board of Directors also assesses the appropriateness of the dividend declarations and the level of dividends to ordinary shareholders. Nyrstar's dividend policy is to ensure that whilst maintaining adequate cash flows for growth and the successful execution of its strategy, Nyrstar aims to maximise total shareholder return through a combination of share price appreciation and dividends. Pursuant to Belgian law, the calculation of amounts available for distribution to shareholders, as dividends or otherwise, must be determined on the basis of the Company's non-consolidated Belgian GAAP financial statements. In accordance with Belgian company law, the Company's articles of association require the Company to allocate each year at least 5% of its annual net profits to its legal reserve, until the legal reserve equals at least 10% of the Company's share capital. As a consequence of these factors, there can be no assurance as to whether dividends or similar payments will be paid out in the future or, if they are paid, their amount.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
The principal exchange rates used in the preparation of 2017 financial statements are (in EUR):
| ANNUAL AVERAGE | YEAR END | |||
|---|---|---|---|---|
| 2016 | 2017 | 2016 | 2017 | |
| United States Dollar | 1.1068 | 1.1299 | 1.0538 | 1.1995 |
| Australian Dollar | 1.4882 | 1.4731 | 1.4587 | 1.5348 |
| Canadian Dollar | 1.4658 | 1.4648 | 1.4188 | 1.5050 |
| Swiss Franc | 1.0901 | 1.1119 | 1.0740 | 1.1701 |
The Group's operating segments (Metals Processing and Mining) reflect the approach of the NMC towards evaluating the financial performance and allocating resources to the Group's operations. The NMC has been identified as the chief operating decision making group. The NMC assesses the performance of the operating segments based on a measure of 'Underlying EBITDA'.
'Underlying EBITDA' is a non-IFRS measure of earnings, which is used by management to assess the underlying performance of Nyrstar's operations and is reported by Nyrstar to provide additional understanding of the underlying business performance of its operations. Nyrstar defines "Underlying EBITDA" as profit and loss for the period, adjusted to exclude loss from discontinued operations (net of income tax), income tax (expense)/benefit, share of loss of equity-accounted investees, gain on the disposal of equity-accounted investees, net finance expense, impairment losses and reversals, restructuring expense, M&A related transaction expenses, depreciation, depletion and amortization, income or expenses arising from embedded derivatives recognised under IAS 39 "Financial Instruments: Recognition and Measurement" and other items arising from events or transactions clearly distinct from the ordinary activities of Nyrstar.
The components of gross profit are non-IFRS measures which are used internally by management and are the following:
The 'Metals processing' segment comprises of the Group's smelting operations. The 'Mining' segment comprises of the Group's mining operations. 'Other & Eliminations' contains corporate activities as well as the eliminations of the intra-group transactions including any unrealised profits resulting from intercompany transactions.
| FOR THE YEAR ENDED 31 DEC 2017, EUR MILLION | METALS PROCESSING | MINING | OTHER AND ELIMINATIONS | TOTAL |
|---|---|---|---|---|
| Revenue from external customers | 3,523.6 | 6.9 | - | 3,530.5 |
| Inter-segment revenue | 0.9 | 250.5 | (251.4) | - |
| Total segment revenue | 3,524.5 | 257.4 | (251.4) | 3,530.5 |
| Payable metal / free metal contribution | 350.9 | 230.3 | - | 581.2 |
| Treatment charges | 286.0 | (23.1) | - | 262.9 |
| Premiums | 152.1 | - | - | 152.1 |
| By-products | 165.5 | 18.4 | - | 183.9 |
| Other | (98.9) | (7.6) | 0.7 | (105.8) |
| Gross Profit | 855.6 | 218.0 | 0.7 | 1,074.3 |
| Employee expenses | (220.5) | (77.0) | (20.7) | (318.2) |
| Energy expenses | (226.9)* | (20.3) | (0.1) | (247.3) |
| Other expenses / income | (201.7)** | (79.9) | (28.1) | (309.7) |
| Direct operating costs | (649.1) | (177.2) | (48.9) | (875.2) |
| Non-operating and other | (0.7) | 6.3 | 0.6 | 6.2 |
| Underlying EBITDA | 205.8 | 47.1 | (47.6) | 205.3 |
| Depreciation, depletion and amortisation | (155.8) | |||
| M&A related transaction expense | (0.2) | |||
| Restructuring expense | (4.1) | |||
| Impairment reversal | 126.1 | |||
| Other income | 8.5 | |||
| Embedded derivatives | (2.6) | |||
| Gain on disposal of subsidiaries | 2.6 | |||
| Net finance expense | (207.1) | |||
| Income tax benefit | 36.9 | |||
| Gain from discontinued operations, net of taxes | 36.9 | |||
| Profit for the period | 46.5 | |||
| Capital expenditure | (302.8) | (58.4) | (3.0) | (364.2) |
* Net of EUR 9.7 million recharge of energy costs to external parties
** Net of EUR 4.2 million recharge of other costs to external parties
| FOR THE YEAR ENDED 31 DEC 2016, EUR MILLION* | METALS PROCESSING | MINING OTHER AND ELIMINATIONS | TOTAL | |
|---|---|---|---|---|
| Revenue from external customers | 2,760.8 | 2.4 | - | 2,763.2 |
| Inter-segment revenue | 0.4 | 144.6 | (145.0) | - |
| Total segment revenue | 2,761.2 | 147.0 | (145.0) | 2,763.2 |
| Payable metal / free metal contribution | 263.1 | 159.6 | - | 422.7 |
| Treatment charges | 370.4 | (31.4) | (0.9) | 338.1 |
| Premiums | 155.6 | - | - | 155.6 |
| By-products | 143.3 | 17.7 | - | 161.0 |
| Other | (89.5) | (9.5) | 2.9 | (96.1) |
| Gross Profit | 842.9 | 136.4 | 2.0 | 981.3 |
| Employee expenses | (218.9) | (62.6) | (20.8) | (302.3) |
| Energy expenses | (195.3)** | (14.6) | (0.2) | (210.1) |
| Other expenses / income | (204.9)*** | (54.2) | (16.3) | (275.4) |
| Direct operating costs | (619.1) | (131.4) | (37.3) | (787.8) |
| Non-operating and other | (1.7) | 2.9 | 0.4 | 1.6 |
| Underlying EBITDA | 222.1 | 7.9 | (34.9) | 195.1 |
| Depreciation, amortisation and depletion | (177.1) | |||
| M&A related transaction expense | (5.3) | |||
| Restructuring expense | (8.4) | |||
| Impairment loss | (125.5) | |||
| Embedded derivatives | (5.2) | |||
| Gain on the disposal of equity accounted investees | - | |||
| Net finance expense | (121.8) | |||
| Income tax expense | (15.5) | |||
| Loss from discontinued operations, net of taxes | (150.1) | |||
| Loss for the period | (413.8) | |||
| Capital expenditure | (236.5) | (40.2) | (3.1) | (279.7) |
* Prior year amounts have been re-presented for the impact of the discontinued operations (note 9)
** Net of EUR 4.2 million recharge of energy costs to external parties
*** Net of EUR 10.1 million recharge of other costs to external parties
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| Belgium | 562.3 | 672.4 |
| Rest of Europe | 772.3 | 1,121.8 |
| Americas | 282.7 | 431.2 |
| Australia | 831.2 | 905.7 |
| Asia | 280.5 | 362.1 |
| Other | 34.2 | 37.3 |
| Total | 2,763.2 | 3,530.5 |
The revenue information above is based on the location (shipping address) of the customer.
Sales to each individual customer (group of customers under the common control) of the Group did not exceed 10% with the exception of sales to Glencore International plc and Trafigura Group Pte. Ltd., which accounted for 28.1% and 14.2% respectively, of the total Group's sales, reported in the Metals Processing segment. (2016: Glencore International plc: 27.7%,Trafigura Group Pte. Ltd.: 13.3%).
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Belgium 222.4 |
227.4 |
| Rest of Europe 267.7 |
270.2 |
| North America 267.3 |
394.8 |
| Central America (incl. Mexico) 7.6 |
- |
| South America 0.9 |
0.9 |
| Australia 656.1 |
800.3 |
| Total 1,422.0 |
1,693.6 |
Non-current assets for this purpose consist of property, plant and equipment and intangible assets.
No acquisitions for the twelve months ended 31 December 2017 and 2016.
In 2017, Nyrstar disposed of its controlling interest in the Campo Morado Mine, Coricancha Mine and Contonga Mines (note 9).
The carrying value of the assets and liabilities over which control was lost and net cash received from these disposals are detailed below:
| EUR MILLION | NOTE | CORICANCHA MINE | CAMPO MORADO MINE | CONTONGA MINE | TOTAL |
|---|---|---|---|---|---|
| Property, plant and equipment | 1.6 | 26.0 | 20.8 | 48.4 | |
| Other assets | - | 0.1 | 1.8 | 1.9 | |
| Total non-current assets | 1.6 | 26.1 | 22.6 | 50.3 | |
| Inventories | 2.6 | - | 2.1 | 4.7 | |
| Trade and other receivables | 1.1 | 1.4 | 4.0 | 6.5 | |
| Prepayments | - | 0.1 | - | 0.1 | |
| Current income tax assets | - | - | 0.1 | 0.1 | |
| Cash and cash equivalents | 0.1 | - | 2.2 | 2.3 | |
| Total current assets | 3.8 | 1.5 | 8.4 | 13.7 | |
| Provisions | 9.8 | 6.9 | 8.7 | 25.4 | |
| Total non-current liabilities | 9.8 | 6.9 | 8.7 | 25.4 | |
| Trade and other payables | 1.4 | 1.3 | 3.7 | 6.4 | |
| Current income tax liabilities | - | - | 0.1 | 0.1 | |
| Provisions | 1.5 | 1.6 | 0.3 | 3.4 | |
| Employee benefits | 0.2 | - | 0.5 | 0.7 | |
| Total current liabilities | 3.1 | 2.9 | 4.6 | 10.6 | |
| Carrying value of net (assets) / liabilities disposed | 7.4 | (17.8) | (17.7) | (28.1) | |
| Add: cash and cash equivalents received | 0.1 | 3.1 | 17.7 | 20.9 | |
| Add: receivables recorded in relation to the disposal | - | 14.7 | 2.6 | 17.3 | |
| Add: other financial liability recorded in relation to the disposal |
20 | (7.5) | - | - | (7.5) |
| Add: Foreign currency translation gains recycled to the income statement on the disposal |
1.1 | 28.4 | (1.3) | 28.2 | |
| Adjustments on 2016 disposals | - | - | - | (1.6) | |
| Net gain / (loss) on disposal | 9 | 1.1 | 28.4 | 1.3 | 29.2 |
| - | |||||
| Cash and cash equivalents received | 0.1 | 3.1 | 17.7 | 20.9 | |
| Less: cash and cash equivalents disposed | 0.1 | - | 2.2 | 2.3 | |
| Cash received from disposals in 2016 | - | - | - | 9.4 | |
| Net cash received from disposal | - | 3.1 | 15.5 | 28.0 |
In 2016, Nyrstar disposed of its controlling interest in the El Toqui Mine and the El Mochito Mine (note 9).
The carrying value of the assets and liabilities over which control was lost and net cash received from these disposals are detailed below:
| EUR MILLION | NOTE | EL TOQUI MINE | EL MOCHITO MINE | TOTAL |
|---|---|---|---|---|
| Property, plant and equipment | 37.8 | 3.6 | 41.4 | |
| Intangible assets | 0.2 | - | 0.2 | |
| Other assets | - | 0.4 | 0.4 | |
| Total non-current assets | 38.0 | 4.0 | 42.0 | |
| Inventories | 20.0 | 9.5 | 29.5 | |
| Trade and other receivables | 5.1 | 4.3 | 9.4 | |
| Other assets | 4.9 | 0.5 | 5.4 | |
| Cash and cash equivalents | 0.3 | 0.7 | 1.0 | |
| Total current assets | 30.3 | 15.0 | 45.3 | |
| Provisions | 7.0 | 6.6 | 13.6 | |
| Employee benefits | 3.4 | 6.2 | 9.6 | |
| Other non-current liabilities | 4.4 | - | 4.4 | |
| Total non-current liabilities | 14.8 | 12.8 | 27.6 | |
| Trade and other payables | 6.3 | 5.4 | 11.7 | |
| Loans and borrowings | 0.1 | - | 0.1 | |
| Employee benefits | 1.7 | 0.4 | 2.1 | |
| Total current liabilities | 8.1 | 5.8 | 13.9 | |
| Carrying value of net assets disposed | (45.4) | (0.4) | (45.8) | |
| Add: cash and cash equivalents received | 11.1 | 0.5 | 11.6 | |
| Add: receivables recorded in relation to the disposal | 20.2 | - | 20.2 | |
| Add: other financial assets received on disposal | 20 | 13.3 | - | 13.3 |
| Add: Foreign currency translation gains recycled to the income statement on the disposal |
28.7 | 27.4 | 56.1 | |
| Net gain on disposal | 9 | 27.9 | 27.5 | 55.4 |
| Cash and cash equivalents received | 11.1 | 0.5 | 11.6 | |
| Less: cash and cash equivalents disposed | 0.3 | 0.7 | 1.0 | |
| Net cash received from disposal | 10.8 | (0.2) | 10.6 |
On 14 December 2016 Nyrstar announced that it has entered into Share Purchase Agreements to sell its Contonga Mine in Peru to subsidiaries of Glencore plc ("Glencore"), a global diversified natural resources company, for a total cash consideration of USD 21.0 million (EUR 19.9 million) (the "Transaction"). Closing of the Transaction was subject to customary closing conditions, which was finalized in September 2017. Accordingly, the Contonga Mine was classified as a disposal group held for sale from 14 December 2016 and presented as a discontinued operation. An impairment loss on re-measurement to fair value less cost to sell for Contonga of EUR 19.1 million was recognised in the consolidated income statement.
In connection with the sale of the Mine, Nyrstar agreed to indemnify Glencore up to a maximum aggregate of USD 22.0 million (EUR 20.9 million) for the following: (i) for a period of six years after the completion of the sale, any unknown tax liabilities incurred prior to the completion of the sale; (ii) for a period of three years after the completion of the sale, all unknown environmental liabilities relating to events or circumstances occurring prior to the completion of the sale (except for certain liabilities specifically assumed by Glencore and set forth in the purchase agreement); (iii) for a period of 12 months after the completion of the sale, any unknown Contonga liabilities arising in relation to the period prior to the completion of the sale (other than those specifically assumed by Glencore) and any Contonga losses occurring as a result of the sale process and structure. Subject to the same USD 22.0 million (EUR 20.9 million) aggregate liability cap, Nyrstar also remains liable for 50% of all liabilities arising from an old tailings deposit in the Contonga Mine to the extent that such liabilities exceed USD 8.0 million (EUR 7.6 million), and liable for all such liabilities that exceed USD 11.0 million (EUR 10.4 million).
The transaction closed on 1 September 2017 (the "Closing Date") at which point the Group recognised the sale of the Contonga Mine (note 8).
Prior to reclassification as disposal group held for sale, the Contonga Mine was part of mining segment in note 7.
At the same time and in connection with the sale of Contonga, the Group also agreed to sell various mineral claims located in Quebec, Canada to another subsidiary of Glencore for cash consideration of USD 5 million (EUR 4.7 million). The transaction closed in April 2017 (the "Closing Date") at which point the Group recognised the sale of the Quebec mineral claims. The carrying value of the mineral claims located in Quebec was Nil.
On 20 December 2016 Nyrstar announced that it has entered into a Share Purchase Agreement to sell its Coricancha Mine in Peru to Great Panther Silver Limited ("Great Panther"), a primary silver mining and exploration company listed on the Toronto Stock Exchange, for a total cash consideration of USD 0.1 million (EUR 0.1 million) plus earn-out consideration of up to USD 10 million (EUR 9.5 million) (the "Transaction"). Under the earn-out, Nyrstar will be paid 15% of the free cash-flow generated by the Coricancha Mine during the 5-year period after which the Coricancha Mine is cumulative free cash-flow positive from closing of the transaction. Additionally, as a part of the sales consideration Nyrstar provided a guarantee letter for a value of USD 9.7 million (EUR 9.2 million) as security in favour of the Ministerio de Energia y Minas of Peru for closure obligations of the Coricancha Mine (the "Mine Closure Bond"). The Mine Closure Bond is secured by a cash-backed account for the full exposure in favor of the issuing bank guarantor, the balance of which is included in the Company's restricted cash (note 20(c)). Upon closing, Nyrstar will recognise a financial liability owing to Great Panther. Should Great Panther:
Upon release of Nyrstar from the Mine Closure Bond, the other financial liability shall be derecognised and the monies in the cash backed account in favour of the issuing bank guarantor shall be released to the Company at which time cash shall be reclassified from restricted cash to cash and cash equivalents.
Additionally, as a part of the sales consideration, the Company has agreed to fund certain reclamation works of the Coricancha Mine of up to USD 20.0 million (EUR 19.0 million) (note 20(i)). The best estimate of this liability amounting to EUR 11.6 million has been included as a part of the sales consideration of the mine. Closing of the Transaction is subject to customary closing conditions and was finalised in the first half of 2017. Accordingly, the Coricancha Mine was classified as a disposal group held for sale from 20 December 2016 and presented as a discontinued operation. An impairment loss on re-measurement to fair value less cost of disposal for Coricancha of EUR 18.4 million was recognised in the consolidated income statement.
Nyrstar also agreed to indemnify Great Panther for any fines or sanctions arising from administrative, judicial or arbitration proceedings or regulatory actions relating to Coricancha existing at the time the sale is completed. Nyrstar's maximum liability under this indemnity is limited to USD 4.0 million (EUR 3.8 million) in connection with any amounts paid or payable under proceedings or actions not under appeal from Nyrstar at the time the sale is completed, but is unlimited in the case of any which are under appeal by Nyrstar at that time. The maximum aggregate amount recoverable by Great Panther from Nyrstar under the indemnities in the share purchase agreement are limited to (i) the sum of the purchase price and any earn-out consideration paid to Nyrstar, (ii) a USD 1.5 million (EUR 1.4 million) payment previously made to Nyrstar by Great Panther in 2015 as consideration for an option to purchase the Coricancha Mine, and (iii) the amount outstanding under the Mine Closure Bond.
The transaction closed on 30 June 2017 (the "Closing Date") at which point the Group recognised the sale of the Coricancha Mine (note 8).
Prior to reclassification as disposal group held for sale, the Coricancha Mine was part of mining segment in note 7.
On 27 April 2017 Nyrstar announced that it has entered into Share Purchase Agreements (the Agreement) to sell its Campo Morado Mine in Mexico to Telson Resources Inc. ("Telson") and Reynas Minas S.A. de C.V. ("Reynas Minas") for a total cash consideration of USD 20 million (the "Consideration"), plus the potential for additional future proceeds through the creation of a new royalty on the Campo Morado Mine (the "Transaction"). Pursuant to the Agreement, Telson will own 99.9% of the purchased shares while Reynas Minas, a Mexican based mining consulting company, will own the other 0.1%.
The transaction closed on 14 June 2017 at which point the Group recognised the sale of the Campo Morado Mine (note 8). The Consideration payable to Nyrstar consists of USD 0.8 million that was paid to Nyrstar upon signing the Agreement, USD 2.7 million paid to Nyrstar in cash in June 2017, and USD 16.5 million (EUR 14.5 million) payable in cash on or before the 12 month anniversary of the closing of the Transaction.
No indemnities have been provided by the Company to Telson and Reynas Minas in connection with the sale of the Campo Morado Mine.
Prior to reclassification as disposal group held for sale, the Campo Morado Mine was part of the mining segment (note 7).
On 27 June 2016 Nyrstar announced that it has entered into a Share Purchase Agreement (the "Agreement") to sell its El Toqui Mine in Chile to Laguna Gold Limited ("Laguna"), an Australian based mining company (the "Transaction"). The Transaction closed on 3 November 2016 ("The Closing Date")at which point the Group recognised the sale of the El Toqui Mine (note 8). The loss for the year relating to El Toqui up to the Closing Date has been presented under discontinued operations in the consolidated income statement. Further, an impairment loss on re-measurement to fair value less cost of disposal for El Toqui of EUR 16.2 million was recognised in the consolidated income statement. This impairment reflected the difference between the fair value of the total consideration expected to receive by the Group and the carrying value of the El Toqui disposal group.
At 31 December 2016 the Group received a Cash Consideration payable to Nyrstar of USD 12 million (EUR 11.1 million) payable in cash on the Closing Date. The Group recognised a receivable representing a net present value of the USD 13 million (EUR 11.6 million) cash payments over a four year period following the Closing Date valued at EUR 9.6 million. In addition, the Group recognised an estimated value of the expected tax refund of EUR 3.2 million and the estimated working capital adjustment of EUR 7.4 million. Finally, Nyrstar also recognised a value of EUR 13.3 million related to cash proceeds through a price participation agreement with Laguna on the first 7.9 million tonnes of ore processed at El Toqui following the Closing Date (note 20(h)).
Nyrstar also agreed to indemnify Laguna for (i) any financial penalties relating to environmental prosecutions that existed as at the closing date of the transaction up to a maximum aggregate liability of USD 3.0 million (EUR 2.8 million) for the four years following completion of the sale, and (ii) any costs or liabilities arising out of a specified royalty dispute with a third party. Nyrstar has recognised a provision of EUR 0.8 million in relation to these risks on its balance sheet at 31 December 2016.
Prior to reclassification as disposal group held for sale, the El Toqui Mine was part of the mining segment (note 7).
On 22 September 2016 Nyrstar announced that it has entered into a Share Purchase Agreement to sell its El Mochito Mine in Honduras ("El Mochito") to Morumbi Resources Inc. ("Morumbi"), a Canadian based mining company, for cash consideration of USD 0.5 million (EUR 0.4 million). The transaction closed on 21 December 2016 ("The Closing Date") at which point the Group recognised the sale of the El Mochito Mine (note 8). The loss for the year relating to El Mochito up to the Closing Date has been presented under discontinued operations in the consolidated income statement. An impairment loss relating to El Mochito of EUR 48.1 million was recognised at 30 June 2016 and a further impairment on remeasurement to fair value less cost of disposal of EUR 31.6 million was recognised in the consolidated income statement. This impairment reflected the difference between the fair value of the total consideration expected to receive by the Group and the carrying value of the disposal group.
In connection with the sale, Nyrstar agreed to indemnify Morumbi for any financial loss relating to certain specified legal and tax proceedings pending at the time of sale, up to a maximum aggregate liability of USD 2.0 million (EUR 1.9 million) in connection with the legal proceedings and USD 1.0 million (EUR 0.9 million) in connection with the tax proceedings.
Prior to reclassification as disposal group held for sale, the El Mochito Mine was part of mining segment (note 7).
| EUR MILLION | NOTE | 2016 | 2017 |
|---|---|---|---|
| Revenue | 108.7 | 13.1 | |
| Raw materials used | (0.2) | - | |
| Freight expense | (6.5) | (0.4) | |
| - | - | ||
| Gross profit | 102.0 | 12.7 | |
| - | - | ||
| Other expenses | (106.7) | (19.9) | |
| Depreciation, amortisation and depletion | (30.4) | (0.5) | |
| Impairment loss * | (55.5) | - | |
| Impairment loss on remeasurement to fair value less cost to sell ** | 17 | (85.3) | 16.1 |
| Result from operating activities | (175.9) | 8.4 | |
| - | - | ||
| Finance income | (0.3) | - | |
| Finance expense | (3.7) | (1.8) | |
| Net foreign exchange (loss) / gain | (1.6) | (0.5) | |
| Net finance expense | (5.6) | (2.3) | |
| Gain on the disposal of subsidiaries | 8 | 55.4 | 29.2 |
| Loss before income tax | (126.1) | 35.3 | |
| Income tax (expense) / benefit | (24.0) | 1.6 | |
| Loss for the period from discontinued operations | (150.1) | 36.9 |
(*) Represents the impairment loss of the El Mochito Mine recognised at 30 June 2016
(**) Includes impairment loss in re-measurement to fair value less cost to sell for Contonga of EUR 4.1 million; impairment reversal on re-measurement to fair value less cost to sell for Coricancha of EUR 0.7 million; and Campo Morado EUR 19.5 million in 2017. For 2016, it includes an impairment loss on re-measurement to fair value less cost to sell for El Toqui of EUR 16.2 million, El Mochito EUR 31.6 million, Contonga EUR 19.1 million and Coricancha EUR 18.4 million in 2016
Cash flows from discontinued operations:
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| Cash flow from operating activities | (30.5) | (30.1) |
| Cash flow used in investing activities | (19.3) | (0.8) |
| Cash flow used in financing activities | (0.5) | - |
| Net decrease in cash held | (50.3) | (30.9) |
Details of assets and liabilities held for sale at 31 December 2016:
| AS AT | |
|---|---|
| EUR MILLION | 31 DEC 2016 |
| Property, plant and equipment | 28.4 |
| Intangible assets | 0.3 |
| Total non-current assets | 28.7 |
| Inventories | 5.6 |
| Trade and other receivables | 4.1 |
| Prepayments | 0.4 |
| Current income tax assets | 0.1 |
| Cash and cash equivalents | 2.4 |
| Total current assets | 12.6 |
| Total assets | 41.3 |
| Provisions | 19.8 |
| Total non-current liabilities | 19.8 |
| Trade and other payables | 5.9 |
| Current income tax liabilities | 0.1 |
| Provisions | 2.4 |
| Employee benefits | 0.6 |
| Total current liabilities | 9.0 |
| Total liabilities | 28.7 |
As at 31 December 2017, all Latin American mining operations of Nyrstar have been sold. The Company has concluded that the North American mining portfolio will be held as a core component of Nyrstar.
Merger and acquisition (M&A) related expense include the acquisition and disposal related direct transaction costs (e.g. advisory, accounting, tax, legal or valuation fees paid to external parties). The M&A related transaction expense in the 2017 income statement amounts to EUR 0.2 million (2016: EUR 5.3 million). The costs incurred in 2017 and 2016 relate to the disposal of the mining assets of the Group.
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| Wages and salaries | (264.2) | (279.9) |
| Compulsory social security contributions | (23.7) | (24.3) |
| Contributions to defined contribution plans | (4.2) | (4.6) |
| Expenses related to defined benefit plans | (7.4) | (6.7) |
| Equity and cash settled share based payment transactions, incl. social security | (2.8) | (2.7) |
| Total employee benefits expense | (302.3) | (318.2) |
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| Interest income | 1.6 | 4.2 |
| Total finance income | 1.6 | 4.2 |
| Interest expense | (79.6) | (104.4) |
| Unwind of discount in provisions | (7.0) | (8.5) |
| Other finance charges | (31.4) | (38.5) |
| Total finance expense | (118.0) | (151.4) |
| Net foreign exchange loss | (5.4) | (59.9) |
| Net finance expense | (121.8) | (207.1) |
| EUR MILLION 2016 |
2017 |
|---|---|
| Current income tax expense (19.3) |
(3.1) |
| Deferred income tax benefit / (expense) (20.2) |
41.6 |
| Total income tax benefit / (expense) (39.5) |
38.5 |
| of which: | |
| Income tax benefit / (expense) from continuing operations (15.5) |
36.9 |
| Income tax benefit / (expense) from discontinued operations (24.0) |
1.6 |
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
| EUR MILLION | 2016 2017 |
|---|---|
| Profit / (loss) before income tax (374.3) |
8.0 |
| Tax at aggregated weighted average tax rate 118.3 |
(7.2) |
| Aggregated weighted average income tax rate 31.6% |
90.0% |
| Tax effect of amounts which are not deductible (taxable) in calculating taxable income: | |
| Non-taxable amounts | 4.2 (2.4) |
| Non-recognition of tax losses and temporary differences (118.7) |
(11.1) |
| Recognition of previously unrecognised tax losses and temporary differences | 31.1 50.0 |
| Overprovision for previous years | 0.8 7.0 |
| Unrecoverable withholding tax | (0.9) (0.6) |
| Net adjustment to deferred tax balances due to tax rate change in foreign jurisdiction | (0.2) (2.7) |
| Tax rate impact from discontinued operations (73.9) |
7.7 |
| Foreign exchange differences | 1.2 (4.2) |
| Other | (1.4) 2.0 |
| Total income tax benefit / (expense) (39.5) |
38.5 |
| Effective income tax rate (10.6%) |
(481.3%) |
The change in the aggregated weighted average income tax rate compared to year ended 31 December 2016 is due to the variation in the relative weight of subsidiaries' profits and the change in the Group's result from a loss before tax into a profit before tax, including results from discontinued operations.
Nyrstar recognised an income tax benefit for the year ended 31 December 2017 of EUR 38.5 million (2016: income tax expense of EUR 39.5 million) representing an effective income tax rate of -481.3% (for the year ended 31 December 2016: -10.6%). The tax rate is impacted by changes in the expected performance of Group entities in Canada and Australia during the period and the associated recognition of previously unrecognized deferred tax assets. Further, the tax rate is impacted by changes in the net deferred tax position due to the change in the corporate income tax rates in both Belgium (reduction of net deferred tax liabilities by EUR 7.9 million) and the USA (reduction of net deferred tax assets by EUR 10.5 million), together with losses incurred by the Group, including the discontinued operations, for which no tax benefit has been recognised.
The Group has assessed the material impacts of the tax reforms enacted in both Belgium and the USA based on the available information of the legislative changes. To the extent new information on application of these changes relating to the specific circumstances of the Group becomes available, adjustments to tax assets and liabilities may be required in subsequent periods.
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| Income tax benefit recognised on cash flow hedges | 0.9 | 1.0 |
| Income tax expense recognised on defined benefits pension schemes | (2.5) | (0.8) |
| Total income tax recognised directly in other comprehensive income | (1.6) | 0.2 |
Deferred tax assets and liabilities consist of temporary differences attributable to:
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Assets: | ||
| Employee benefits Provisions |
28.0 16.1 |
12.6 29.6 |
| Property, plant and equipment Payables / receivables |
- (0.7) |
7.6 2.4 |
| Tax losses carried forward | 348.4 | 338.7 |
| Other | 0.3 | 2.0 |
| Total | 392.1 | 392.9 |
| Set off of tax | (49.1) | (60.8) |
| Deferred tax assets | 343.0 | 332.1 |
| Liabilities: | ||
| Embedded derivatives | (17.8) | (19.4) |
| Property, plant and equipment | (109.1) | (94.5) |
| Payables / receivables | (5.1) | (12.5) |
| Other | (4.9) | (2.1) |
| Total | (136.9) | (128.5) |
| Set off of tax | 49.1 | 60.8 |
| Deferred tax liabilities | (87.8) | (67.7) |
| Deferred tax - net | 255.2 | 264.4 |
| Income statement: | ||
| Employee benefits | 5.8 | (14.6) |
| Provisions | (22.6) | 13.5 |
| Property, plant and equipment | 30.8 | 22.3 |
| Payables / receivables | (2.5) | (6.9) |
| Tax losses carried forward | (9.8) | 23.6 |
| Embedded derivatives | (7.8) | (2.6) |
| Change in consolidation scope | (11.7) | 1.8 |
| Other | (2.4) | 4.5 |
| Total | (20.2) | 41.6 |
| Reconciliation of deferred tax - net: | ||
| As at 1 Jan | 262.1 | 255.2 |
| Deferred income tax benefit / (expense) | (20.2) | 41.6 |
| Recognised in OCI | (1.6) | 0.2 |
| Deferred tax from disposed operations | 4.2 | (1.8) |
| Provision for unrealized foreign exchange result | (1.1) | 2.5 |
| Currency translation effects | 11.8 | (33.3) |
| As at 31 Dec | 255.2 | 264.4 |
EUR 329.7 million of the EUR 332.1 million (31 December 2016: EUR 343.0 million) net deferred tax assets arise in entities that have been loss making in either 2017 or 2016, respectively.
In evaluating whether it is probable that taxable profits will be earned in future accounting periods, all available evidence was considered including the analysis of historical operating results and the assessment of the approved budgets, forecasts and business plans. The forecasts are consistent with those prepared and used internally for business planning and impairment testing purposes.
The most significant net deferred tax assets arise in the Company's subsidiaries in Switzerland, in the USA and in Canada, where the Company has recognised a net deferred tax asset of EUR 242.6 million, EUR 59.9 million and EUR 27.2 million, respectively.
Swiss tax law allows for a seven year carry-forward period for tax losses. The Group's Swiss subsidiary is the marketing entity for the Metal Processing segment that is responsible for the raw material purchases and sales of the Group's products. Therefore, the profitability of the Swiss subsidiary is closely linked to the performance of the Group's Metals Processing segment. The unused tax losses recognised in the Swiss subsidiary resulted primarily from impairments made on investments in affiliated mining entities held by the Swiss subsidiary in the Americas. As these investments held by the Group's Swiss subsidiary have been substantially impaired, no further impairment losses are expected to be incurred in the future.
The Group has assessed the recoverability of the deferred tax asset in the Swiss subsidiary. The assessment considered the underlying reasons for historical tax losses, likelihood of the losses to repeat in the future, nature and predictability of the future taxable income of the Swiss subsidiary and the impact of the time restriction to utilise the tax losses in Switzerland. Based on the evaluation of the forecasts of the Swiss subsidiary it was determined that it is probable that taxable profits will be available in the future against which recognised tax assets can be utilised before expiring. The Group expects to fully utilise the recognised tax losses within five years.
The key assumptions included in the assessment of the recoverability of the tax losses previously incurred by the Swiss entity are those that drive the profitability of the Metal Processing Segment. The key assumptions include:
The Group applied sensitivity testing by modelling a further conservative scenario assuming a 30% reduction in the forecasted profitability of the Project. Under this scenario, the Group would expect to fully utilise the recognised tax losses within seven years.
The US tax group's losses were generated in periods prior to 2017 and as such, US tax law allows for a twenty year carry-forward period for these losses. The available tax losses as at 31 December 2017 have been revalued to the enacted tax rate applicable for periods starting after 31 December 2017.
The Group has evaluated the latest forecast for its US fiscal unity which includes both the smelting and the mining operations of the Group in the USA. The assessment considered; the underlying reasons for historical tax losses, the likelihood of the losses to repeat in the future based on the Group's financial models, the nature and predictability of the future taxable income in the Group's US fiscal unity and the impact of the time restriction to utilise the tax losses in the USA. The recoverability of the tax losses is supported by:
In its assessment, the Group has limited the expected profitability of both the East and Middle Tennessee Mines to the next five years on the basis that this is the period that reflects the Group's detailed mine plan and only includes resources, which have the highest level of geological confidence of extraction. Based on its assessment the Group has determined it is probable that the available deferred tax assets related to the tax losses incurred in the USA will be fully utilised before expiring.
The Group has also recognised net deferred tax assets related to losses incurred by the Myra Falls Mine and the Langlois Mine in Canada. Canadian tax law allows for a twenty year carry-forward period for tax losses.
Excluding non-recurring items, the Langlois Mine generated profits in both 2016 and 2017, which are expected to continue in the future primarily due to favorable zinc prices.
In 2017, the Group finalised a comprehensive review of the Myra Falls Mine and commenced a restart of the Mine in Q3 2017 with the expected first production in H1 2018. The Myra Falls Mine is expected to generate profits starting the second half of 2018.
To further test the recoverability of the recognised tax assets, the Group has limited the expected profitability of the Myra Falls Mine to include only proven and probable reserves in the deferred tax recoverability calculation. In addition, the operating costs and forecast production throughput were aligned with historical levels. These assumptions are lower than the Company expects to achieve based on the outcomes of the comprehensive review of the Myra Falls Mine, however, the Company applied a conservative approach in the recognition of the deferred tax assets as required by IAS 12.
Based on this assessment, the Group has determined it is probable the recognised deferred tax assets of EUR 27.1 million related to the tax losses incurred in Canada will be fully utilised before expiring.
| EUR MILLION | NET DEDUCTIBLE TEMPORARY DIFFERENCES |
TAX LOSS CARRY FORWARD |
TOTAL DEC 31, 2016 | NET DEDUCTIBLE TEMPORARY DIFFERENCES |
TAX LOSS CARRY FORWARD |
TOTAL DEC 31, 2017 |
|---|---|---|---|---|---|---|
| No expiration date | 448.4 | 414.0 | 862.4 | 123.6 | 335.0 | 458.6 |
| Expiration date within 4 years | - | 70.4 | 70.4 | - | 107.3 | 107.3 |
| Expiration date 4 to 7 years | - | 394.8 | 394.8 | - | 50.6 | 50.6 |
| Expiration date over 7 years | - | - | - | - | 531.0 | 531.0 |
| Total | 448.4 | 879.2 | 1,327.6 | 123.6 | 1,023.9 | 1,147.5 |
As at 31 December 2017, positive unremitted earnings of EUR 668.7 million (31 December 2016: EUR 1,058.6 million) have been retained by subsidiaries and associates for reinvestment. No provision is made for income taxes that would be payable upon the distribution of such earnings.
Nyrstar periodically assesses its liabilities and contingencies for all tax years open to audit based on the latest information available. For those matters where it is probable that an adjustment will be made, the Group recorded its best estimate of these tax liabilities, including related interest charges. The final outcome of tax examinations may result in a materially different outcome compared to the recorded tax liabilities and contingencies.
Since in certain jurisdictions some of the circumstances that are subject to tax audits are still in existence at 31 December 2017, similar arguments may be put forward by the tax authorities for additional years that are currently not under audit, which may lead to significant tax expenses in the future. For these matters, the best estimate of the quantifiable possible exposure as at 31 December 2017 is between Nil and EUR 76 million. Although Nyrstar cannot estimate the risk related to these tax matters as remote, it does not consider it probable that these tax matters will result in additional tax liabilities to the Company. Therefore, it has not recognised a provision in respect of these matters.
As part of tax dispute procedures, Nyrstar Netherlands (Holdings) BV is challenging a corrective corporate income tax assessment relating to an intra-group reorganisation in the year ended 31 December 2010, for which the court of first instance delivered a decision in the Group's favour in the second half of 2017. The Dutch Authorities are appealing the lower court decision and Nyrstar continues to defend its position. In addition and in connection with the same matter, the Group is challenging corrective assessments issued in 2017 for the years ended 31 December 2011 and 31 December 2013.
Further, Nyrstar Belgium NV is challenging an assessment relating to the non-deductibility of interest expenses incurred in the year ended 31 December 2012. Despite the recent court decision in first instance in favour of the tax authorities' position, Nyrstar continues to defend itself in court and remains confident that it has a strong position, which will prevail. Nyrstar has not recorded a provision in respect of these matters.
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| Stock movement - conversion costs | (1.7) | 6.9 |
| Other tax expense | (11.1) | (11.0) |
| Travel expense | (3.6) | (4.4) |
| Operating lease | (10.4) | (14.8) |
| Insurance expense | (5.7) | (5.8) |
| Royalties | - | (2.5) |
| Communication expense | (2.7) | (2.8) |
| IT costs | (2.2) | (2.2) |
| Memberships/subscriptions | (1.9) | (1.9) |
| Training | (1.4) | (1.6) |
| Other | (8.5) | 4.6 |
| Total other expenses | (49.2) | (35.5) |
| LAND AND | PLANT AND | MINING PROPERTIES AND |
UNDER | CYCLICAL MAINTENANCE AND |
|||
|---|---|---|---|---|---|---|---|
| EUR MILLION | NOTE | BUILDINGS | EQUIPMENT | DEVELOPMENT | CONSTRUCTION | OTHER | TOTAL |
| Cost | 179.7 | 1,534.0 | 427.1 | 632.2 | 126.6 | 2,899.6 | |
| Accumulated depreciation and | |||||||
| impairment | (48.0) | (892.7) | (193.5) | - | (75.0) | (1,209.2) | |
| Carrying amounts | 131.7 | 641.3 | 233.6 | 632.2 | 51.6 | 1,690.4 | |
| As at 1 Jan 2017 | 132.0 | 648.5 | 114.1 | 482.6 | 38.8 | 1,416.0 | |
| Disposal of subsidiaries | (4.4) | (31.2) | (8.5) | (4.3) | - | (48.4) | |
| Additions | 0.8 | 54.0 | 0.7 | 278.4 | 28.4 | 362.3 | |
| Restoration provision adjustments | 29 | - | - | 17.3 | - | - | 17.3 |
| Transfers | 5.4 | 68.2 | 23.4 | (101.0) | 3.5 | (0.5) | |
| Disposals | (0.1) | (1.2) | - | (0.4) | - | (1.7) | |
| Depreciation expense* | (7.1) | (104.3) | (22.3) | - | (18.6) | (152.3) | |
| Assets previously held for sale in | |||||||
| 2016 and now disposed** | 4.9 | 2.5 | 13.3 | 7.7 | - | 28.4 | |
| Impairment reversal | 17 | 6.1 | 26.7 | 109.4 | - | - | 142.2 |
| Currency translation effects | (5.9) | (21.9) | (13.8) | (30.8) | (0.5) | (72.9) | |
| As at 31 Dec 2017 | 131.7 | 641.3 | 233.6 | 632.2 | 51.6 | 1,690.4 |
* The amount includes AUD 2.0 million impairment charge
** These assets were held for sale in 2016 and are to show the decrease on disposal of subsidiaries
| EUR MILLION | NOTE | LAND AND BUILDINGS |
PLANT AND EQUIPMENT |
MINING PROPERTIES AND DEVELOPMENT |
UNDER CONSTRUCTION |
CYCLICAL MAINTENANCE AND OTHER |
TOTAL |
|---|---|---|---|---|---|---|---|
| Cost | 181.6 | 1,639.8 | 803.9 | 482.6 | 146.1 | 3,254.0 | |
| Accumulated depreciation and | |||||||
| impairment | (49.6) | (991.3) | (689.8) | - | (107.3) | (1,838.0) | |
| Carrying amounts | 132.0 | 648.5 | 114.1 | 482.6 | 38.8 | 1,416.0 | |
| As at 1 Jan 2016 | 144.2 | 721.2 | 290.4 | 404.3 | 47.7 | 1,607.8 | |
| Disposal of subsidiaries | (0.1) | (34.8) | (2.5) | (3.6) | (0.4) | (41.4) | |
| Additions | 2.3 | 35.3 | - | 229.2 | 11.9 | 278.7 | |
| Restoration provision adjustments | 29 | - | - | 22.9 | - | - | 22.9 |
| Transfers | 16.9 | 97.7 | 24.9 | (147.1) | 6.7 | (0.9) | |
| Disposals | (0.1) | (0.4) | - | - | - | (0.5) | |
| Depreciation expense | (9.5) | (134.8) | (29.0) | - | (28.5) | (201.8) | |
| Reclassified to assets held for sale | (4.9) | (2.5) | (13.3) | (7.7) | - | (28.4) | |
| Impairment | 17 | (18.9) | (45.9) | (186.6) | (2.3) | 1.3 | (252.4) |
| Currency translation effects | 2.1 | 12.7 | 7.3 | 9.8 | 0.1 | 32.0 | |
| As at 31 Dec 2016 | 132.0 | 648.5 | 114.1 | 482.6 | 38.8 | 1,416.0 |
The carrying amount of property, plant and equipment accounted for as finance lease assets at 31 December 2017 is EUR 0.3 million and is classified as plant and equipment (2016: EUR 0.6 million). The carrying amount of exploration and evaluation expenditure at 31 December 2017 is EUR 10.3 million and is included in mining properties and development (2016: EUR 8.9 million). The additions (including transfers from under construction) to the carrying amount of the exploration and evaluation expenditure during 2017 were EUR 6.7 million (2016: EUR 4.7 million).
The total gains on sales of property, plant and equipment in the 2017 income statement amount to EUR 1.0 million (2016: EUR 1.9 million).
| EUR MILLION | EMISSION AND CARBON RIGHTS | SOFTWARE AND OTHER | TOTAL |
|---|---|---|---|
| Cost | - | 39.4 | 39.4 |
| Accumulated amortisation and impairment | - | (36.1) | (36.1) |
| Carrying amounts | - | 3.3 | 3.3 |
| As at 1 Jan 2017 | 1.1 | 4.9 | 6.0 |
| Additions | - | 1.9 | 1.9 |
| Transfers | (0.2) | 0.8 | 0.6 |
| Disposals | (0.9) | - | (0.9) |
| Amortisation expense | - | (4.1) | (4.1) |
| Currency translation effects | - | (0.2) | (0.2) |
| As at 31 Dec 2017 | 0.0 | 3.3 | 3.3 |
| EUR MILLION | NOTE | EMISSION AND CARBON RIGHTS | SOFTWARE AND OTHER | TOTAL |
|---|---|---|---|---|
| Cost | 1.1 | 40.2 | 41.3 | |
| Accumulated amortisation and impairment | - | (35.3) | (35.3) | |
| Carrying amounts | 1.1 | 4.9 | 6.0 | |
| As at 1 Jan 2016 | 1.4 | 9.9 | 11.3 | |
| Additions* | 0.8 | 0.3 | 1.1 | |
| Transfers | - | 0.9 | 0.9 | |
| Disposals | (1.2) | - | (1.2) | |
| Amortisation expense | - | (5.7) | (5.7) | |
| Impairment | 17 | - | (0.4) | (0.4) |
| Currency translation effects | 0.1 | (0.1) | - | |
| As at 31 Dec 2016 | 1.1 | 4.9 | 6.0 |
* EUR 0.8 million relate to non-cash recognition of emission and carbon rights.
In the year ended 31 December 2017, Nyrstar recognised pre-tax net impairment reversal of EUR 142.2 million (2016: Impairment loss of 266.3 million). Impairment reversals of EUR 126.1 million related to pre-tax impairment reversals on Nyrstar's mining assets and EUR 16.1 million related to its discontinued operations. The allocation of the impairment charges for the period to individual assets, cash generating units and operating segments is outlined below:
| IN EUR MILLION | WHEREOF | |||
|---|---|---|---|---|
| IMPAIRMENT (LOSS) / REVERSAL |
PP&E | INVESTMENTS | OTHER | |
| CONTINUING OPERATIONS | ||||
| Myra Falls | 89.5 | 89.5 | - | - |
| Middle Tennessee Mines | 36.6 | 36.6 | - | - |
| Mining | 126.1 | 126.1 | - | - |
| Total continuing operations | 126.1 | 126.1 | - | - |
| (note 15,16) | ||||
| Discontinued operations (note 9) | ||||
| Campo Morado | 19.5 | 19.5 | - | - |
| Contonga | (4.2) | (4.2) | - | - |
| Coricancha | 0.8 | 0.8 | - | - |
| Total discontinued operations | 16.1 | 16.1 | - | - |
| Total | 142.2 | 142.2 | - | - |
In the year ended 31 December 2016, Nyrstar recognised pre-tax net impairment losses of EUR 266.3 million. The majority of the impairment losses relate to pre-tax impairment charges on Nyrstar's mining assets.
The allocation of the impairment charges for the period to individual assets, cash generating units and operating segments is outlined below:
| IN EUR MILLION | WHEREOF | |||
|---|---|---|---|---|
| IMPAIRMENT (LOSS) / REVERSAL |
PP&E AND INTANGIBLE ASSETS |
INVESTMENTS | OTHER | |
| CONTINUING OPERATIONS | ||||
| Myra Falls | (62.1) | (62.1) | - | - |
| Middle Tennessee Mines | (30.7) | (30.7) | - | - |
| Pucarrajo | (14.1) | (14.1) | ||
| Langlois | (18.6) | (18.6) | - | - |
| Mining | (125.5) | (125.5) | - | - |
| Total continuing operations | (125.5) | (125.5) | - | - |
| (note 15,16) | ||||
| DISCONTINUED OPERATIONS (NOTE 9) | ||||
| El Mochito | (79.7) | (73.7) | - | (6.0) |
| El Toqui | (16.1) | (16.2) | - | - |
| Campo Morado | (7.4) | (1.1) | - | (6.3) |
| Contonga | (19.2) | (18.1) | (1.0) | |
| Coricancha | (18.4) | (18.0) | - | (0.4) |
| Total discontinued operations | (140.8) | (127.1) | - | (13.7) |
| Total | (266.3) | (252.6) | - | (13.7) |
Recoverable values were determined in their functional currencies on the basis of fair value less cost of disposal (FVLCD) for each operation. The FVLCD for mining operations were determined as the present value of the estimated future cash flows (expressed in real terms) expected to arise from the continued use of the assets (life of asset), including reasonable forecast expansion prospects and using assumptions that an independent market participant would take into account. These cash flows were discounted using a real after-tax discount rate that reflected current market assessments of the time value of money and the risks specific to the operation. The FVLCD measurement is categorised as a Level 3 per the fair value hierarchy. Management projected the cash flows over the expected life of the mines, which varied from 8 to 9 years.
The key assumptions underlying the FVLCD were forecast commodity prices, foreign exchange rates, treatment charges, discount rates, amount of inferred resources, production assumptions and capital and operating costs.
Commodity price and foreign exchange forecasts were developed from externally available forecasts from a number of different market commentators. A broad range of externally available reputable forecasts were utilised in establishing the robust composite price sets. Equal weighting was applied to each of the individual forecasts in order to exclude any bias. The metal prices applied in the impairment assessment varied in accordance with the year the sale of production was expected to occur with long-term prices held flat effective from 2023. The ranges of prices used are outlined in the table below showing the high and low prices over the period of assumed cash flows:
| LOW | HIGH | LONG TERM | |
|---|---|---|---|
| COMMODITY PRICES (USD) | |||
| Zinc (per tonne) | 2,318 | 3,188 | 2,318 |
| Lead (per tonne) | 2,023 | 2,281 | 2,023 |
| Copper (per tonne) | 6,143 | 6,863 | 6,257 |
| Gold (per ounce) | 1,203 | 1,316 | 1,203 |
| Silver (per ounce) | 19 | 21 | 19 |
| FOREIGN EXCHANGE RATES (VERSUS USD) | |||
| Canadian Dollar | 1.14 | 1.40 | 1.26 |
| LOW | HIGH | LONG TERM | |
|---|---|---|---|
| COMMODITY PRICES (USD) | |||
| Zinc (per tonne) | 2,340 | 2,859 | 2,340 |
| Lead (per tonne) | 2,018 | 2,243 | 2,018 |
| Copper (per tonne) | 5,300 | 6,287 | 6,287 |
| Gold (per ounce) | 1,212 | 1,278 | 1,212 |
| Silver (per ounce) | 17 | 29 | 19 |
| FOREIGN EXCHANGE RATES (VERSUS USD) | |||
| Canadian Dollar | 1.31 | 1.34 | 1.31 |
Zinc treatment charge assumptions are determined by reference to benchmark treatment charges and historical treatment charge rates as a proportion of the associated metal price and range from 5% to 9% (2016: 4% to 9%) of the underlying metal price.
Discount rates are determined using a weighted average cost of capital methodology on an operation specific basis. The discount rates applied for operations with impairment charges and reversals on property, plant and equipment are outlined in the table below:
| DISCOUNT RATES | DISCOUNT RATES |
|---|---|
| 2016 | 2017 |
| Langlois / Myra Falls 8.50% |
7.70% |
| Middle Tennessee Mines 8.00% |
7.00% |
Production assumptions and capital and operating costs are determined based on approved budgets and forecasts with greater weight given to historical results, unless definitive plans are in place for capital projects which are expected to have a significant, favourable effect on the operation. In such circumstances, expenditures associated with the capital project are incorporated into the FVLCD model.
Nyrstar has included inferred mineral resources in its valuation models. An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on more limited information than indicated and measured mineral resources. Due to the uncertainty that may be attached to inferred mineral resources it cannot always be assumed that all or any part of an inferred mineral resource will be upgraded to an indicated or measured mineral resource as a result of continued exploration. Due to this uncertainty, Nyrstar has included differing levels of inferred resources for each mine based on management's view of the likely conversion of inferred resources into reserves at that asset given the geological set up of each mine. For Myra Falls 17% and for the Middle Tennessee Mines 83% of total reserves and resources are inferred resources.
The carrying values of net assets of each mining CGU tested for impairment reversal as at 31 December 2017 are outlined in the table below:
| EUR MILLION | ||||
|---|---|---|---|---|
| CASH GENERATING UNIT | TOTAL ASSETS | TOTAL LIABILITIES | NET ASSETS | |
| Myra Falls | FVLCD | 227.2* | (89.5) | 137.7 |
| Middle Tennessee Mines | FVLCD | 81.7 | (20.0) | 61.7 |
* Includes deferred tax assets of EUR 35.6 million relating to tax losses carried forward which have been assessed for recoverability under IAS 12 (note 13)
The carrying values of net assets of each mining CGU, which was impaired as at 31 December 2016 are outlined in the table below:
| EUR MILLION | ||||
|---|---|---|---|---|
| CASH GENERATING UNIT | TOTAL ASSETS | TOTAL LIABILITIES | NET ASSETS | |
| Campo Morado | FVLCD | 9.6 | (9.6) | 0.0 |
| Myra Falls | FVLCD | 69.7 | (51.2) | 18.5 |
| Middle Tennessee Mines | FVLCD | 35.9 | (9.2) | 26.7 |
| East Tennessee Mines | FVLCD | 121.4 | (20.6) | 100.8 |
| Pucarrajo | FVLCD | 2.7 | (15.7) | (13.0) |
| Langlois | FVLCD | 124.2* | (33.5) | 90.7 |
* Includes deferred tax assets of EUR 10.3 million relating to tax losses carried forward which have been assessed for recoverability under IAS 12 (note 13)
The results of the impairment reversal testing are affected by changes in commodity prices, foreign exchange rates, discount rates and rate of utilisation of inferred resources. Sensitivities to variations in relevant assumptions are depicted in the following table, which sets out the estimated impact on the impairment reversals for the financial year ended 31 December 2017 (in EUR million). All previously recognised impairments of non-current assets have been reversed and there remains headroom between the recoverable value and the net assets (after impairment reversals). If forecast zinc prices were to be 30 % lower, the impairment reversal recognised in the year ended 31 December 2017 would be lower by EUR 37.0 million. Any other reasonably plausible changes to the key assumptions do not have an impact on the amount of the impairment reversal recognised in the year ended 31 December 2017.
| PARAMETER | VARIABLE | EUR MILLION |
|---|---|---|
| Zinc price | +/- 30% | - / (37) |
| Lead price | +/- 10% | - / - |
| Copper price | +/- 10% | - / - |
| Gold price | +/- 10% | - / - |
| Silver price | +/- 10% | - / - |
| Foreign exchange rates | +/- 10% | - / - |
| Production rate | +/- 10% | - / - |
| Discount rate | + 100bps | - |
| Utilisation of Inferred Resources | - 10% | - |
Based on the results of its impairment reversal testing at 31 December 2017, the Group has recorded impairment reversals related to its continued mining operations totalling of EUR 126.1 million (2016: Impairment losses of EUR 125.5 million). The impairment reversal of the Myra Falls Mine in Canada was based on significantly improved metal price environment in 2017, the detailed operational review of the mine performed by the Group together with independent consultants, has resulted in the Group taking a decision to restart the Myra Falls operation in early 2018. The Mid Tennessee Mines impairment reversal recognised during 2017 reflected the most recent operational assumptions for the mine based on the detailed review performed by the Group together with independent consultants, which has resulted in the restart of the Mid Tennessee operation during 2017, coupled with significantly improved metal price environment in 2017.
In 2017 the Company has also recorded impairment reversals related to its discontinued mining operations totalling of EUR 16.1 million (2016: impairment loss of EUR 140.8 million) (note 9) reflecting the actual outcomes of the sales process.
Based on the results of its impairment testing at 31 December 2016, the Group has recorded impairment losses related to its continued mining operations totalling of EUR 125.5 million. The impairment of the Myra Falls Mine in Canada was based on the current status of the sales process for the respective mines, comparable market transactions which included recent Nyrstar mine sales, and continued uncertainty related to the restart of the mines. The Langlois Mine impairment recognised during 2016 reflected the most recent operational assumptions, and comparable market transactions which included recent Nyrstar mine sales. The Mid Tennessee Mines impairment recognised during 2016 reflected the most recent operational assumptions for the mine, and the risks and related costs associated with the mine production ramp up after coming out of care and maintenance in 2016. The impairment in the Puccarajo Mine in Peru reflects the decision to close the mine.
In 2016 the Company has also recorded impairment losses related to its discontinued mining operations totalling of EUR 140.8 million (note 9).
| EUR MILLION | OWNERSHIP | ||
|---|---|---|---|
| 2016/2017 | 31 DEC 2016 | 31 DEC 2017 | |
| Ironbark Zinc Ltd. | 19.3%/18.1% | 3.3 | 3.3 |
| Other | 49%/49% | 0.1 | 0.1 |
| Total | 3.4 | 3.4 |
Summary financial information for equity accounted investees, adjusted for the percentage ownership held by the Group, is as follows:
| EUR MILLION | CURRENT ASSETS | NON-CURRENT ASSETS | CURRENT LIABILITIES | NON-CURRENT LIABILITIES | REVENUES | PROFIT |
|---|---|---|---|---|---|---|
| As at 31 Dec 2017 | 0.4 | 5.4 | 0.1 | - | - | - |
| As at 31 Dec 2016 | 0.4 | 5.8 | - | - | - | - |
The fair value (based on the quoted bid prices in an active market, a Level 1 measurement) of Nyrstar's share of Ironbark Zinc Ltd. as of 31 December 2017 is EUR 4.5 million (2016: 6.0 million).
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Herencia Resources Ltd. 0.2 |
0.2 |
| Qualified Environmental Trust 18.6 |
17.4 |
| Exeltium SAS 1.5 |
1.5 |
| Other 2.1 |
0.7 |
| Total 22.4 |
19.8 |
All investments in equity securities are measured at level 1 under the fair value measurements using quoted bid prices in an active market (refer to note 35g for further explanation), with the exception of Exeltium SAS, which is a private company and carried at cost.
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Embedded derivatives (b) | 36.5 | 35.2 |
| Restricted cash (c) | 111.7 | 113.0 |
| Held to maturity (d) | 5.4 | 5.2 |
| Other non-current financial assets (h) | 11.7 | 10.4 |
| Total non-current financial assets | 165.3 | 163.8 |
| Commodity contracts - fair value hedges (a) | 16.7 | 2.5 |
| Commodity contracts - cash flow hedges (e) | 5.5 | 4.1 |
| Foreign exchange contracts - held for trading (a) | 5.2 | 3.1 |
| Foreign exchange contracts - cash flow hedge (f) | 0.6 | - |
| Other current financial assets (h) | 2.1 | 4.4 |
| Embedded derivatives (b) | 22.7 | 27.9 |
| Total current financial assets | 52.8 | 42.0 |
| Zinc prepayment (g) | 85.2 | - |
| Other non-current financial liabilities (i) | - | 15.6 |
| Total non-current financial liabilities | 85.2 | 15.6 |
| Commodity contracts - fair value hedges (a) | 3.5 | 29.2 |
| Commodity contracts - cash flow hedges (e) | 18.8 | 35.0 |
| Zinc prepayment (g) | 85.2 | 74.8 |
| Foreign exchange contracts - held for trading (a) | 2.8 | 11.2 |
| Other current financial liabilities (i) | 11.6 | 1.3 |
| Total current financial liabilities | 121.9 | 151.5 |
The fair value of derivatives (commodity contracts) hedging inventories and fixed forward sales contracts resulted in a net liability of EUR 26.7 million (31 December 2016: net asset of EUR 13.2 million) being recognised on the statement of financial position.
Carrying amounts of the hedged items of inventory as well as the firm commitments for fixed forward sales contracts are disclosed in note 21 and 22, respectively.
The fair value of foreign exchange derivatives that are commercially effective hedges but are not hedge accounted by the Company are classified as held for trading and resulted in a net liability of EUR 8.1 million (31 December 2016 net asset: EUR 2.4 million).
The Group's exposure to currency and commodity risk related to other financial assets and liabilities is disclosed in note 35.
The change in fair value on the effective portion of the Group's embedded derivatives during the year ended 31 December 2017 with a pre-tax positive impact of EUR 9.9 million (31 December 2016: positive impact of EUR 28.9 million) was recognised in the cash flow hedge reserve. Changes in fair value on the ineffective portion and amortisation of the swap's fair value at inception of EUR 2.6 million loss (31 December 2016: EUR 5.2 million loss) were recognised in the income statement within energy expense.
The restricted cash balance of EUR 113.0 million as at 31 December 2017 (31 December 2016: EUR 111.7 million) represents amounts placed on deposit to cover certain reclamation costs for the mining operations.
The balance includes an amount of AUD 30.0 million (EUR 19.5 million) (2016: AUD 30.0 million or EUR 20.6 million) which represents a Minimum Cash Balance that the Company agreed to keep in its subsidiary, Nyrstar Port Pirie Pty Ltd.'s bank account until the Perpetual Securities (note 26) are fully redeemed.
Additionally, the balance includes restricted cash of USD 9.7 million (EUR 8.1 million) as security in favor of the Ministerio de Energia y Minas of Peru for closure obligations of the Coricancha Mine (the "Mine Closure Bond") (note 20(i)) .
The remaining balance of restricted cash relates to the mine closure deposits that the Company has in place primarily in relation to its mining operations.
The held to maturity instrument is a government bond that is required to be maintained as a security deposit.
The net liability of EUR 30.9 million represents a remaining balance of the commodity contracts – cash flow hedges that were not settled at 31 December 2017. The fair value of the effective portion of commodity contracts - cash flow hedges at 31 December 2017 is a pre-tax loss of EUR 28.8 million (31 December 2016: pre-tax loss of EUR 40.9 million). The loss of EUR 28.8 million has been recognised in the cash flow hedge reserve. The hedges were determined to be 100% effective.
The asset of nil represents a remaining balance of the foreign exchange contracts – cash flow hedges that were not settled at 31 December 2017. The fair value of the effective portion of foreign exchange contracts - cash flow hedges at 31 December 2017 is a pre-tax loss of EUR 1.4 million (31 December 2016: pre-tax loss of EUR 2.9 million). The loss of EUR 1.4 million has been recognised in the cash flow hedge reserve. The hedges were determined to be 100% effective.
In December 2015, Nyrstar entered into a zinc prepayment, a tripartite agreement between a physical offtaker and a bank, in the nominal amount of USD 150 million (EUR 137.8 million) through a special purpose vehicle ("SPV") structure. The zinc prepayment was increased in the second half of 2016 to USD 185 million (EUR 175.6 million). The prepayment agreement is linked to the physical delivery of refined zinc metal to Trafigura under the terms of a three-year offtake agreement and the zinc prepayment was arranged by Deutsche Bank AG. The zinc metal prepayment has an amortising structure with a three-year term and a 12-month grace period following which the prepayment will be repaid in equal monthly zinc metal deliveries over a period of two years.
The risks and obligations of Nyrstar as to the SPV are fully described above except that in the event of Trafigura failing to take physical delivery of the zinc delivered by Nyrstar, the Company is required to, on a best efforts basis, find alternative buyers on behalf of the SPV. No financial risks arise to Nyrstar from this obligation.
The zinc metal deliveries are priced at the date of delivery based on prevailing market prices and have not been hedged by the Company thereby retaining full price exposure to zinc metal prices.
Directly attributable transaction costs have been deducted at initial recognition of the zinc prepayment and are amortised over the term of the zinc prepayment together with the interest of LIBOR plus a margin of 4.5%.
In the year ended 31 December 2017 the Company settled an equivalent of EUR 79.4 million through a physical delivery of zinc metal.
In November 2016 Nyrstar completed its sale of El Toqui Mine in Chile to Laguna Gold Limited ("Laguna") (Note 8). As a part of the sales proceeds the Company entered into a price participation agreement with Laguna based on which the Company is entitled to receive price participation proceeds from the owners of the El Toqui Mine on the first 7.9 million tonnes of ore processed and sold by El Toqui following the sale of the mine. The price participation commences above a zinc price of USD 2,100 per tonne and is applicable at set zinc prices.
The price participation agreement is a financial asset designated as fair value through profit and loss. The fair value is measured using level 3 inputs which comprise unobservable inputs relating to macroeconomic factors (price and treatment charges consistent with those disclosed in note 17) and operational assumptions relating to production, ore head grades and recoveries of the El Toqui Mine that have been determined based on historically achieved levels.
The subsequent changes to the fair value will be recognised in profit and loss based on the changes in the key assumptions used in the calculation of the fair value of the price participation agreement and based on the finalised sales of the processed ore by the El Toqui Mine. At 31 December 2017, the Company has revalued the price participation agreement using the most recent zinc price assumptions consistent with those used in the impairment reversal assessment (note 17) and has recognised a fair value increase of EUR 1.6 million (net of the 2017 cash receipts of EUR 1.3 million) in the income statement for the year ended 31 December 2017.
In connection with the sale of the Coricancha Mine (note 9), the Company agreed to fund the reclamation works for the Cancha 1 and 2 and Triana tailings facilities up to a maximum amount of USD 20 million (EUR 19.0 million). The Company has recognised EUR 11.6 million as other financial liability representing the Company's best estimate of its obligation to fund the tailings facilities reclamation works. The fair value is measured using level 3 inputs which comprise unobservable inputs.
Additionally, as a part of the sales consideration Nyrstar provided a guarantee letter for a value of USD 9.7 million (EUR 9.2 million) as security in favour of the Ministerio de Energia y Minas of Peru for closure obligations of the Coricancha Mine.
The Mine Closure Bond is currently secured by a cash-backed account for the full exposure in favor of the issuing bank guarantor, the balance of which is included in the Company's restricted cash. Upon the Closing Date, Nyrstar recognised a financial liability owing to Great Panther. Should Great Panther:
Upon release of Nyrstar from the Mine Closure Bond, the other financial liability shall be derecognised and the monies in the cash backed account in favour of the issuing bank guarantor shall be released to the Company at which time cash shall be reclassified from restricted cash to cash and cash equivalents.
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Raw materials | 289.0 | 387.7 |
| Work in progress | 266.9 | 331.1 |
| Finished goods | 111.9 | 162.2 |
| Stores and consumables | 56.7 | 61.5 |
| Fair value adjustment* | (4.4) | 22.6 |
| Total inventories | 720.1 | 965.1 |
* As the Group applies hedge accounting as described in note 3g, the hedged items of inventories are adjusted for fair value movements.
The increase of inventories between 2017 and 2016 is primarily due to the higher zinc, lead and silver prices in USD.
As of 31 December 2016, by-product inventories included in finished goods, which were written down by EUR 12.2 million to their net realisable value. There were no write down as of 31 December 2017.
As at 31 December 2017, EUR 633.4 million (2016: 390.4 million) of inventories were pledged for the SCTF credit facility.
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 | |
|---|---|---|
| Other - non-current | 2.0 | 0.7 |
| Total other non-current assets | 2.0 | 0.7 |
| Fair value of underlying hedged risk - current (a) | - | 0.7 |
| Total other current assets | - | 0.7 |
| Fair value of underlying hedged risk - current (a) | 1.3 | 2.1 |
| Total other current liabilities | 1.3 | 2.1 |
The fair value of fixed forward sales contracts (the underlying hedged items) resulted in a net liability of EUR 1.4 million (2016: net liability of EUR 1.3 million), being offset by an amount of EUR 1.4 million (2016: EUR 1.3 million). This represented the fair value of hedging derivatives on these fixed forward sales contracts and included in note 20 other financial assets and liabilities.
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Trade receivables 150.2 |
174.0 |
| Less provision for receivables (1.3) |
(1.2) |
| Net trade receivables 148.9 |
172.8 |
| Other receivables* 70.1 |
50.7 |
| Total trade and other receivables 219.0 |
223.5 |
* During 2016 the Company entered into various commodity swaps ("swaps") to optimise sourcing of raw material supply to its smelters. The outstanding balances of the swaps that did not meet the revenue recognition criteria are recognised in Other receivables: EUR 36.1 million and Other payables: EUR 33.5 million. There were no outstanding balances of the swaps, which did not meet the revenue recognition criteria in 2017.
As at 31 December 2017, EUR 59.3 million (2016: EUR 28.9 million) of trade receivables were pledged for the SCTF credit facility.
The movement in the provision for receivables is detailed in the table below:
| EUR MILLION 2016 |
2017 |
|---|---|
| As at 1 Jan 2.0 |
1.3 |
| Disposal of subsidiaries - |
(0.1) |
| Payments (0.6) |
- |
| Additions 0.1 |
- |
| Currency translation effects (0.2) |
- |
| As at 31 Dec 1.3 |
1.2 |
The Group's exposure to currency and liquidity risk related to trade and other receivables is disclosed in note 35.
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Cash at bank and on hand 127.1 |
68.4 |
| Total cash and cash equivalents 127.1 |
68.4 |
Cash at bank and on hand and short-term deposits earned a combined weighted average interest rate of 0.8% for calendar year 2017 (2016: 0.7% per annum).
The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 35.
In November 2017, Nyrstar issued 15,384,616 new shares as the result of the completion of a capital increase in the amount of EUR 100.0 million within the framework of an accelerated book build offering. The associated costs of the capital increase amounted to EUR 2.4 million.
In June 2017 the Company issued 84,969 new ordinary shares for a cash consideration of EUR 0.4 million (consisting of capital and issue premium) within the framework of the authorised capital. The new shares were subscribed for by certain existing senior employees of the Company and its subsidiaries.
As at 31 December 2017, the number of issued ordinary shares is 109,033,545 (31 December 2016: 93,563,960) with a par value of EUR 1.038 (2016: EUR 1.038). The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.
In February 2016, Nyrstar issued 608,165,740 new shares as the result of the completion of a capital increase in the amount of EUR 273.7 million within the framework of a rights offering which was approved by the extraordinary general shareholders' meeting of 18 January 2016. The associated costs of the capital increase amounted to EUR 11.4 million.
In May 2016, the Company implemented a share consolidation with respect to all outstanding shares by means of a 1-for-10 reverse stock split (the "RSS"). The RSS was effective as of 9 June 2016.
In addition to the issued share capital, Nyrstar has the following two outstanding convertible bonds issued in 2013 and 2016 (note 28) respectively:
The Board of Directors has decided not to propose to shareholders a distribution for the financial year 2017 and 2016.
| ISSUED SHARES | 2016 | 2017 | |
|---|---|---|---|
| Shares outstanding | 93,563,960 | 109,033,545 | |
| Treasury shares | - | - | |
| As at 31 Dec | 93,563,960 | 109,033,545 | |
| MOVEMENT IN SHARES OUTSTANDING | 2016 | 2017 | |
| As at 1 Jan | 327,473,863 | 93,563,960 | |
| Capital increase | 608,165,740 | 15,469,585 | |
| Reverse stock split | (842,075,643) | - | |
| Employee shared based payment plan | - | - | |
| As at 31 Dec | 93,563,960 | 109,033,545 | |
| MOVEMENT IN TREASURY SHARES | NOTE | 2016 | 2017 |
| As at 1 Jan | 12,571,225 | - | |
| Cancellation of treasury shares | (12,571,225) | - | |
| Employee shared based payment plan | 33 | - | - |
| As at 31 Dec | - | - |
At 18 January 2016, Nyrstar's extraordinary general meeting approved cancellation of all outstanding treasury shares. Following the cancellation Nyrstar does not hold any treasury shares.
The Group's major shareholders (holding greater than 3% of the Group's outstanding shares) based on the latest information received of significant shareholdings available as at 31 December 2017 were:
| SHAREHOLDER'S NAME | SHAREHOLDER'S ADDRESS | DATE OF NOTIFICATION | NUMBER OF VOTING RIGHTS | IN % |
|---|---|---|---|---|
| Urion Holdings (Malta) Ltd. | Leicester Court, Suite 2, Edgar | |||
| Bernard Str., Gzira, Malta | 1 Sep 2015 | 26,830,662.0 | 24.61% | |
| Total | 26,830,662.0 | 24.61% |
The Group's major shareholders (holding greater than 3% of the Group's outstanding shares) based on notifications of significant shareholdings available as at 31 December 2016 were:
| SHAREHOLDER'S NAME | SHAREHOLDER'S ADDRESS | DATE OF NOTIFICATION | NUMBER OF VOTING RIGHTS | IN % |
|---|---|---|---|---|
| Urion Holdings (Malta) Ltd. | Leicester Court, Suite 2, Edgar Bernard Str., Gzira, Malta |
1 Sep 2015 | 23,055,662.0 | 24,64% |
| BlackRock Group* | 33 King William Street, London EC4R 9AS, UK |
16 Dec 2016 | 5,789,472.0 | 6,19% |
| BlueMountain Capital Management LLC | 280 Park Ave, 12 FL New York, NY 10017 USA |
1 March 2016 | 4,250,000.0 | 4,54% |
| Umicore S.A. / N.V. | Broekstraat 31, 1000 Brussels, Belgium |
23 Mar 2011 | 2,891,126.0 | 3,09% |
Total 35,986,261.0 38,46%
* The number of 6.19% is comprised of voting rights linked to securities (1.73%) and voting rights that may be acquired upon exercise of financial instruments deemed equivalent to voting securities (4.46%)
Commencing in November 2015, Nyrstar Port Pirie (NPP) issued tranches of perpetual securities (the Securities) related to the Nyrstar Port Pirie lead smelter redevelopment (the Project). The Securities are perpetual, subordinated and unsecured. Distributions on the Securities are unconditionally deferrable into perpetuity and cumulative if deferred. The Securities are redeemable at the option of Nyrstar or on insolvency of the Group.
At 31 December 2017, an aggregate total of EUR 186.3 million (31 December 2016: EUR 131.6 million) of perpetual securities had been issued. Each tranche represented an amount equal to the forecast project costs actually payable in the following calendar month (less the unspent amount of any previous tranches and less any required overrun funding) with the last drawdown in November 2017 including a six months lookahead mechanism. No further tranches can be issued.
Whilst the Securities are outstanding, NPP is subject to forms of economic compulsion which compel the Company to make the intended distributions on the Securities. During the year ended 31 December 2017 distributions were made in accordance with the targeted distribution schedule. The Company estimates, taking into consideration the forms of economic compulsion, it will continue to make future distributions and then redeem the Securities according to the targeted amortisation schedule. The redemption of the Securities is expected to commence in May 2018 through to November 2022.
(i) The Securities have scheduled (targeted) distributions (the Distribution Amount Payments) every six months (with the first payment on 27 May 2016) and scheduled (targeted) redemption every six months commencing on 27 May 2018 according to an agreed targeted amortisation schedule (the Amortisation Schedule). The Amortisation Schedule contemplates ten payments of AUD 29.125 million (EUR 27.7 million) with the first payment in May 2018 and subsequent payments every six months with the final payment targeted in November 2022. The distributions on Perpetual Securities in 2017 amounted to AUD 11.0 million (EUR 7.4 million) (2016: EUR 3.5 million). No redemptions were made in in 2017 and 2016. The Distribution Amount on the Securities accrues daily in respect of each day in the relevant six month period at a distribution rate plus a fee component amount. The distribution rate is based on a floating interest rate being the Bank Bill Rate (this is the interbank rate published by the Australian Financial Markets Association) plus a fixed margin of 1.275%. The average distribution rate for 2017 was 3.24% (2016: 3.37%). The fee component amount varies based on the time and amount of the Securities outstanding. The fees were renegotiated in 2017. The fee component amount for 2017 varied between 1.7% and 2.2% (2016: 1.7%). Distributions on Securities are recognised directly in equity.
Nyrstar, at its sole discretion, will have the ability to defer any and all of the Distribution Amount Payments. However, if Nyrstar does not make the Distribution Amount Payments every six months, the unpaid amount is capitalised and added to the amount of accumulated distributions for the following six month period (and so on). The fee component amount may increase depending on the amount outstanding and for how long that amount is outstanding. Should the Company not make the Distribution Amount Payments in accordance with the targeted distribution amount schedule within the first 2.5 years, the fee component amount will increase from 2.2%% to 3.5% (and may potentially increase to 5.7% in certain circumstances). The fee increases to 8% per annum if the Perpetual Securities have not been redeemed by the seventh year after first issue, and 12% after ten years.
During the year ended 31 December 2017, Nyrstar agreed with the holder of the Securities to amend or exclude certain clauses relating to the contingent option for the holder to request redemption (i.e. a contingent settlement provision). Nyrstar can undertake certain actions to prevent a contingent settlement event from occurring. There are no circumstances where Nyrstar would have to mandatorily redeem the Securities. As such, the Securities have been accounted for as entirely equity financial instruments as at 31 December 2017. This classification did not impact the financial statements as at 31 December 2017 on the basis that the fair value of the financial liability component of the compound financial instrument presented in the 31 December 2016 financial statements was insignificant.
The final contingent settlement provisions for the Securities are provided below.
Nyrstar NV ceases to legally or beneficially own (directly or indirectly) 100% of the issued voting share capital of NPP.
NPP breaches its obligation not to make a distribution other than in the few permitted circumstances and does not remedy the breach within 5 business days of its occurrence.
then such non-performance alone of itself is not an Early Redemption Event.
NPP fails to comply with its undertakings in respect of:
except where, if any such non-compliance can be remedied, NPP remedies the non-compliance within 5 business days of a Security holder requesting remedy or NPP becoming aware of the non-compliance.
In addition to the requirement to redeem the Securities upon an early repayment event, NPP is obliged to redeem the Securities upon liquidation of either NPP or the Company (other than, in the case of the Company, for the purpose of a solvent merger, restructure or amalgamation, provided that the merged, restructured or amalgamated entity has equivalent or better financial standing and technical expertise and provides guarantees and indemnities on the same terms as the Company issued a guarantee and Indemnity connected to the financing arrangement and closure indemnity).
| EUR MILLION | TREASURY SHARES | TRANSLATION RESERVES |
REVERSE ACQUISITION RESERVE |
CASH FLOW HEDGE | RESERVE CONVERTIBLE BOND | INVESTMENTS RESERVE |
TOTAL |
|---|---|---|---|---|---|---|---|
| As at 1 Jan 2017 | - | 83.9 | (265.4) | 45.5 | 39.2 | 3.1 | (93.7) |
| Losses on cash flow hedges | - | - | - | (19.3) | - | - | (19.3) |
| Foreign currency translation differences |
- | (48.1) | - | - | - | - | (48.1) |
| Change in fair value of investments in equity securities |
- | - | - | - | - | (0.2) | (0.2) |
| As at 31 Dec 2017 | - | 35.8 | (265.4) | 26.2 | 39.2 | 2.9 | (161.3) |
| EUR MILLION | TREASURY SHARES | TRANSLATION RESERVES |
REVERSE ACQUISITION RESERVE |
CASH FLOW HEDGE | RESERVE CONVERTIBLE BOND | INVESTMENTS RESERVE |
TOTAL |
| As at 1 Jan 2016 | (1.2) | 148.8 | (265.4) | 59.5 | 24.5 | 2.8 | (31.0) |
| Losses on cash flow hedges | - | - | - | (14.0) | - | - | (14.0) |
| Foreign currency translation differences |
- | (64.9) | - | - | - | - | (64.9) |
| Change in fair value of investments in equity securities |
- | - | - | - | - | 0.3 | 0.3 |
| Cancellation of treasury shares | 1.2 | - | - | - | - | - | 1.2 |
| Convertible bond | - | - | - | - | 14.7 | - | 14.7 |
| As at 31 Dec 2016 | - | 83.9 | (265.4) | 45.5 | 39.2 | 3.1 | (93.7) |
The extraordinary general shareholders' meeting held on 18 January 2016 approved the cancellation of all 12,571,225 treasury shares held by the Company.
The treasury shares reserve comprises the par value of the Company's share held by the Group. As at 31 December 2017, the Group held none of the Company's shares (31 December 2016: Nil).
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rate, foreign currency and liquidity risks see note 35.
| AS AT | AS AT | ||
|---|---|---|---|
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 | |
| Convertible bonds | 211.5 | 100.8 | |
| Fixed rate bonds | 340.8 | 837.0 | |
| Unsecured bank loans | 12.2 | 10.2 | |
| Finance lease liabilities | 0.5 | 0.4 | |
| Total non-current loans and borrowings | 565.0 | 948.4 | |
| Convertible bonds | - | 27.2 | |
| Unsecured bank loans | 2.1 | 17.2 | |
| SCTF Credit Facility | 329.9 | 176.9 | |
| Loans from related parties | 94.8 | - | |
| Finance lease liabilities | 0.2 | 0.3 | |
| Total current loans and borrowings | 427.0 | 221.6 | |
| Total loans and borrowings | 992.0 | 1,170.0 |
In July 2016, Nyrstar issued an EUR 115 million 5.00% convertible bonds listed on the Frankfurt Open Market (Freiverkehr), due July 2022.
The bonds are convertible at the option of the holder, at any time from 17 November 2016 until 1 July 2022 (ten days prior to final maturity date being 11 July 2022), or if the bonds are called by the Group for redemption prior to the final maturity date, until the seventh day before the date fixed for redemption. The conversion price as at 31 December 2017 is EUR 9.60 per share.
The bonds consist of a liability component and an equity component. The fair values of the liability component (EUR 97.3 million) and the equity component (EUR 14.6 million) were determined, using the residual method, at issuance of the bonds. The liability component is measured at amortised cost at an effective interest rate of 8.46% per annum.
The bonds have been issued at 100% of their principal amount and have a coupon of 5.00% per annum, payable semi-annually in arrears.
In September 2013 Nyrstar issued an EUR 120 million 4.25% convertible bonds listed on the Frankfurt Open Market (Freiverkehr), due September 2018.
The bonds are convertible at the option of the holder, at any time from 31 December 2013 until 15 September 2018 (ten days prior to final maturity date being 25 September 2018), or if the bonds are called by the Group for redemption prior to the final maturity date, until the seventh day before the date fixed for redemption. The conversion price as at 31 December 2017 is EUR 21.63 per share.
The bonds consist of a liability component and an equity component. The fair values of the liability component (EUR 102.3 million) and the equity component (EUR 15.7 million) were determined, using the residual method, at issuance of the bonds. The liability component is measured at amortised cost at an effective interest rate of 8.03% per annum.
The bonds have been issued at 100% of their principal amount and have a coupon of 4.25% per annum, payable semi-annually in arrears.
In March 2017, Nyrstar bought back part of its own 4.25% convertible bonds (due in 2018) with a face value of EUR 29.5 million for a total cash consideration of EUR 29.5 million.
In September 2017, Nyrstar bought back part of its own 4.25% convertible bonds (due in 2018) with a face value of EUR 61.5 million for a total cash consideration of EUR 63.7 million.
In 2017 and 2016 no convertible bonds were converted in ordinary shares of the company.
SCTF credit facility is a secured multi-currency revolving structured commodity trade finance credit facility with a limit of EUR 600 million. The facility was refinanced in December 2017 and has a maturity of four years (with run-off period during the fourth year leading to a maturity of December 2021). The facility includes an accordion to increase its size to EUR 750 million on a pre-approved but uncommitted basis.
Funds drawn under the facility bear interest at EURIBOR plus a margin of 2.25%.
Directly attributable transaction costs have been deducted at initial recognition and are amortized over the term of the credit facility. Transaction cost not yet amortized at the balance sheet date amount to EUR 6.5 million (31 December 2016: EUR 2.3 million). In 2017, the costs of the previous SCTF credit facility were written off at the time of renewal, leading to finance charges of EUR 1.7 million.
Borrowings under this facility are secured by Nyrstar's inventories and receivables. In addition to standard representations, warranties and undertakings, including restrictions on mergers and disposals of assets, the facility provides for financial covenants which are linked to total consolidated tangible net worth and net debt to equity.
In March 2017, Nyrstar issued a EUR 400.0 million 6.875 % Senior Notes listed on the Luxembourg Stock Exchange's Euro MTF market, due in 2024. In September 2017 Nyrstar issued an additional EUR 100.0 million Senior Notes to be consolidated with and form a single series with the original EUR 400.0 million 6.875 % Senior Notes. The EUR 100.0 million Notes have been consolidated on 10 November 2017.
In May 2016, Nyrstar repaid its 5.375% fixed rate bonds with an original face value of EUR 525.0 million, due May 2016.
At 31 December 2017, the Company has two outstanding fixed rate bonds; 8.5% fixed rate bond with an original face value of EUR 350 million (maturity: September 2019) and the 6.875% fixed rate bond with an original face value of EUR 500 million (maturity: March 2024) . Directly attributable transaction costs have been deducted at initial recognition and are amortised over the term of the bonds.
In May 2016, Nyrstar entered into a USD 150 million revolving working capital facility agreement with Trafigura. The facility was uncommitted and was secured by the shares of Nyrstar France SAS, a subsidiary of the Company, with a current term through to January 2017 and with an interest of LIBOR plus 4%. In November 2016, with the effective date of 1 January 2017, the working capital facility become committed, was extended till 31 December 2017 and was upsized to USD 250 million. The amended working facility is secured by a share pledge over the shares of Nyrstar France SAS and Budel BV, subsidiaries of the Company. In November 2017 the facility USD 250 million was extended until the end of 2019 on similar terms to the existing facility.
Terms and conditions of outstanding loans were as follows:
| 31 DEC 2016 | 31 DEC 2017 | ||||||
|---|---|---|---|---|---|---|---|
| EUR MILLION | CURRENCY | NOMINAL INTEREST RATE |
YEAR OF MATURITY |
FACE VALUE CARRYING AMOUNT | FACE VALUE CARRYING AMOUNT | ||
| Convertible bonds* | EUR | 4.25% | 2018 | 120.0 | 113.0 | 29.0 | 27.2 |
| Fixed rate bonds | EUR | 8.50% | 2019 | 350.0 | 340.8 | 350.0 | 343.9 |
| Convertible bonds** | EUR | 5.00% | 2022 | 115.0 | 98.5 | 115.0 | 100.8 |
| SCTF credit facility | USD | EURIBOR+2.25% | 2021 | 332.1 | 329.9 | 183.4 | 176.9 |
| Loan from related party | USD | LIBOR+4% | 2019 | 100.0 | 94.8 | - | - |
| Fixed rate bonds | EUR | 6.88% | 2024 | - | - | 500.0 | 493.0 |
| Total interest bearing liabilities | 1,017.1 | 977.0 | 1,177.4 | 1,141.8 |
* The Company may, at any time on or after 16 October 2016, redeem the convertible bonds together with accrued but unpaid interest, if on not less than 20 out 30 days consecutive dealing days, the volume weighted average price of the shares exceeds 130% of the conversion price.
** The Company may, at any time on or after 1 August 2020, redeem the convertible bonds together with accrued but unpaid interest, if on not less than 20 out 30 days consecutive dealing days, the volume weighted average price of the shares exceeds 150% of the conversion price.
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 | |
|---|---|---|
| Within 1 year | 0.1 | 0.3 |
| Between 2 and 5 years | 0.7 | 0.5 |
| Total undiscounted minimum lease payments | 0.8 | 0.8 |
| Less: amounts representing finance lease charges | 0.1 | 0.1 |
| Present value of minimum lease payments | 0.7 | 0.7 |
| RESTORATION, REHABILITATION AND |
|||||
|---|---|---|---|---|---|
| EUR MILLION | NOTE | DECOMMISSIONING | RESTRUCTURING | OTHER | TOTAL |
| As at 1 Jan 2017 Reclassified from held for sale |
158.9 19.8 |
7.3 - |
22.4 2.4 |
188.6 22.2 |
|
| Disposal of subsidiaries | (24.6) | - | (3.8) | (28.4) | |
| Payments | (8.4) | (5.2) | (3.3) | (16.9) | |
| Additions / (reversals) | (1.4) | 1.0 | (2.4) | (2.8) | |
| PPE asset adjustment | 15 | 17.3 | - | - | 17.3 |
| Transfers | (0.2) | - | - | (0.2) | |
| Unwind of discount | 10.0 | - | 0.2 | 10.2 | |
| Currency translation effects | (12.3) | (0.2) | (1.6) | (14.1) | |
| As at 31 Dec 2017 | 159.1 | 2.9 | 13.9 | 175.9 | |
| Whereof current | 9.4 | 2.9 | 6.8 | 19.1 | |
| Whereof non-current | 149.7 | - | 7.1 | 156.8 |
| EUR MILLION | NOTE | RESTORATION, REHABILITATION AND DECOMMISSIONING |
RESTRUCTURING | OTHER | TOTAL |
|---|---|---|---|---|---|
| As at 1 Jan 2016 | 189.3 | 1.9 | 21.2 | 212.4 | |
| Reclassified to held for sale | (19.8) | - | (2.4) | (22.2) | |
| Disposal of subsidiaries | (13.6) | - | - | (13.6) | |
| Payments | (14.2) | (1.9) | (2.6) | (18.7) | |
| Additions / (reversals) | (10.0) | 7.2 | 5.3 | 2.5 | |
| PPE asset adjustment | 15 | 22.9 | - | - | 22.9 |
| Transfers | (12.2) | - | - | (12.2) | |
| Unwind of discount | 10.3 | - | 0.1 | 10.4 | |
| Currency translation effects | 6.2 | 0.1 | 0.8 | 7.1 | |
| As at 31 Dec 2016 | 158.9 | 7.3 | 22.4 | 188.6 | |
| Whereof current | 15.5 | 7.3 | 5.4 | 28.2 | |
| Whereof non-current | 143.4 | - | 17.0 | 160.4 |
95% (2016: 95%) of all Group's restoration, rehabilitation and decommissioning work on the projects provided for is estimated to occur progressively over the next 20 years. The provision is discounted using a current market based pre-tax real discount rate and the unwinding of the discount is included in interest expense. Refer to note 4 for the significant estimations and assumptions applied in the measurement of this provision.
The discount rates used in the calculation of the environmental provisions are summarised below:
| 2016 | 2017 | |||
|---|---|---|---|---|
| METALS PROCESSING | MINING | METALS PROCESSING | MINING | |
| Country specific risk free rate (nominal) | 1.29% - 2.91% | 2.91% - 8.60% | 1.47% - 2.84% | 2.63% - 4.17% |
| Market credit spread | 5.0% | 5.0% | 5.0% | 5.0% |
| Discount rate (nominal) | 6.29% - 7.91% | 7.91% - 13.60% | 6.47% - 7.84% | 7.63% - 9.17% |
| Discount rate (real) | 5.03% - 5.67% | 5.67% - 11.36% | 3.97% - 5.35% | 5.27% - 6.81% |
The following table sets out the estimated impact on the environmental provisions for the financial year ended 31 December 2017 and 2016 due to a change in the discount rates (in EUR million):
| EUR MILLION | 2016 | 2017 | |||
|---|---|---|---|---|---|
| PARAMETER | VARIABLE | METALS PROCESSING | MINING | METALS PROCESSING | MINING |
| Discount rate | + 100 bps | (3.3) | (8.3) | (2.9) | (8.5) |
| Discount rate | - 100 bps | 3.5 | 9.2 | 3.5 | 10.0 |
In 2017, Nyrstar incurred restructuring costs of EUR 4.1 million (2016: EUR 8.4 million). The remaining provision of EUR 2.9 million (31 December 2016: EUR 7.3 million) is mainly related to the effect associated with the disposal of the mining operations and the restructuring of the Company's support functions during 2017. The implementation of the restructuring measures is expected to be finalised during 2018.
Other provisions primarily relate to workers compensation benefits, legal claims and other liabilities. The current portion of these costs is expected to be utilised in the next 12 months and the non-current portion of these costs is expected to be utilised over a weighted average life of 2 years (2016: 2 years). The estimates may vary due to changes in cost estimates and timing of the costs to be incurred.
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Long service leave | 2.8 | 2.5 |
| Retirement plans | 66.8 | 66.8 |
| Other | 4.4 | 4.2 |
| Total non-current employee provisions | 74.0 | 73.5 |
| Annual leave and long service leave | 23.0 | 22.6 |
| Other | 13.0 | 14.0 |
| Total current employee provisions | 36.0 | 36.6 |
| Total employee provisions | 110.0 | 110.1 |
Nyrstar participates in a number of superannuation and retirement benefit plans. The plans provide benefits on retirement, disablement, death, retrenchment or withdrawal from service, the principal types of benefits being lump sum defined benefits and lump sum defined contribution benefits.
The Group is required to contribute a specified percentage of payroll costs to the retirement benefit schemes to fund the benefits. The only responsibility of the Group is to make the specified contributions.
Employees of Nyrstar Budel BV are members of a multi-employer Metal and Electricity industry defined benefit pension plan (PME). PME are unable to provide the necessary information for defined benefit accounting to be applied and consequently the PME plan has been accounted for as a defined contribution plan. The entity's obligations are limited to the payment of the contributions required according to the funding plan of the PME and cannot be held liable for any deficits or contributions from other participating companies.
In 2017, the total expense for defined contribution plans recognised in the consolidated income statement is EUR 4.6 million (2016: EUR 4.2 million).
The Group sponsors defined benefit plans as described below. All defined benefit plans are externally funded, either through a collective insurance contract or through a self-administered pension fund legally separated from the entity. All plans comply with local regulatory frameworks and minimum funding requirements and have been reviewed as at 31 December 2017. Furthermore the Group is responsible for the administration and governance of the defined benefit plans in Belgium, Switzerland, the US and Canada. The plan assets do not include direct investments in the Group's own financial instruments nor in property occupied by or used by the companies of the Group.
The defined benefit plans also include the so-called cash balance plans. The cash balance plans, sponsored by the Belgian and Swiss entities, account for about 11% of the total defined benefit obligation value as at 31 December 2017 (2016: 11%) and are valued on the basis of the Projected Unit Credit Method.
In Belgium, defined contribution plans are subject to a legally enforced minimum rate of return. The latter was modified by a 2015 change of legislation in Belgium on occupational pensions enacted in December 2015. Until 2015, the minimum return was fixed at 3.25% on employer contributions and 3.75% on employee contributions. As of 2016, the minimum rate of return is determined based on the Belgian state bonds with a term of 10 years with an absolute minimum of 1.75% and an absolute maximum of 3.75%. The Belgium DC plans are funded through a group insurance.
The obligations of the Belgium pension plans have been valued as the actuarial present value at any moment of the career of the highest of the accrued individual reserves with the insurance company and the minimum reserves to be guaranteed by the employer. Insured assets have been valued as the actuarial present value of the paid-up value at retirement of the insurance policy for each individual. Both present values are calculated on the basis of the market yield on high-quality corporate bonds. The net defined liability for the plan then equals the sum of the positive differences between liabilities and assets calculated for each individual separately, less the collective reserves accumulated in the group insurance financing fund.
The defined benefit plans expose the sponsoring company to actuarial risks such as investment risk, interest rate risk, salary risk, inflation risk and longevity risk. The medical benefit plans are further exposed to medical cost inflation risk. The possible impact of changes in these risks has been illustrated by a sensitivity analysis which is further detailed below.
Death in service and disability risks are in most countries insured with an external (re)insurance company.
Based on geographical location of the sponsoring entities, the recognised retirement benefit obligations as at 31 December 2017 can be split as follows:
| EUR MILLION AVERAGE DURATION |
31 DEC 2017 |
|---|---|
| EUROZONE: 11.0 years |
(20.3) |
| Nyrstar Budel BV Excedent Pension Plan | |
| Nyrstar Belgium SA/NV: Staff Old Defined Benefit plan funded through pension fund, Staff Cash Balance | |
| Plan, Staff Complementary Savings Plan, Staff Insured Old Defined Benefit plan, Staff "appointements | |
| continués", Salaried Employees Old Defined Benefit Plan, Salaried Employees "appointements continués" | |
| Nyrstar NV: Staff Cash Balance Plan, Staff Complementary Savings Plan | |
| Nyrstar France Régime d'Indemnités de Fin de Carrière and Régime du Mutuelle | |
| Nyrstar France Mutuelle (medical benefit plan) | |
| USA: 13.8 years |
(29.1) |
| Nyrstar Clarksville Inc: Hourly Employees' Pension Plan, Salaried Employees' | |
| Retirement Plan, Pension Plan for Bargaining Unit Employees, NCI/JCZ Pension Plan | |
| for Bargaining Unit Employees, Supplemental Executive Retirement Plan | |
| Nyrstar Clarksville Inc. Post Retirement Medical Benefit and Life Insurance Plan (medical benefit plan) | |
| CANADA: 11.1 years |
(12.4) |
| Nyrstar Myra Falls Ltd.: Hourly-Paid Employees' Pension Plan, Thirty-Year | |
| Retirement Supplement and Voluntary Early retirement Allowance | |
| Nyrstar Myra Falls Ltd.: Non-Pension post-retirement benefits plan (medical benefit plan) | |
| SWITZERLAND: 19.7 years |
(5.0) |
| Nyrstar Sales & Marketing AG: Pension Plan Staff and Pension Plan Staff | |
| NMC funded through the Helvetia Group Foundation | |
| Nyrstar Finance International AG: Pension Plan funded through the Helvetia Group Foundation | |
| Total 12.5 years |
(66.8) |
In 2017, the total value of the medical benefit plans, included in the retirement benefit obligations is EUR 35.4 million (2016: EUR 33.5 million).
The amounts recognised on the statement of financial position have been determined as follows:
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Present value of funded obligations 168.0 |
163.1 |
| Present value of unfunded obligations 43.4 |
44.5 |
| Total present value of obligations 211.4 |
207.6 |
| Fair value of plan assets (144.6) |
(141.4) |
| TOTAL DEFICIT 66.8 |
66.2 |
| Limitation on recognition of surplus due to asset ceiling - |
0.6 |
| Total recognised retirement benefit obligations 66.8 |
66.8 |
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Cash | 1.7 | 1.5 |
| Equity instruments | 50.7 | 47.5 |
| Debt instruments | 35.0 | 35.9 |
| Other assets | 57.2 | 56.5 |
| Total plan assets | 144.6 | 141.4 |
Mutual funds consist of equity funds, fixed-income funds and mixed investments funds including both equity and debt instruments. All assets, except for the insurance contracts have quoted prices in active markets. The fair value of the insurance contracts corresponds either to the present value of the secured future benefits (Netherlands) or to the capitalized value of the paid contributions at the contractually guaranteed insurance rate (other countries).
The changes in the present value of the defined benefit obligations are as follows:
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Defined benefit obligations at start of period | 211.2 | 211.4 |
| Current service cost | 8.9 | 6.7 |
| Interest cost | 6.1 | 5.3 |
| Remeasurement (gains)/losses: | ||
| Actuarial (gains)/losses arising from changes in demographic assumptions | (2.4) | (1.1) |
| Actuarial (gains)/losses arising from changes in financial assumptions | 5.5 | 10.1 |
| Actuarial (gains)/losses arising from changes in experience | (6.0) | 0.5 |
| Actuarial (gains)/losses due to exchange rate movements | 5.5 | (12.3) |
| Contributions paid into the plans by participants | 1.4 | 1.3 |
| Benefits paid by the plans | (16.5) | (13.2) |
| Past service cost (including plan amendment or curtailment) | (1.5) | (0.3) |
| Admin expenses, taxes and social securities | (0.8) | (0.8) |
| Inclusion of Belgian DC Plans | - | - |
| Defined benefit obligations at end of period | 211.4 | 207.6 |
The changes in the present value of plan assets are as follows:
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Fair value of plan assets at start of period | 137.6 | 144.6 |
| Interest Income | 4.0 | 3.6 |
| Remeasurement gains/(losses): | ||
| Return on plan assets excluding interest income recognised in net interest expense | 7.1 | 4.8 |
| Actuarial gains/(losses) due to exchange rate movements | 3.8 | (7.3) |
| Contribution paid into the plans by employer | 6.3 | 6.8 |
| Contribution paid into the plans by participants | 1.4 | 1.3 |
| Benefits paid by the plans | (14.8) | (11.6) |
| Admin expenses, taxes and social securities | (0.8) | (0.8) |
| Inclusion of Belgian DC Plans | - | - |
| Fair value of plan assets at end of period | 144.6 | 141.4 |
The expense recognised in the income statement is as follows:
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Service cost: | ||
| Current service cost, including admin fees, taxes and social securities | (8.9) | (6.8) |
| Past service cost | 1.5 | 0.3 |
| Net interest expense | (2.1) | (1.7) |
| Components of defined benefit costs included in income statement | (9.5) | (8.2) |
| Remeasurement on the net defined benefit liability: | ||
| The return on plan assets (excluding amounts included in net interest expense) | 7.1 | 4.8 |
| Actuarial gains and (losses) arising from changes in demographic assumptions | 2.4 | 1.1 |
| Actuarial gains and (losses) arising from changes in financial assumptions | (5.5) | (10.1) |
| Actuarial gains and (losses) arising from experience adjustments | 6.0 | 0.5 |
| Adjustments for restrictions on the defined benefit asset | (0.2) | (0.2) |
| Actuarial gains/(losses) due to exchange rate movements | 0.5 | (1.3) |
| Components of defined benefit costs recorded in OCI | 10.3 | (5.2) |
| Total of components of defined benefit cost | 0.8 | (13.4) |
The principal actuarial assumptions used at the reporting date are as follows:
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Discount rate (range; weighted average in %) | 0.0 - 4.0; 2.7 | 0.0 - 3.65; 2.43 |
| Expected future salary increases (range; weighted average in %) | 1.0 - 1.8; 1.5 | 0.0 - 1.8; 1.4 |
| Expected inflation rate (range; weighted average in %) | 1.8; 1.8 | 1.8; 1.8 |
| Initial trend rate (range; weighted average in %) | 1.8 - 7.0; 5.8 | 1.8 - 8.0; 5.9 |
| Ultimate trend rate (range; weighted average in %) | 1.8 - 6.0; 4.4 | 1.8 - 6.0; 3.7 |
| Years until ultimate is reached | 0 - 4; 3.2 | 0 - 10; 6.4 |
Multiple discount rates have been used in accordance with the regions as indicated in the table above. The discount rates have been determined by reference to high quality corporate bonds with a similar duration as the weighted average duration of the concerned plans for the EURO zone, USA and Canada. As there is no deep market for AA corporate bonds with the required term in Switzerland, discount rates have been determined by reference to government bond rates.
Future salary increase assumptions reflect the Groups' expectations and HR policy for the next few years.
In 2017, a single inflation rate assumption of 1.8% (2016: 1.8%) has been used for the EURO zone corresponding to the target inflation rate of the European Central Bank.
The medical cost trend rate assumptions have been determined based on industry standards and survey data with consideration for actual plan experience.
Mortality assumptions are based on the latest available standard mortality tables for the individual countries concerned. These tables imply expected future lifetimes (in years) for employees aged 65 as at the 31 December 2017 of 19 to 24 for males (2016: 19 to 24) and 23 to 28 (2016: 23 to 28) for females. The assumptions for each country are reviewed each year and are adjusted where necessary to reflect changes in fund experience and actuarial recommendations. If applicable, the longevity risk is covered by using appropriate prospective mortality rates.
The significant actuarial assumptions for the determination of the defined benefit obligation have been discussed earlier in this note. The table below shows the sensitivity analysis on the effect on the defined benefit obligation of reasonable positive changes in the most significant actuarial assumptions used. Note that the sensitivity analysis is done per assumption (where the other significant assumptions were held constant):
| EUR MILLION | 31 DEC 2017 |
|---|---|
| Discount rate -0.5% | 14.6 |
| Discount rate +0.5% | (12.9) |
| Expected future salary increase - 0.5% | (0.6) |
| Expected future salary increase + 0.5% | 0.8 |
| Expected inflation rate - 0.25% | (0.7) |
| Expected inflation rate + 0.25% | 0.7 |
| Medical cost trend rate -1.0% | (5.9) |
| Medical cost trend rate +1.0% | 7.7 |
| Life expectancy - 1 year | 6.2 |
| Life expectancy + 1 year | (6.2) |
The Group expects to make EUR 7.6 million contributions to post-employment defined benefit plans for the year ending 31 December 2018 (2017: EUR 7.1 million).
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Trade payables 572.6 |
590.2 |
| Other payables* 34.3 |
41.7 |
| Total trade and other payables 606.9 |
631.9 |
* During 2016, the Company entered into various commodity swaps ("swaps") to optimise sourcing of raw material supply to its smelters. The outstanding balances of the swaps that did not meet the revenue recognition criteria are recognised in Other receivables: EUR 36.1 million and in Other payables: EUR 33.5 million. There were no outstanding balances of the swaps that did not meet the revenue recognition criteria in 2017.
The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in note 35.
| AS AT | AS AT | |
|---|---|---|
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
| Prepayments for deliveries of silver metal | 52.7 | 54.1 |
| Prepayments for deliveries of copper metal | - | 25.0 |
| Total non-current deferred income | 52.7 | 79.1 |
| Prepayments for deliveries of silver metal | 77.6 | 158.3 |
| Prepayments for deliveries of zinc and lead metal | 229.0 | 307.3 |
| Other prepayments | 6.4 | - |
| Total current deferred income | 313.0 | 465.6 |
| Total deferred income | 365.7 | 544.7 |
Deferred income consists of payments received by the Company from customers for future physical deliveries of metal production that are expected to be settled in normal course of business.
During 2017, Nyrstar entered into five prepay transactions to deliver silver or gold for which it received total funds of USD 230 million (EUR 198.6 million):
The third silver prepay of USD 50 million (EUR 43.8 million) has an eleven months grace period and six months delivery period with equal instalments and total delivery of 4.2 million oz. As at 31 December 2017, no silver has been delivered. The remaining 4.2 million oz will be delivered between June 2018 and November 2018.
The fourth silver prepay of USD 60 million (EUR 50.0 million) has a nine months grace period with a ten months delivery period with variable silver instalments based on the silver price at the time of deliveries. As at 31 December 2017, no silver has been delivered. The remaining approximately 3.8 million oz will be delivered between October 2018 and July 2019.
In connection with the silver prepay agreements with the fixed silver oz deliveries Nyrstar entered into forward purchase contracts with equivalent delivery dates to hedge the silver price exposure related to delivery commitments. These contracts are accounted for as effective fair value hedges of the firm sales commitments in the silver prepay agreements. The change in fair value of the forward purchase contracts of EUR 1.2 million has been included in other financial assets and the portion of deferred income related to the silver prepay agreement of EUR 1.2 million effectively offsets in the income statement.
In October 2014, Nyrstar entered into a forward sale of a portion of the future incremental silver production from the Port Pirie smelter for a gross upfront payment of approximately AUD 120 million (net proceeds of EUR 85.2 million) in order to fund the second component of the funding package of the redevelopment of its smelter in Port Pirie. The forward sale is for a term of five years. Under the terms of the forward sale, the majority of the silver volumes will be delivered under a defined delivery schedule from 2016 until the end of 2019. Silver prices have been hedged with counterparties.
During 2017, Nyrstar entered into a copper prepay transaction with its offtaker related to a delivery of the copper concentrate from its mines for which it received total funds of USD 30 million (EUR 25.0 million). The prepay has a 12 months grace period with a three years delivery period until December 2021.
The prepayments for deliveries of zinc and lead metal consist prepayments received from the Company's customers for future physical deliveries of 101kt of zinc and lead metal under existing offtake agreements that will be delivered in first quarter of 2018.
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| Share based payment expenses, including social security | (2.8) | (2.7) |
The Company has established an Executive Long Term Incentive Plan (LTIP), a Leveraged Employee Stock Ownership Plan (LESOP) and a Deferred Share Award Plan (together referred to as the "Plans") with a view to attracting, retaining and motivating the employees and senior management of the Company and its wholly owned subsidiaries. The key terms of each Plan are disclosed below:
LTIP Grants 6 to 10 were granted between 2013 and 2017 in accordance with the rules and conditions of the Executive Long Term Incentive Plan (LTIP). The table below summarises the details of the grants.
| GRANT 6 | GRANT 7 | GRANT 8 | GRANT 9 | GRANT 10 | |
|---|---|---|---|---|---|
| Number of instruments | |||||
| granted at the grant date | 2,270,961 | 5,121,113 | 3,803,515 | 871,000 | 1,155,536 |
| Effective grant date | 30 Jun 2013 | 5 Sep 2014 | 30 Jun 2015 | 2 Nov 2016 | 30 Apr 2017 |
| Performance period | 1 Jan 2013 to 31 Dec | 1 Jan 2014 to 31 Dec | 1 Jan 2015 to 31 Dec | 1 Jan 2016 to 31 Dec | 1 Jan 2017 to 31 Dec |
| 2015 | 2016 | 2017 | 2018 | 2019 | |
| Vesting date | 31 Dec 2015 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2018 | 31 Dec 2019 |
| Settlement (b) | Share | Share | Share | Share | Share |
| Fair value at grant date (EUR per share) * | 1.37 | 0.44 | 2.78 | 1.13 | 4.57 |
* The fair value is the weighted average fair value for both performance measures: price of Zinc and MSCI as explained below
The Board initially set two performance conditions, which are weighted equally. For both performance conditions an equal number of awards was granted. For an award to vest, Nyrstar's annual share price performance was measured relative to the implied change in a notional share price that was based upon the historical performance of the price of zinc and the MSCI World Metals and Mining Index. To ensure that the LTIP is aligned with maximizing shareholder returns the Board modified in 2017 the performance criterial related to LTIP 9 and 10 by amending the performance conditions.
Shares are awarded to eligible employees to the extent that predetermined scaling thresholds for each of the performance conditions are met and that the employee remains in service to vesting date of the respective grant.
The Board has the discretion to settle Grant 8, Grant 9 and Grant 10 award in shares or cash. However it intends, whenever possible, to settle all plans in shares. As such, all LTIP plans are treated as equity settled share based payments.
The significant inputs into the valuation model for the LTIP plans granted in 2017 and 2016 are:
| 2016 | 2017 | |
|---|---|---|
| Dividend yield | - | - |
| Expected volatility - Nyrstar share price | 60.0% | 60.0% |
| Expected volatility - zinc price | 25.0% | n/a |
| Expected volatility - MSCI metals and mining index | 26.0% | 25.0% |
| Risk free interest rate | 1.4% | 0.7% |
| Share price at grant date (in EUR) | 4.77 | 5.20 |
| Expected forfeiture rate | - | - |
| Valuation model used | Monte Carlo | Monte Carlo |
The expected volatilities are based on the historic volatility during the period prior to the grant date (that is equivalent to the expected life of the award, subject to historical data remaining relevant). The performance conditions are both market-related and were accounted for in calculating the fair value of the awards.
The following table sets out the movements in the number of equity instruments granted during the period in relation to the LTIP plans:
| GRANT 7 | GRANT 8 | GRANT 9 | GRANT 10 | TOTAL | |
|---|---|---|---|---|---|
| As at 1 Jan 2017 | 717,174 | 475,223 | 871,000 | - | 2,063,397 |
| Initial allocation 2 Nov 2017 | - | - | - | 1,155,536 | 1,155,536 |
| Dilutive impact / adjustment | - | 42,754 | 127,135 | 194,166 | 364,055 |
| Forfeitures | - | (231,807) | (415,703) | (89,545) | (737,055) |
| Additions | - | 16,848 | 318,562 | 115,934 | 451,344 |
| Expired | - | - | - | - | - |
| Settlements | (717,174) | - | - | - | (717,174) |
| As at 31 Dec 2017 | - | 303,018 | 900,994 | 1,376,091 | 2,580,103 |
| GRANT 7 | GRANT 8 | GRANT 9 | TOTAL | |
|---|---|---|---|---|
| As at 1 Jan 2016 | 5,471,628 | 3,281,719 | - | 8,753,347 |
| Initial allocation 5 Sep 2016 | - | - | 871,000 | 871,000 |
| Dilutive impact / adjustment | 4,386,870 | 2,919,100 | - | 7,305,970 |
| Reverse stock split | (8,872,647) | (5,580,737) | - | |
| Forfeitures | (333,025) | (252,082) | - | (585,107) |
| Additions | 64,348 | 107,223 | - | 171,571 |
| Expired | - | - | - | - |
| Settlements | - | - | - | - |
| As at 31 Dec 2016 | 717,174 | 475,223 | 871,000 | 2,063,397 |
In 2017 and 2016 LTIP Grant 7 and Grant 6 was settled in cash.
During 2017, the Group modified the Grant 9 of the LTIP and issued the awards under the Grant 10 of the LTIP.
The modification of Grant 9 and the issuance of Grant 10 were made in accordance with the rules and conditions of the LTIP. 871,000 awards of Grant 9 were modified and 1,155,536 awards of Grant 10 were granted with an effective accounting grant date of 30 April 2017 and a performance period of 3 years, commencing 1 January 2016 and 1 January 2017 respectively, over which the performance conditions are assessed.
To ensure that the LTIP is aligned with maximising shareholder returns, the Board has set two performance conditions under the modified Grant 9 and under Grant 10. These performance conditions are:
Shares are awarded pro rata to executives to the extent that the target underlying EBITDA is met and predetermined scaling thresholds for the second market-based condition is met. Settlement of the awarded shares will be in the way of an allocation of shares.
The fair value of services received in return for the modified Grant 9 award and the newly issued Grant 10 award issued for the twelve month period to 31 December 2017 was EUR 2.3 million.
In 2017 and 2016, certain employees who joined Nyrstar during the year received LTIP awards under Grants 7, 8, 9 and 10. The fair value of these rights amounted to EUR 0.6 million for 2017 (2016: EUR 1.7 million). There have been no changes to the terms and conditions of the grants.
On 17 June 2015 the Board decided to suspend the LESOP plan and to not continue it in 2015.
In 2013, the Board submitted to the general shareholder`s meeting a proposal to provide a new remuneration component to certain senior managers, including the Management Committee, called a LESOP. The LESOP would enable participants to purchase shares of the Company at a discount of 20%, following which the shares would be subject to a holding period of three years. For each share purchased by a participant with their personal contribution, a financial institution would provide the participant with additional financing enabling them to purchase nine additional shares at such discount. The number of shares that a participant could purchase with their personal contribution under the LESOP is capped. With respect to the members of the Nyrstar Management Committee, the cap is set at 50,000 shares for each member. At the end of the holding period, the participant will be required to transfer all shares purchased to the financial institution and will receive in return a cash amount or a number of shares of the Company, the value of which equals their personal contribution in the LESOP and a certain percentage of any increase in value of the shares over the lifetime of the LESOP.
The 2013 LESOP was approved by the general shareholder's meeting in April 2013. The first stage of the 2013 LESOP was implemented in December 2013.
3,065,000 shares were granted, with an effective accounting grant date of 21 December 2013. The shares vested immediately at grant date. The fair value at the grant date per share was EUR 0.10, resulting in the total fair value of EUR 0.3 million fully recognised in the financial year ended 31 December 2013.
On 30 April 2014, the Company's general shareholders' meeting approved and granted the Board of Directors the powers to establish an annual leveraged employee stock ownership plan for the years 2014, 2015 and 2016 (respectively the ''2014 LESOP'', the ''2015 LESOP'' and the ''2016 LESOP''), whereby each LESOP (if established) must have the following features:
The total number of shares that can be purchased under each LESOP amounts to 6,000,000.
The first stage of the 2014 LESOP was implemented in June 2014. 3,750,000 shares were granted, with an effective accounting grant date of 15 June 2014. 2,500,000 shares vested immediately at grant date and the remaining 1,250,000 shares vested in 2017. The fair value at the grant date per share was EUR 0.11, resulting in the total fair value of EUR 0.3 million fully recognized in the financial year ended 31 December 2014.
The significant inputs into the valuation model for the LESOP plan granted in 2014 were:
| 2016 |
|---|
| 3.0% |
| 0.5% |
| 5.0% |
| 0.5% |
| 2.15 |
| Monte Carlo |
The following table sets out the movements in the number of equity instruments granted during the period in relation to the LESOP plans:
| 2016 | 2017 | |
|---|---|---|
| As at 1 Jan | 1,250,000 | 217,505 |
| Dilutive impact / adjustment | 2,175,048 | - |
| Reverse stock split (1 to 10) | (3,207,543) | - |
| Settlements | - | (217,505) |
| As at 31 Dec | 217,505 | - |
The basic earnings / (loss) per share is calculated as follows:
| EUR MILLION | 2016 | 2017 |
|---|---|---|
| SHAREHOLDERS OF NYRSTAR | ||
| Profit / (loss) attributable to ordinary shareholders (basic) | (413.8) | 46.5 |
| Weighted average number of ordinary shares (basic, in million)(1) | 101.7 | 95.6 |
| Earnings / (loss) per share (basic, in EUR) | (4.07) | 0.49 |
| CONTINUING OPERATIONS | ||
| Profit / (loss) attributable to continuing operations (basic) | (263.7) | 9.6 |
| Weighted average number of ordinary shares (basic, in million)(1) | 101.7 | 95.6 |
| Earnings / (loss) per share continuing operations (basic, in EUR) | (2.59) | 0.10 |
| DISCONTINUED OPERATIONS | ||
| Profit / (loss) attributable to discontinued operations (basic) | (150.1) | 36.9 |
| Weighted average number of ordinary shares (basic, in million)(1) | 101.7 | 95.6 |
| Earnings / (loss) per share discontinued operations (basic, in EUR) | (1.48) | 0.39 |
(1) In relation to the November 2017 equity placement, the comparative earnings per share for 31 December 2016 have been restated to retroactively reflect the impact of the November 2017 equity placement. The weighted average number of shares outstanding for 31 December 2017 and 31 December 2016 was adjusted in accordance with IAS 33 Earnings per Share. The adjustment resulted in an increase in the weighted average shares outstanding, both basic and diluted, in 2017 and 2016 of approximately 16 %. Further details of the equity placement are disclosed in Note 25 Share capital and share premium.
The calculation of diluted earnings per share (EPS) at 31 December 2017 was based on the profit attributable to ordinary shareholders (diluted) of EUR 46.5 million and a weighted average number of ordinary shares outstanding of 97.3 million. As the Group incurred a loss for the twelve months ended 31 December 2016, the diluted loss per share EUR 4.07 equals the basic loss per share. The convertible bonds have been anti-dilutive for 2017 and 2016.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of dilutive potential ordinary shares. The dilutive impact of the long term incentive plan has been included in the weighted average number of ordinary shares for the calculation of the dilutive EPS.
The diluted weighted average number of shares is calculated as follows:
| 2016 | 2017 |
|---|---|
| Weighted average number of ordinary shares (basic, in million)(1) 101.7 |
95.6 |
| Effect of long term incentive plan (in million) - |
1.7 |
| Effect of conversion of convertible bond (in million) - |
- |
| Weighted average number of ordinary shares (diluted, in million)(1) 101.7 |
97.3 |
The diluted EPS is calculated as follows:
| EUR MILLION | 2016 | 2017 | |
|---|---|---|---|
| SHARHOLDERS OF NYRSTAR | |||
| Profit / (loss) attributable to ordinary shareholders (diluted) | (413.8) | 46.5 | |
| Weighted average number of ordinary shares (diluted, in million)(1) | 101.7 | 97.3 | |
| Earnings / (loss) per share (diluted, in EUR) | (4.07) | 0.48 | |
| CONTINUING OPERATIONS | |||
| Profit / (loss) attributable to continuing operations (diluted) | (263.7) | 9.6 | |
| Weighted average number of ordinary shares (diluted, in million)(1) | 101.7 | 97.3 | |
| Earnings / (loss) per share continuing operations (diluted, in EUR) | (2.59) | 0.10 | |
| DISCONTINUED OPERATIONS | |||
| Profit / (loss) attributable to discontinued operations (diluted) | (150.1) | 36.9 | |
| Weighted average number of ordinary shares (diluted, in million)(1) | 101.7 | 97.3 | |
| Earnings / (loss) per share discontinued operations (diluted, in EUR) | (1.48) | 0.38 |
In the normal course of business, Nyrstar is exposed to fluctuations in commodity prices and exchange rates, interest rate risk, credit risk and liquidity risk. In accordance with Nyrstar's risk management policies, derivative financial instruments are used to hedge exposures to commodity prices and exchange fluctuations, but may not be entered into for speculative purposes.
Credit risk for the Group primarily represents the loss that would be recognised if the counterparties to financial instruments fail to perform as contracted. The carrying amount of financial assets represents the maximum credit exposure. The Group does not have any significant credit enhancements to mitigate its credit exposure, except for the retention to the title of the sold products until payment is received by the customers. The maximum exposure to credit risk at the reporting date was:
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Trade and other receivables | 219.0 | 223.5 |
| Cash and cash equivalents | 127.1 | 68.4 |
| Other financial assets | 13.8 | 14.8 |
| Commodity contracts used for hedging: assets | 22.2 | 6.6 |
| Embedded derivatives: assets | 59.2 | 63.1 |
| Foreign exchange contracts used for hedging: assets | 0.6 | - |
| Foreign exchange contracts used for trading: assets | 5.2 | 3.1 |
| Restricted cash | 111.7 | 113.0 |
| Held to maturity | 5.4 | 5.2 |
| Total | 564.2 | 497.7 |
The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Eurozone countries 78.9 |
101.5 |
| Asia 45.2 |
40.4 |
| United States 10.8 |
10.2 |
| Other European countries 48.0 |
14.2 |
| Other regions 36.1 |
57.2 |
| Total 219.0 |
223.5 |
The maximum exposure to credit risk for trade and other receivables at the reporting date by type of customer was:
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 |
|---|---|
| Wholesale customers 183.8 |
189.0 |
| End-user customers 35.2 |
34.5 |
| Total 219.0 |
223.5 |
Trade and other receivables including ageing of trade and other receivables which are past due but not impaired at the reporting date was:
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 | |
|---|---|---|---|
| Not past due | 173.9 | 172.8 | |
| Past due 0-30 days | 18.0 | 35.5 | |
| Past due 31-120 days | 23.8 | 11.0 | |
| Past due 121 days – one year | 0.5 | 3.9 | |
| More than one year | 2.8 | 0.3 | |
| Total | 219.0 | 223.5 | |
Credit risk in trade receivables is also managed in the following ways:
For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:
| EUR MILLION | CARRYING AMOUNT |
CONTRACTUAL CASH FLOWS |
6 MONTHS OR LESS |
6 - 12 MONTHS |
1 - 2 YEARS |
2 - 5 YEARS |
5 YEARS OR MORE |
|---|---|---|---|---|---|---|---|
| Finance lease liabilities | (0.7) | (0.7) | (0.1) | (0.2) | (0.2) | - | (0.2) |
| Loans and borrowings | (1,169.3) | (1,524.4) | (51.6) | (249.0) | (422.0) | (127.9) | (673.9) |
| Trade and other payables | (631.9) | (631.9) | (621.1) | (5.3) | (2.9) | (1.0) | (1.6) |
| Zinc prepayment * | (74.8) | (77.3) | (38.7) | (38.6) | - | - | - |
| Other financial liability | (16.9) | (16.9) | - | - | (9.4) | (7.5) | - |
| Commodity contracts – fair value hedges | (29.2) | (29.2) | (29.2) | - | - | - | - |
| Commodity contracts – cash flow hedges | (35.0) | (35.0) | (35.0) | - | - | - | - |
| Foreign exchange contracts – held for trading | (11.2) | (11.2) | (11.2) | - | - | - | - |
| Total, 31 Dec 2017 | (1,969.0) | (2,326.6) | (786.9) | (293.1) | (434.5) | (136.4) | (675.7) |
* To be settled through physical deliveries of zinc (note 20)
In addition to the contractual maturities of financial liabilities disclosed above, the Company intends to redeem the Perpetual Securities as described in note 26(i).
| EUR MILLION | CARRYING AMOUNT |
CONTRACT-UAL CASH FLOWS |
6 MONTHS OR LESS |
6 - 12 MONTHS |
1 - 2 YEARS |
2 - 5 YEARS |
5 YEARS OR MORE |
|---|---|---|---|---|---|---|---|
| Finance lease liabilities | (0.7) | (0.7) | (0.1) | (0.1) | (0.2) | (0.3) | - |
| Loans and borrowings | (991.3) | (1,160.4) | (21.4) | (448.4) | (162.7) | (403.4) | (124.5) |
| Trade and other payables | (606.9) | (606.9) | (596.4) | (1.9) | (2.5) | (4.2) | (1.9) |
| Zinc prepayment * | (170.4) | (195.3) | (50.6) | (49.5) | (95.2) | - | - |
| Other financial liability | (11.6) | (11.6) | - | (11.6) | |||
| Commodity contracts – fair value hedges | (3.5) | (3.5) | (3.5) | - | - | - | - |
| Commodity contracts – cash flow hedges | (18.8) | (18.8) | (18.8) | - | - | - | - |
| Foreign exchange contracts – held for trading | (2.8) | (2.8) | (2.8) | - | - | - | - |
| Total, 31 Dec 2016 | (1,806.0) | (2,000.0) | (693.6) | (511.5) | (260.6) | (407.9) | (126.4) |
* To be settled through physical deliveries of zinc (note 20)
In addition to the contractual maturities of financial liabilities disclosed above, the Company intends to redeem the Perpetual Securities as described in note 26(i).
Since 2016, Nyrstar has entered into a series of foreign exchange options to hedge the Company's monthly exposure related to the direct operating costs denominated in Australian Dollars (AUD), Canadian Dollars (CAD) and in Euro (EUR) utilising put and call collar structures. For the EUR/USD transactional exposure, various collars were executed resulting in a weighted average collar of 1.05 to 1.14 for approximately 100% of the total transactional expenses in the first half of 2017; and a weighted average collar of 1.00 to 1.10 for approximately 100% of the total transactional expenses in the second half of 2017. For the AUD/USD transactional exposure, various collars were executed resulting in a weighted average collar of 0.62 to 0.81 for approximately 100% of the total transactional expenses for the first half of 2017; a weighted average collar of 0.68 to 0.81 for approximately 100% of the second half of 2017; and a weighted average collar of 0.70 to 0.80 for approximately 100% of 2018. For the CAD/USD transactional exposure on Langlois, various collars have been executed resulting in a weighted average collar of 1.28 to 1.35 for approximately 70% of 2017 and a weighted average collar of 1.32 to 1.36 for approximately 100% of 2018. Nyrstar has not undertaken hedging of EUR/USD transactional exposure for 2018.
The Group has accounted for the strategic foreign exchange hedges as cash flow hedges and determined the hedge relationship to be effective. The amount recognised in other comprehensive income during the period was a gain of EUR 3.3 million. A gain of EUR 12.3 million related to the strategic foreign exchange hedges was reclassified from equity to income statement in 2017. There was also no ineffectiveness recognised in the income statement.
The Group entered into foreign exchange forwards to hedge its exposure to the volatility in cash outflows related to capital expenditure denominated in foreign currency and incurred in relation to the Nyrstar Port Pirie Redevelopment. The Group hedged its AUD exposure to the cash outflows that have been denominated in Euro, USD and Chinese Yuan Renminbi (CNY).
Nyrstar has accounted for the foreign exchange hedges of the Nyrstar Port Pirie capital expenditures as cash flow hedges. The amount recognised in other comprehensive income at 31 December 2017 is a loss of EUR 1.4 million. There was no ineffectiveness recognised in profit or loss related to the foreign exchange hedges of the Nyrstar Port Pirie capital expenditures. The amount that was recycled out of equity during the period and into the carrying amount of the capital expenditure was EUR 0.2 million. EUR 0.6 million was recognised in the Income Statement in 2017. The final cash flows related to the hedges are expected to occur during the year ending 31 December 2018.
The Group's exposure to foreign currency risk was as follows based on notional amounts:
| EUR MILLION | EUR | USD | AUD | CAD | OTHER | TOTAL |
|---|---|---|---|---|---|---|
| Trade and other receivables | 62.6 | 140.5 | 8.7 | 9.5 | 2.2 | 223.5 |
| Other financial assets | - | 14.8 | - | - | - | 14.8 |
| Loans and borrowings | (992.4) | (176.9) | - | (0.2) | (0.5) | (1,170.0) |
| Zinc prepayment | - | (74.8) | - | - | - | (74.8) |
| Other financial liabilities | - | (16.9) | - | - | - | (16.9) |
| Trade and other payables | (135.9) | (398.9) | (66.1) | (19.9) | (11.1) | (631.9) |
| Gross balance sheet exposure | (1,065.7) | (512.2) | (57.4) | (10.6) | (9.4) | (1,655.3) |
| Foreign exchange contracts | 124.4 | 195.1 | (245.6) | (67.5) | (14.5) | (8.1) |
| Commodity contracts | - | (57.6) | - | - | - | (57.6) |
| Net exposure, 31 Dec 2017 | (941.3) | (374.7) | (303.0) | (78.1) | (23.9) | (1,721.0) |
| EUR MILLION | EUR | USD | AUD | CAD | OTHER | TOTAL |
|---|---|---|---|---|---|---|
| Trade and other receivables | 65.0 | 126.5 | 3.6 | 22.3 | 1.6 | 219.0 |
| Other non-current financial assets | - | 13.8 | - | - | - | 13.8 |
| Loans and borrowings | (566.6) | (424.7) | - | - | (0.7) | (992.0) |
| Zinc prepayment | - | (170.4) | - | - | - | (170.4) |
| Other financial liabilities | - | (11.6) | - | - | - | (11.6) |
| Trade and other payables | (146.7) | (357.0) | (80.7) | (10.1) | (12.4) | (606.9) |
| Gross balance sheet exposure | (648.3) | (823.4) | (77.1) | 12.2 | (11.5) | (1,548.1) |
| Foreign exchange contracts | 160.8 | 82.9 | (131.5) | (93.0) | (16.2) | 3.0 |
| Commodity contracts | - | (0.1) | - | - | - | (0.1) |
| Net exposure, 31 Dec 2016 | (487.5) | (740.6) | (208.6) | (80.8) | (27.7) | (1,545.2) |
Nyrstar's results are significantly affected by changes in foreign exchange rates. Sensitivities to variations in foreign exchange rates are depicted in the following table, which sets out the estimated impact on Nyrstar's full year results and equity (in EUR million).
| INCOME STATEMENT | EQUITY | |||||||
|---|---|---|---|---|---|---|---|---|
| PARAMETER | FULL YEAR 2016 ANNUAL AVERAGE RATE |
FULL YEAR 2017 ANNUAL AVERAGE RATE |
VARIABLE | 2016 | 2017 | 2016 | 2017 | |
| EUR / USD | 1.107 | 1.130 | + / - 10% | (83) / 102 | (87) / 106 | (70) / 89 | (87) / 106 | |
| EUR / AUD | 1.488 | 1.473 | + / - 10% | 23 / (28) | 25 / (31) | 23 / (28) | 24 / (4) | |
| EUR / CHF | 1.09 | 1.112 | + / - 10% | 4 / (5) | 5 / (6) | 4 / (5) | 5 / (6) |
The above sensitivities were calculated by modelling Nyrstar's 2017 and 2016 underlying operating performance. Exchange rates are based on an average value observed during that period and are varied in isolation to determine the impact on Nyrstar's full year results and equity.
The Group is exposed to commodity price volatility on commodity sales and raw materials purchased. The Group enters into zinc, lead and silver futures and swap contracts to hedge certain forward fixed price sales to customers in order to achieve the relevant metal price at the date that the transaction is settled. The Group also enters into zinc, lead and silver futures and swap contracts to more closely align the time at which the price for externally sourced concentrate purchases is set to the time at which the price for the sale of metal produced from that concentrate is set. These instruments are referred to as 'metal at risk' hedges and the terms of these contracts are normally between one and three months.
The Group has accounted the metal at risk hedges as fair value hedges with any mark-to-market on the hedging instrument recognised in the Income Statement. The amount of the losses recognised on the hedging instrument in 2017 was EUR 108.4 million. The gains on the hedged item attributable to the hedged risk was EUR 100.5 million. The fair values of the metal at risk hedges at 31 December 2017 was a loss of EUR 26.7 million.
In the first quarter of 2017, Nyrstar had in place zinc price collar hedges to protect 70% of total free metal produced at the zinc smelters and North American mines within a price range of USD 2,127 and USD 2,496 with full upside from USD 2,800; and for the second quarter of 2017 to the fourth quarter of 2017, a collar of USD 2,172 to USD 2,543 (plus a call at USD 3,117). During the entirety of 2017, the zinc production at Langlois has been hedged with a fixed forward position of USD 2,280 per tonne on a payable volume of 2,000 tonnes per month.
During the course of 2017, Nyrstar has further placed protective zinc hedges on certain volumes of the total free metal produced by Nyrstar's zinc smelters and mines. Nyrstar has put in place hedges for 70% of the total free metal produced by Nyrstar's zinc smelters and mines for the first half of 2018 and 30% of the total free metal produced in the second half of 2018. The first half of 2018 hedges result in full exposure to the zinc price for 100% of the production volume in the first half of 2018 between a floating zinc price of USD 2,300/t and USD 3,094/t. Above and below these prices, Nyrstar's exposure is limited to 30% of the total free metal produced. The second half of 2018 hedges result in full exposure to the floating zinc price within a price range of USD 2,600/t and USD 3,641/t. Above and below these prices, Nyrstar's exposure is reduced to 70% of the total free metal produced. Nyrstar has also placed fixed forward hedges to protect the profitability of the Myra Falls Mine during its restart and ramp-up. The Myra Falls Mine fixed forward commodity price hedging has been placed at USD 2,760 and USD 2,685 per tonne for zinc in 2018 and 2019 respectively; USD 1,281 and USD 1,296 per troy ounce in 2018 and 2019 respectively; USD 6,461 and USD 6,415 per tonne for copper in 2018 and 2019 respectively; and USD 17.41 per troy ounce for silver in both 2018 and 2019.
The Group entered into forward sales of silver metal to hedge its exposure related to the deliveries of silver units under the long term silver prepayment.
Nyrstar has accounted for the silver price hedges related to the long term silver prepayment as cash flow hedges. The amount recognised in other comprehensive income during the period was a loss of EUR 17.7 million. There was no ineffectiveness recognised in profit or loss related to the silver price hedges related to the long term silver prepayment. The amount reclassified from equity to income statement was EUR 13.9 million. The cash flows related to the hedges are expected to occur during the year ending from 31 December 2018 to 31 December 2019.
At 31 December 2017 Nyrstar Hobart has in place two electricity fixed price contracts (in the form of swaps) to hedge its exposure to the volatility in electricity prices until 2029. The hedge relationships have been accounted for as cash flow hedges. The amount recognised in other comprehensive income during the period was a gain of EUR 9.8 million. The Group reclassified an amount of EUR 0.8 million related to the Hobart embedded derivatives from equity to income statement. The hedge ineffectiveness recognised in profit or loss related to the Hobart embedded derivatives was a loss of EUR 2.6 million. The cash flows related to the hedges are expected to occur during the year ending 31 December 2018 through to 31 December 2029.
| EUR MILLION | AVERAGE PRICE IN USD |
6 MONTHS OR LESS |
6 - 12 MONTHS |
12 - 18 MONTHS |
MORE THAN 18 MONTHS |
TOTAL |
|---|---|---|---|---|---|---|
| ZINC | per tonne | |||||
| Contracts purchased | 2,641 | 17.7 | 88.7 | 24.2 | 23.7 | 154.3 |
| Contracts sold | 3,174 | 806.7 | 113.8 | - | - | 920.5 |
| Net position | 824.4 | 202.5 | 24.2 | 23.7 | 1,074.8 | |
| LEAD | per tonne | |||||
| Contracts purchased | 2,531 | (6.0) | - | - | - | (6.0) |
| Contracts sold | 2,493 | 77.4 | - | - | - | 77.4 |
| Net position | 71.4 | - | - | - | 71.4 | |
| SILVER | per ounce | |||||
| Contracts purchased | 17.0 | (138.7) | (60.1) | - | - | (198.8) |
| Contracts sold | 16.8 | 252.6 | 60.2 | 1.2 | 1.2 | 315.2 |
| Net position | 113.9 | 0.1 | 1.2 | 1.2 | 116.4 | |
| GOLD | per ounce | |||||
| Contracts purchased | 1,264.9 | (2.9) | - | - | - | (2.9) |
| Contracts sold | 1,283.7 | 41.7 | 4.1 | 5.2 | 5.2 | 56.2 |
| Net position | 38.8 | 4.1 | 5.2 | 5.2 | 53.3 | |
| COPPER | per tonne | |||||
| Contracts purchased | - | - | - | - | - | - |
| Contracts sold | 6,424 | 0.1 | 1.6 | 5.6 | 5.6 | 12.9 |
| Net position | 0.1 | 1.6 | 5.6 | 5.6 | 12.9 |
The following table sets out a summary of the notional value of derivative contracts hedging commodity price risks at 31 December 2017.
| EUR MILLION | AVERAGE PRICE IN USD |
6 MONTHS OR LESS |
6 - 12 MONTHS |
12 - 18 MONTHS |
MORE THAN 18 MONTHS |
TOTAL |
|---|---|---|---|---|---|---|
| ZINC | per tonne | |||||
| Contracts purchased | 2,609.0 | 295.0 | 391.5 | - | - | 686.5 |
| Contracts sold | 2,566.0 | 229.0 | 213.9 | 26.0 | - | 468.9 |
| Net position | 524.0 | 605.4 | 26.0 | - | 1,155.4 | |
| LEAD | per tonne | |||||
| Contracts purchased | 2,117.0 | (19.4) | - | - | - | (19.4) |
| Contracts sold | 2,185.0 | 90.2 | - | - | - | 90.2 |
| Net position | 70.8 | - | - | - | 70.8 | |
| Silver | per ounce | |||||
| Contracts purchased | 16.1 | (80.7) | - | - | - | (80.7) |
| Contracts sold | 16.7 | 161.1 | - | - | - | 161.1 |
| Net position | 80.4 | - | - | - | 80.4 | |
| GOLD | per ounce | |||||
| Contracts purchased | 1,140.7 | (3.9) | - | - | - | (3.9) |
| Contracts sold | 1,227.9 | 16.8 | - | - | - | 16.8 |
| Net position | 12.9 | - | - | - | 12.9 | |
| COPPER | per tonne | |||||
| Contracts purchased | - | - | - | - | - | - |
| Contracts sold | 5,702 | 0.9 | - | - | - | 0.9 |
| Net position | 0.9 | - | - | - | 0.9 |
The following table sets out a summary of the notional value of derivative contracts hedging commodity price risks at 31 December 2016.
Nyrstar's results are significantly affected by changes in metal prices and treatment charges (TC). Sensitivities to variations in metal prices and treatment charges are depicted in the following table, which sets out the estimated impact on Nyrstar's full year results and equity (in EUR million).
| INCOME STATEMENT | EQUITY | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| PARAMETER | FULL YEAR 2016 ANNUAL AVERAGE PRICE |
FULL YEAR 2017 ANNUAL AVERAGE PRICE |
VARIABLE | 2016 | 2017 | 2016 | 2017 | ||
| Zinc price | \$2,095 | \$2,896 | + / - 30% | 199 / (148) | 198 / (175) | 111 / (70) | 78 / (126) | ||
| Lead price | \$1,872 | \$2,317 | + / - 10% | 1 / (1) | 1 / (1) | 1 / (1) | 1 / (1) | ||
| Silver price | \$17.1 | \$17.1 | + / - 10% | 4 /(4) | 5 /(5) | (4) / 4 | 0 / 0 | ||
| Zinc TC | \$203 | \$172 | + / - 10% | 25 / (25) | 20 / (20) | 25 / (25) | 20 / (20) | ||
| Lead TC | \$165 | \$120 | + / - 10% | 4 / (4) | 3 / (3) | 4 / (4) | 3 / (3) |
The above sensitivities were calculated by modelling Nyrstar's 2017 and 2016 underlying operating performance. Metal prices are based on an average value observed during that period and are varied in isolation to determine the impact on Nyrstar's full year results and equity.
| EUR MILLION | LOANS AND RECEIVABLES |
FAIR VALUE THROUGH PROFIT AND LOSS |
HELD TO MATURITY |
AVAILABLE FOR SALE |
DERIVATIVES USED FOR HEDGING |
AT AMORTISED COSTS |
TOTAL |
|---|---|---|---|---|---|---|---|
| Derivative financial instruments | - | 5.6 | - | - | 67.2 | - | 72.8 |
| Other financial assets | - | 14.8 | - | - | - | - | 14.8 |
| Trade and other receivables excl. prepayments | 223.5 | - | - | - | - | - | 223.5 |
| Cash and cash equivalents | 68.4 | - | - | - | - | - | 68.4 |
| Restricted cash | 113.0 | - | - | - | - | - | 113.0 |
| Held to maturity | - | - | 5.2 | - | - | - | 5.2 |
| Investments in equity securities | - | - | - | 19.8 | - | - | 19.8 |
| Borrowings excl. finance lease liabilities | - | - | - | - | - | (1,169.3) | (1,169.3) |
| Finance lease liabilities | - | - | - | - | - | (0.7) | (0.7) |
| Derivative financial instruments | - | (40.4) | - | - | (35.0) | - | (75.4) |
| Zinc prepayment | - | - | - | - | - | (74.8) | (74.8) |
| Other financial liabilities | (16.9) | (16.9) | |||||
| Trade and other payables | - | - | - | - | (631.9) | (631.9) | |
| Net position, 31 Dec 2017 | 404.9 | (20.0) | 5.2 | 19.8 | 32.2 | (1,893.6) | (1,451.5) |
| EUR MILLION | LOANS AND RECEIVABLES |
FAIR VALUE THROUGH PROFIT AND LOSS |
HELD TO MATURITY |
AVAILABLE FOR SALE |
DERIVATIVES USED FOR HEDGING |
AT AMORTISED COSTS |
TOTAL |
|---|---|---|---|---|---|---|---|
| Derivative financial instruments | - | 21.9 | - | - | 65.3 | - | 87.2 |
| Other financial assets | - | 13.8 | 13.8 | ||||
| Trade and other receivables excl. prepayments | 219.0 | - | - | - | - | - | 219.0 |
| Cash and cash equivalents | 127.1 | - | - | - | - | - | 127.1 |
| Restricted cash | 111.7 | - | - | - | - | - | 111.7 |
| Held to maturity | - | - | 5.4 | - | - | - | 5.4 |
| Investments in equity securities | - | - | - | 22.4 | - | - | 22.4 |
| Borrowings excl. finance lease liabilities | - | - | - | - | - | (991.3) | (991.3) |
| Finance lease liabilities | - | - | - | - | - | (0.7) | (0.7) |
| Derivative financial instruments | - | (6.3) | - | - | (18.8) | - | (25.1) |
| Zinc prepayment | - | - | - | - | - | (170.5) | (170.5) |
| Other financial liabilities | - | - | - | - | - | (11.6) | (11.6) |
| Trade and other payables | - | - | - | - | - | (606.9) | (606.9) |
| Net position, 31 Dec 2016 | 457.8 | 29.4 | 5.4 | 22.4 | 46.5 | (1,781.0) | (1,219.5) |
Nyrstar's exposure to interest rate risk and along with sensitivity analysis on a change of 100 basis points in interest rates at balance date on interest bearing assets and liabilities is set out below:
| 31 DEC 2017 | SENSITIVITY ANALYSIS, IN 100 BP | ||||||
|---|---|---|---|---|---|---|---|
| INTEREST RATE | INCOME STATEMENT | EQUITY | |||||
| EUR MILLION | FLOATING | FIXED | TOTAL | INCREASE | DECREASE | INCREASE | DECREASE |
| Financial assets: | |||||||
| Cash and cash equivalents | 68.4 | - | 68.4 | 0.7 | (0.5) | 0.7 | (0.5) |
| Restricted cash | - | 113.0 | 113.0 | - | - | - | - |
| Held to maturity | - | 5.2 | 5.2 | - | - | - | - |
| Financial liabilities: | |||||||
| Loan facility | - | (27.4) | (27.4) | - | - | - | - |
| Borrowings - fixed rate bonds | - | (837.0) | (837.0) | - | - | - | - |
| Borrowings - convertible bonds | - | (128.0) | (128.0) | - | - | - | - |
| Borrowings - SCTF Credit Facility | (176.9) | - | (176.9) | (1.8) | 1.8 | (1.8) | 1.8 |
| Zinc prepayment | (74.8) | (74.8) | (0.7) | 0.7 | (0.7) | 0.7 | |
| Finance lease liabilities | - | (0.7) | (0.7) | - | - | - | - |
| Net interest bearing financial assets / (liabilities) |
(183.3) | (874.9) | (1,058.2) | (1.8) | 2.0 | (1.8) | 2.0 |
In addition to the exposure to the interest rate risk on financial liabilities disclosed above, the Company is exposed to the interest rate movements on the Perpetual Securities as described in note 26(i).
| 31 DEC 2016 | SENSITIVITY ANALYSIS, IN 100 BP | ||||||
|---|---|---|---|---|---|---|---|
| INTEREST RATE | INCOME STATEMENT | EQUITY | |||||
| EUR MILLION | FLOATING | FIXED | TOTAL | INCREASE | DECREASE | INCREASE | DECREASE |
| Financial assets: | |||||||
| Cash and cash equivalents | 127.1 | - | 127.1 | 1.0 | (0.4) | 1.0 | (0.4) |
| Restricted cash | - | 111.7 | 111.7 | - | - | - | - |
| Held to maturity | - | 5.4 | 5.4 | - | - | - | - |
| Financial liabilities: | |||||||
| Loan facility | - | (14.3) | (14.3) | - | - | - | - |
| Borrowings - fixed rate bonds | - | (340.8) | (340.8) | - | - | - | - |
| Borrowings - convertible bonds | - | (211.5) | (211.5) | - | - | - | - |
| Borrowings - SCTF Credit Facility | (329.8) | - | (329.8) | (3.3) | 2.5 | (3.3) | 2.5 |
| Borrowings - Loans from related parties | (94.8) | - | (94.8) | (1.0) | 0.7 | (1.0) | 0.7 |
| Zinc prepayment | (170.5) | - | (170.5) | (1.7) | 1.3 | (1.7) | 1.3 |
| Finance lease liabilities | - | (0.7) | (0.7) | - | - | - | - |
| Net interest bearing financial assets / (liabilities) |
(468.0) | (450.2) | (918.2) | (5.0) | 4.1 | (5.0) | 4.1 |
In addition to the exposure to the interest rate risk on financial liabilities disclosed above, the Company is exposed to the interest rate movements on the Perpetual Securities as described in note 26(i).
Sensitivity calculations are based on closing cash balances. No negative interest rates are assumed.
The carrying amount of all financial assets and liabilities recognised at amortised cost on the consolidated statement of financial position approximate their fair value, with the exception of the fixed rate bonds of EUR 837.0 million (2016: EUR 340.8 million) and the convertible bonds of EUR 128.0 million (2016: EUR 211.5 million), with fair values based on quoted prices in active markets (Level 1 measurement including equity and debt component), of EUR 917.4 million (2016: EUR 381.4 million), and EUR 157.6 million (2016: EUR 245.4 million) respectively.
The following table presents the fair value measurements by level of the following fair value measurement hierarchy for derivatives:
| VALUATION TECHNIQUE(S) AND KEY INPUT(S) |
LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL AS AT 31 DEC 2017 |
|---|---|---|---|---|
| a | - | 2.5 | - | 2.5 |
| a | - | 4.1 | - | 4.1 |
| b | - | 3.1 | - | 3.1 |
| c | - | 63.1 | - | 63.1 |
| - | 72.8 | - | 72.8 | |
| a | - | (29.2) | - | (29.2) |
| a | - | (35.0) | - | (35.0) |
| b | - | (11.2) | - | (11.2) |
| - | (75.4) | - | (75.4) | |
| EUR MILLION | VALUATION TECHNIQUE(S) AND KEY INPUT(S) |
LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL AS AT 31 DEC 2016 |
|---|---|---|---|---|---|
| Commodity contracts – fair value hedges | a | - | 16.7 | - | 16.7 |
| Commodity contracts – cash flow hedges | a | - | 5.5 | - | 5.5 |
| Foreign exchange contracts – held for trading | b | - | 5.2 | - | 5.2 |
| Foreign exchange contracts – cash flow hedge | b | - | 0.6 | - | 0.6 |
| Embedded derivative | c | - | 59.2 | - | 59.2 |
| Total | - | 87.2 | - | 87.2 | |
| Commodity contracts – fair value hedges | a | - | (3.5) | - | (3.5) |
| Commodity contracts – cash flow hedges | a | - | (18.8) | - | (18.8) |
| Foreign exchange contracts – held for trading | b | - | (2.8) | - | (2.8) |
| Total | - | (25.1) | - | (25.1) | |
For level 2 fair value measurements, fair values are determined based on the underlying notional amount and the associated observable forward prices/rates in active markets. The key inputs in these valuations are as follows (with reference to the tables above):
The table below shows changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's consolidated statement of cash flows as cash flows from financing activities.
| EUR MILLION | 1 JAN 2017 | FINANCING CASH INFLOWS / (OUTFLOWS) |
NON-CASH CHANGES - AMORTISATION / (INCURRENCE) OF TRANSACTION RELATED COSTS USING THE EFFECTIVE INTEREST RATE METHOD |
NON-CASH CHANGES - REPAYMENT OF ZINC PREPAYMENT |
OTHER CHANGES - FOREIGN EXCHANGE CHANGES |
31 DEC 2017 |
|---|---|---|---|---|---|---|
| Convertible bonds | 211.5 | (88.8) | 5.3 | - | - | 128.0 |
| Fixed rate bonds | 340.8 | 492.2 | 4.0 | - | - | 837.0 |
| Unsecured bank loans | 14.3 | 13.7 | - | - | (0.6) | 27.4 |
| Finance lease liabilities | 0.7 | - | - | - | - | 0.7 |
| SCTF credit facility | 329.9 | (115.1) | (4.1) | - | (33.8) | 176.9 |
| Loans from related parties | 94.8 | (88.4) | - | - | (6.4) | - |
| Zinc prepayment | 170.4 | - | - | (79.4) | (16.2) | 74.8 |
| Total | 1,162.4 | 213.6 | 5.2 | (79.4) | (57.0) | 1,244.8 |
The sale of Campo Morado, Coricancha and Contonga Mines does not impact the disclosure.
The value of commitments for acquisition of plant and equipment contracted for but not recognised as liabilities at the reporting date are set out in the table below.
| EUR MILLION | 31 DEC 2016 | 31 DEC 2017 |
|---|---|---|
| Within one year | 53.1 | 22.9 |
| Total | 53.1 | 22.9 |
The value of commitments in relation to operating leases contracted for but not recognised as liabilities at the reporting date are set out in the table below.
| EUR MILLION 31 DEC 2016 |
31 DEC 2017 | |
|---|---|---|
| Within one year | 8.5 | 16.1 |
| Between one and five years 11.7 |
30.6 | |
| Total 20.2 |
46.7 |
Although Nyrstar is the subject of a number of claims and legal, governmental and arbitration proceedings incidental to the normal conduct of its business, neither the Company nor any of its subsidiaries is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the year ended 31 December 2017 which may have or has had significant effects on the financial position or profitability of the Company and its subsidiaries, taken as a whole.
The sanction process initiated at Coricancha in 2014, related to alleged non-compliances identified by the environmental regulator (OEFA) during an inspection in April 2013, remains open at 31 December 2017. Nyrstar has filed a legal defense contesting OEFA's findings and Nyrstar's assessment is that material monetary penalties are unlikely to be incurred. Efforts to return the sites to compliance are being pursued, however the potential for regulatory action cannot be excluded.
Trafigura is a significant shareholder of the Company through its subsidiary, Urion Holdings (Malta) Ltd. ("Urion"). It acquired its shareholding in the Company through several acquisitions, which were notified to the Company as follows:
| DATE OF NOTIFICATION | NUMBER OF SHARES NOTIFIED | PERCENTAGE OF SHARES NOTIFIED |
|---|---|---|
| 1 October 2014 | 28,638,753 | 8.42% (1) |
| 2 October 2014 | 34,651,369 | 10.19%(1) |
| 12 November 2014 | 52,035,694 | 15.30%(1) |
| 1 September 2015 | 68,090,869 | 20.02%(1) |
(1) On the basis of 340,045,088 outstanding Shares of the Company at that time before conversion of any of the convertible bonds outstanding at that time.
Since the notification of significant shareholding received by the Company at 1 September 2015, Urion acquired additional shares in the Company via market purchases. According to the most recent information received by the Company, at 31 December 2017 Urion held 26,830,622 shares representing 24.61% of the voting rights.
Following the annual general shareholders' meeting held at 27 April 2016, the Board of Directors is comprised of two Non-Executive Dependent Directors, namely Mr. Christopher Cox and Jesús Fernandez. Both Mr Christopher Cox and Jesús Fernandez represent Urion.
In connection with Trafigura's commitment to support the Offering (see below), on 9 November 2015 the Company entered into a relationship agreement (the "Relationship Agreement") with Trafigura Group Pte. Ltd. to govern Nyrstar's relationship with Trafigura Group Pte. Ltd. and its affiliated persons (collectively "Trafigura").
The Relationship Agreement provides amongst other things for the following:
The Relationship Agreement will have effect for as long as Trafigura holds 20% or more but less than 50% of the shares in the Company. It may be terminated by Trafigura if any of the Trafigura Commercial Agreements that it entered into with the Nyrstar Sales & Marketing AG on 9 November 2015 is terminated other than as a result of expiry or non-renewal and other than due to material breach by Trafigura.
On 9 November 2015, Trafigura, (through its subsidiary, Urion) agreed, subject to certain conditions, to subscribe for shares in the rights offering ("Offering") that was launched on 5 February 2016, for up to a maximum aggregate amount of EUR 125 million, and provided that its aggregate shareholding in the Company after completion of the Offering is not more than 49.9%. Pursuant to the Rights Offering, Urion subscribed with rights for 149,861,803 new shares for an aggregate amount of EUR 67.4 million. As a result of the Offering, Urion's shareholding in the Company remained at 24.61% in aggregate. The Company paid to Trafigura a commission of EUR 5.0 million;
On 14 November 2017, Trafigura, (through its subsidiary, Urion) subscribed for shares in the equity issuance of EUR 100 million. Urion subscribed for 3,775,000 new shares. As a result of the equity issuance, Urion's shareholding in the Company changed to 24.61% in aggregate.
On 9 November 2015, Nyrstar Sales & Marketing AG entered into commercial agreements with Trafigura Pte. Ltd. (the "Trafigura Commercial Agreements") relating to the purchase by Nyrstar from Trafigura of zinc concentrate, lead concentrate and finished refined aluminium metal (the "Purchase Agreements") and the sale by Nyrstar to Trafigura of finished refined zinc metal (part of this contract being implemented by way of the 2015 prepay financing), finished refined lead metal and finished refined copper cathodes (the "Sales Agreements").
All of the agreements entered into force on 1 January 2016 for a fixed term of five years, with an option for Trafigura to renew for a further period of five years. Thereafter they are expected to continue on an evergreen basis, provided that with at least one calendar year's notice (which can be given on and from 31 December 2024) (i) Trafigura may terminate at any time and (ii) Nyrstar may terminate if Trafigura's or its affiliates' shareholding in Nyrstar NV or its affiliate falls below 20%. In addition, the agreements are subject to certain termination rights in case of default under the various agreements. The Company is of the opinion that Trafigura Commercial Agreements were entered into at market conditions.
The Purchase Agreements provide for market-based prices with annually agreed treatment charges (for zinc concentrate and lead concentrate) and premiums (for aluminium) subject to certain fallback mechanisms, in case no agreement can be reached between the parties. Subject to annual agreement, the Purchase Agreements will relate to approximately 10-35% of Nyrstar's feedbook requirements. In January 2017, Nyrstar and Trafigura agreed a framework for the granting by Trafigura, on a case by case basis, of deferred payment terms on concentrate deliveries for two specific Purchase Agreements. Any such deferred payments will be secured by the shares of Nyrstar Budel BV, a subsidiary of the Company.
The Sales Agreements provide for market-based prices with (i) market-based premiums subject to specific market-based discounts up to and including 2017 and annually agreed discounts thereafter for zinc metal, (ii) annually agreed premiums for lead metal and (iii) market-based premiums subject to annually agreed discounts for copper cathodes, subject to certain fallback mechanisms in case no agreement can be reached between the parties. The Sales Agreements will relate to substantially all of Nyrstar's commodity grade metal.
In May and November 2017, Nyrstar and Trafigura amended the "Trafigura Commercial Agreements" entered into on 9 November 2015. These amendments are effective as of the date the agreements are signed. These amendments further defined the zinc specifications and volumes by region.
In April 2016, Nyrstar announced that it terminated the offtake and marketing agreement with Noble Group Limited ("Noble") to market and sell 200,000 tonnes per annum of commodity grade zinc metal produced at its European smelters. Nyrstar has included the zinc metal volumes that were previously to be provided to Noble until the end of 2016 into the zinc metal offtake agreement with Trafigura entered into on 9 November 2015 with market based terms and a prepayment mechanism.
In December 2015, Trafigura also become the off-taker in the USD 150 million (EUR 137.8 million) zinc prepayment arranged by Deutsche Bank AG that is linked to the physical delivery of refined zinc metal to Trafigura under the terms of a three-year offtake agreement. In second half of 2016 the zinc prepayment was increased to USD 185 million.
In May 2016, Nyrstar entered into a USD 150 million revolving working capital facility agreement with Trafigura. The facility was uncommitted and was secured by the shares of Nyrstar France SAS, a subsidiary of the Company, with a current term through to January 2017 and with an interest of LIBOR plus 4%. In November 2016, with the effective date of 1 January 2017, the working capital facility become committed, was extended till 31 December 2017 and was upsized to USD 250 million. The amended working facility is secured by a share pledge over the shares of Nyrstar France SAS and Budel BV, subsidiaries of the Company. In November 2017, the facility USD 250 million was extended until the end of 2019 on similar terms to the existing facility.
| TRANSACTION VALUES FOR THE YEAR ENDED 31 DECEMBER |
||
|---|---|---|
| EUR MILLION | 2016 | 2017 |
| SALE OF GOODS AND SERVICES | ||
| Trafigura Beheer BV | - | - |
| Subsidiaries & associates of Trafigura Beheer BV | 354.5 | 650.8 |
| Other related parties | - | - |
| PURCHASE OF GOODS | ||
| Trafigura Beheer BV | - | - |
| Subsidiaries & associates of Trafigura Beheer BV | 514.0 | 674.9 |
| Other related parties | - | 33.1 |
| AMOUNTS OWED BY* | ||
| Trafigura Beheer BV | - | - |
| Subsidiaries & associates of Trafigura Beheer BV | 40.9 | 25.8 |
| Other related parties | - | - |
| AMOUNTS OWED TO* | ||
| Trafigura Beheer BV | - | - |
| Subsidiaries & associates of Trafigura Beheer BV | 140.7 | 71.9 |
| Other related parties | - | 0.6 |
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expenses have been recognized in the current or prior years for bad or doubtful debts in respect of the amounts owed by related parties.
The balance owed to Trafigura at 31 December 2017 of EUR 14.6 million (2016: EUR 129.8 million) represents Trafigura's direct participation of USD 17.5 million (EUR 14.6 million) in the zinc prepayment (2016: USD 35 million (EUR 33.2 million)) (note 20). The loan from related parties was Nil in 2017 (2016: EUR 94.8 million) (note 28).
| BALANCES AT THE END OF 31 DECEMBER | |
|---|---|
| EUR MILLION 2016 |
2017 |
| LOAN FROM RELATED PARTIES | |
| Trafigura Beheer BV - |
- |
| Subsidiaries & associates of Trafigura Beheer BV 129.8 |
14.6 |
| INTEREST AND FEES PAID TO RELATED PARTIES | |
| Trafigura Beheer BV - |
- |
| Subsidiaries & associates of Trafigura Beheer BV 4.3 |
4.1 |
| EUR MILLION 2016 |
2017 |
|---|---|
| Salaries and other compensation 0.4 |
0.5 |
| Nyrstar Management Committee | |
| EUR MILLION 2016 |
2017 |
| Salaries and other compensation 4.7 |
5.8 |
| Pension benefits 0.7 |
0.6 |
| Share based payments 0.9 |
1.0 |
Share based payments reflect the cost to the Group related to share based awards granted to the members of the NMC. These costs do not represent actual monetary or non-monetary benefits received by the members of the NMC.
During the period, the auditor received fees for audit and audit related services provided to the Group as follows:
| EUR THOUSAND | 2016 | 2017 |
|---|---|---|
| Audit services | 186.6 | 194.1 |
| Audit related services | - | 5.4 |
| Tax services | - | 66.6 |
| Other services | - | 263.5 |
| Total Deloitte Bedrijfsrevisoren | 186.6 | 529.6 |
| Audit services | 951.8 | 974.2 |
| Audit related services | 213.1 | 79.1 |
| Tax services | 22.4 | 2.7 |
| Other services | - | 45.0 |
| Total other offices in the Deloitte network | 1,187.3 | 1,101.0 |
The holding company and major subsidiaries included in the Group's consolidated financial statements are:
| ENTITY | BELGIAN COMPANY NUMBER COUNTRY OF INCORPORATION | OWNERSHIP | OWNERSHIP | |
|---|---|---|---|---|
| 31 DEC 2016 | 31 DEC 2017 | |||
| Nyrstar NV | RPR 0888.728.945 | Belgium | Holding entity | Holding entity |
| Nyrstar Australia Pty Ltd. | Australia | 100% | 100% | |
| Nyrstar Hobart Pty Ltd. Nyrstar Port Pirie Pty Ltd. |
Australia Australia |
100% 100% |
100% 100% |
|
| Nyrstar Trading GmbH | Austria | 100% | - | |
| Nyrstar Resources (Barbados) Ltd. | Barbados | 100% | - | |
| Nyrstar Belgium NV | RPR 0865.131.221 | Belgium | 100% | 100% |
| Breakwater Resources Ltd. | Canada | 100% | 100% | |
| Canzinco Ltd. | Canada | 100% | 100% | |
| Nyrstar Mining Ltd. | Canada | 100% | 100% | |
| Nyrstar Canada (Holdings) Ltd. | Canada | 100% | 100% | |
| Nyrstar Myra Falls Ltd. | Canada | 100% | 100% | |
| Nyrstar France SAS | France | 100% | 100% | |
| Nyrstar France Trading SAS | France | 100% | 100% | |
| Nyrstar Germany GmbH | Germany | 100% | 100% | |
| Nyrstar Hoyanger AS | Norway | 100% | 100% | |
| Nyrstar Campo Morado SA de CV | Mexico | 100% | - | |
| Nyrtrade Mexico SA de CV | Mexico | 100% | 100% | |
| Nyrstar Budel BV | The Netherlands | 100% | 100% | |
| Nyrstar International BV | The Netherlands | 100% | 100% | |
| Nyrstar Netherlands (Holdings) BV | The Netherlands | 100% | 100% | |
| Nyrstar Coricancha S.A. | Peru | 100% | - | |
| Nyrstar Ancash S.A. | Peru | 100% | 100% | |
| Nyrstar Peru S.A. | Peru | 100% | 100% | |
| Nytrade Perú SA. | Peru | 100% | 100% | |
| Nyrstar Finance International AG | Switzerland | 100% | 100% | |
| Nyrstar Sales & Marketing AG | Switzerland | 100% | 100% | |
| Breakwater Tunisia SA | Tunisia | 100% | 100% | |
| Nyrstar Clarksville Inc. | United States | 100% | 100% | |
| Nyrstar Holdings Inc. | United States | 100% | 100% | |
| Nyrstar IDB LLC | United States | 100% | 100% | |
| Nyrstar Tennessee Mines - Gordonsville LLC | United States | 100% | 100% | |
| Nyrstar Tennessee Mines - Strawberry Plains LLC | United States | 100% | 100% | |
| Nyrstar US Inc. | United States | 100% | 100% | |
| Nyrstar US Trading Inc. | United States | 100% | 100% |
There have been no material reportable events subsequent to 31 December 2017.
In the context of the audit of the consolidated financial statements of Nyrstar NV ("the Company") and its subsidiaries (jointly "the Group"), we hereby submit our statutory audit report to you. This report includes our report on the consolidated financial statements together with our report on other legal and regulatory requirements. These reports are one and indivisible.
We were appointed in our capacity as statutory auditor by the shareholders' meeting of 29 April 2015 in accordance with the proposal of the board of directors issued upon recommendation of the Audit Committee. Our mandate will expire on the date of the shareholders' meeting approving the consolidated financial statements for the year ended 31 December 2017. We have performed the statutory audit of the consolidated financial statements of Nyrstar NV for six consecutive years.
We have audited the consolidated financial statements of the Group, which comprise the consolidated statement of financial position as at 31 December 2017, the consolidated income statement, the consolidated statement of comprehensive loss, the consolidated statement of changes in equity and the consolidated statement of cash flow for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated statement of financial position shows total assets of 3 529.7 million EUR and the consolidated income statement shows a consolidated profit for the year then ended of 46.5 million EUR (Group share).
In our opinion, the consolidated financial statements of Nyrstar NV give a true and fair view of the Group's net equity and financial position as of 31 December 2017 and of its consolidated results and its consolidated cash flow for the year then ended, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.
1
We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under those standards are further described in the "Responsibilities of the statutory auditor for the audit of the consolidated financial statements" section of our report. We have complied with all ethical requirements relevant to the statutory audit of consolidated financial statements in Belgium, including those regarding independence.
We have obtained from the board of directors and the company's officials the explanations and information necessary for performing our audit.
We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our opinion.
196 NYRSTAR ANNUAL REPORT 2017
3
| assessed as part of our impairment testing as outlined above. - Evaluated the status of the Port Pirie redevelopment (refer to the Commissioning of the Project KAM for details of our audit response). We discussed the commissioning of the Port Pirie redevelopment and challenged whether the completion was in line with management's expectations and full ramp-up |
|
|---|---|
| was expected to be achieved by the planned 24 months. - challenged whether the Port Pirie smelting operations production and cost assumptions as determined by operational management, were consistently applied in the deferred tax asset recoverability assessment. - Performed our own sensitivity calculations to test the adequacy of the deferred tax recoverability. - Used our tax specialists, to confirm whether the tax losses are legally available for up to seven year. |
|
| Related party transactions | |
| Trafigura Group Pte (Trafigura) is a significant shareholder of the Group, through its subsidiary, Urion Holdings Ltd. The Group has entered into a number of agreements with Trafigura, which are significant to the operations of Nyrstar. There is a risk of undisclosed related party transactions as well as the risk that these transactions are not performed on an arm's length basis when disclosed as such. We refer to the related disclosures in note 39 of the financial statements. |
We understood and documented management's process for identifying related parties and recording related party transactions. We have assessed management's controls in relation to the assessment and approval of related party transactions and reviewed management's disclosures in respect of the transactions. We assessed management's evaluation that the transactions are at an arm's length basis by reviewing a sample of agreements entered into with Trafigura and comparing the related party transaction price to those quoted by comparable companies when available. We have reviewed significant agreements entered into during the year with related parties, including with Trafigura and through corroboration of our review of the minutes of meetings of the Board of Directors. Throughout the performance of our audit we remained alert for any evidence of related party transactions that had not been disclosed and unusual transactions that do not have an apparent |
| business nature. | |
| Classification of metal prepayments | |
| Nyrstar enters into metal prepayment arrangements whereby it receives an upfront cash payment and agrees to physically deliver metal over time. Judgement is required to determine whether: |
We understood and documented management's process for accounting for metal prepayments. |
| i) the arrangements are capable of requiring Nyrstar to deliver cash in lieu of physical metal; and ii) Nyrstar has both the intention and ability to deliver metal from its own production. In the event metal prepayments are not settled by the delivery of metal from its own production the upfront cash payment would be classified as a financial liability. We refer to the related disclosures in note 32 of the financial statements. |
We have assessed management's controls in relation to the approval and accounting for new metal prepayments. We reviewed management's position paper and performed the following procedures: Reviewed the underlying contracts to identify any clauses that would require Nyrstar to deliver cash; Reviewed historical deliveries to assess whether there has been any tainting of the arrangement through net settlement (i.e. settlement in cash or the delivery of metal purchased); and Compared forecast production as at 31 December 2017 to ensure there is sufficient production to |
|---|---|
| Carrying value and commissioning of the Port | settle the delivery obligations. |
| Pirie Redevelopment Project At the end of 2016, the Group announced delays in the completion of the Port Pirie Redevelopment Project (the "Project"), where an external expert performed a review on the construction and ramp up milestones. Completion of the redevelopment as well as delays in commissioning represent a risk that the Group encounters significant overruns leading to an impairment of the Project. Significant judgement is required to determine when the Project has reached its intended use, which represents the commissioning date of the Project and the cessation of cost capitalisation. We refer to the related disclosures in note 2 of the financial statements. |
We have met with operational management to review the Project's revised commissioning timeline and cost performance to budget to determine whether the assumptions under which the Project was approved continued to be relevant and appropriate. We have assessed the design and implementation of controls related to the commissioning of the Project. We assessed through discussion with operational management and review of the Project's status, whether the overruns incurred as a result of the delays represented an indicator of impairment. We visited Port Pirie to observe the status of the Project. We performed sample testing on the expenditure capitalised under the Project to determine whether the costs have been appropriately accounted for in accordance with IFRS. We challenged management's assessment of the commissioning date of the Project and verified the assets being depreciated. |
| Responsibilities of the board of directors for the consolidated financial statements |
are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements the board of directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters to be considered for going
5
Nyrstar NV | 31 December 2017 Deloitte Bedrijfsrevisoren / Réviseurs d'Entreprises Burgerlijke vennootschap onder de vorm van een coöperatieve vennootschap met beperkte aansprakelijkheid / Société civile sous forme d'une société coopérative à responsabilité limitée Registered Office: Gateway building, Luchthaven Nationaal 1 J, B-1930 Zaventem VAT BE 0429.053.863 - RPR Brussel/RPM Bruxelles - IBAN BE 17 2300 0465 6121 - BIC GEBABEBB Member of Deloitte Touche Tohmatsu Limited Other statements This report is consistent with our additional report to the audit committee referred to in article 11 of Regulation (EU) No 537/2014. Zaventem, 22 February 2018 The statutory auditor DELOITTE Bedrijfsrevisoren / Réviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Gert Vanhees
The annual accounts prepared under Belgian GAAP are presented below in summarized form. In accordance with the Belgian Company Code, the annual accounts of Nyrstar NV together with the management report and the statutory auditor's report will be deposited with the National Bank of Belgium.
These documents may also be obtained on request from: Nyrstar NV, Zinkstraat 1, B- 2490 Balen (Belgium).
The statutory auditor, Deloitte Bedrijfsrevisoren BV o.v.v.e. CVBA, represented by Gert Vanhees has expressed an unqualified opinion on the annual statutory accounts of Nyrstar NV.
| € THOUSANDS | AS AT 31 DECEMBER 2016 | AS AT 31 DECEMBER 2017 |
|---|---|---|
| ASSETS | ||
| Formation expenses | 14,077 | 9,762 |
| Non-current assets | 1,235,423 | 1,237,222 |
| Property, plant and equipment | 3 | 2 |
| Financial assets | 1,235,420 | 1,237,220 |
| Current assets | 411,444 | 412,378 |
| Receivables > 1 year | - | 400,000 |
| Receivables < 1 year | 406,287 | 6,566 |
| Cash | 109 | 644 |
| Accrued income | 5,048 | 5,168 |
| Total assets | 1,660,944 | 1,659,362 |
| LIABILITIES | ||
| Shareholders' equity | 1,257,203 | 1,341,994 |
| Issued share capital | 97,193 | 113,263 |
| Share premium | 2,368,925 | 1,228,124 |
| Legal reserve | 16,257 | 16,257 |
| Distributable reserves | 17,029 | - |
| Retained earnings | (1,242,201) | (15,650) |
| Provisions for risks and charges | 9,856 | 3,657 |
| Liabilities | 393,885 | 313,711 |
| Non-current Liabilities | 214,732 | 103,080 |
| Current Liabilities | 175,094 | 206,572 |
| Accruals and deferred income | 4,059 | 4,059 |
| Total equity and liabilities | 1,660,944 | 1,659,362 |
| € THOUSANDS | PER 31 DECEMBER 2016 | PER 31 DECEMBER 2017 |
|---|---|---|
| Operating income | 13,596 | 9,022 |
| Operating charges | (25,592) | (17,248) |
| Operating result | (11,996) | (8,226) |
| Financial income | 12,346 | 11,948 |
| Financial charges | (285,816) | (19,368) |
| Ordinary result before taxes | (285,466) | (15,646) |
| Income taxes | 426 | (4) |
| Net result | (285,040) | (15,650) |
| Result allocation | ||
| Retained earnings from prior year | (957,161) | (1,242,201) |
| Withdrawals from capital and reserves | ||
| - | 1,242,201 | |
| Transfer to capital and reserves | - | - |
| Profit/loss to be carried forward | (1,242,201) | (15,650) |
Acid plant A facility that recovers sulphur dioxide from discharged gases and manufactures sulphuric acid from it.
Ag Chemical symbol for silver.
Alloy Metal containing several components.
Alloying A technique of combining or mixing two or more metals to make an entirely new metallic compound; for example, mixing copper and tin creates bronze.
Antimony A metallic element, often a pathfinder element for gold.
Au Chemical symbol for gold.
Base metal Non precious metal, usually refers to copper, lead, and zinc.
Blast furnace A tall shaft furnace used to smelt sinter and produce crude lead bullion and a slag.
Bullion Crude metal that contains impurities; needs to be refined to make market quality metal.
By-products By-products are secondary products obtained in the course of producing zinc or lead and include primarily sulphuric acid, silver, gold, indium, copper and cadmium.
Cadmium A soft bluish-white ductile malleable toxic bivalent metallic element; occurs in association with zinc ores.
C1 cash costs 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 the by-product credits.
Cake The solid mass remaining after the liquid that contained it has been removed.
Calcine Product of roasting zinc sulphide concentrates; mainly zinc oxide, also with silica and iron
compounds, lead compounds, minor elements and residual combined sulphur.
Cathode Negatively charged electrode in electrolysis; in zinc and cadmium electrolysis, the cathode is a flat sheet of aluminium.
Cellhouse The location in the production process where zinc metal is electrolytically plated onto aluminium cathodes.
Cement, cementation The process of obtaining a metal from a solution of one of its compounds by precipitation with another metal (e.g., obtaining copper from a solution of copper sulphate by adding metallic zinc).
CGG Continuous Galvanising Grade zinc; contains alloying agents such as aluminium. lead and selenium in specific qualities desired by customers; used in continuous strip galvanising plants.
CIM Canadian Institute of Mining, Metallurgy and Petroleum.
Cobalt A hard, lustrous, silver-grey metal.
Coke Product made by de-volatilisation of coal in the absence of air at high temperature.
Concentrate Material produced from metalliferous ore by mineral processing or beneficiation; commonly based on sulphides of zinc, lead and copper; in a concentrate, the abundance of a specific mineral is higher than in the ore.
Continuous galvanising A system for providing a continuous supply of material to be galvanised.
Conversion Price Operating cost for a smelter to produce market quality metal, not including the cost of raw materials.
Copper cementate Metallic copper obtained by cementation.
Copper sulphate A copper salt made by the action of sulphuric acid on copper oxide.
Cu Chemical symbol for copper.
Dewatering A process usually used to remove water from wet solids or slurries by draining, pressing, pumping.
Die casting A process for producing parts in large quantities, by injecting molten metal under pressure into a steel die.
dmt Dry metric tonne.
doré Unrefined gold and silver bullion bars, usually consisting of approximately 90% precious metals, which are to be further refined to almost pure metal.
Dross Solid scum that forms on top of molten metals as a result of oxidation; must be removed for recycle.
EBITDA Most references to EBITDA in the releases are Underlying EBITDA.
"Underlying EBITDA" is a non-IFRS measure of earnings, which is used internally by management to assess the underlying performance of Nyrstar's operations and is reported by Nyrstar to provide additional understanding of the underlying business performance of its operations.
Nyrstar defines "Underlying EBITDA" as profit or loss for the period adjusted to exclude loss from discontinued operations, net of income taxes, income tax (expense) / benefit, share of loss of equity-accounted investees, gain on the disposal of equity-accounted investees, net finance expense, impairment losses and reversals, restructuring expense, M&A related transaction expense, depreciation, depletion and amortization, material income or expense arising from embedded derivatives recognized under IAS 39 "Financial Instruments: Recognition and Measurement and other items arising from events or transactions that management considers to be clearly
distinct from the ordinary activities of Nyrstar."
Electrolysis The process by which metals (here zinc, cadmium, and copper) are 'won' or deposited from solution onto a cathode by the passage of an electric current through the solution between anode and cathode.
Electrolyte Solution containing metals (here zinc, cadmium, copper and silver) circulating in an electrolysis cell.
Electrowinning The process of removing metal from a metal bearing solution by passing an electric current through the solution.
EPA Environment Protection Authority of a state, provincial or federal government.
EZDA Proprietary zinc die casting alloy made at the Hobart smelter; the alloy contains aluminium and magnesium.
Flotation A method of mineral concentration, usually of sulphide ores, by which valuable mineral particles adhere to froth bubbles for collection as a concentrate; waste particles remain in the slurry for eventual disposal as a tailing.
Fluxes Additives to a feed mix made to produce a fluid slag in the furnace; typical fluxes are lime, silica and iron oxide.
Processing's free metal contribution is the value of the difference received between the amount of metal that is paid for in a concentrate and the total zinc and lead recovered from the sale by a smelter
Fuming, fume A process for recovering of zinc and lead from molten lead blast furnace slag by injecting coal; the metals are removed as vapours in the gas stream, and are deoxidised to form a fume that is collected.
Galvanising Process of coating steel
sheet or fabricated products with a thin layer of zinc for corrosion protection.
Gangue The non-valuable minerals in an ore or concentrate.
Germanium A brittle grey crystalline element that is a semiconducting metalloid (resembling silicon).
Grade Quantity of metal per unit weight of host rock.
Greenhouse gases Gaseous components of the atmosphere that contribute to the greenhouse effect.
Grinding Size reduction to relatively fine particles.
Gross profit Revenue minus raw materials used and freight expense.
g/t Grammes per tonne.
Gypsum Calcium sulphate, hydrated.
Hydrometallurgical The treatment of ores and concentrates using a wet process that usually involves the dissolution of some component and its subsequent recovery from solution.
Indicated Mineral Resource That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
Indium A rare, soft silvery metallic element.
Induction furnace Furnace that heats metals without fuel combustion; the metal is heated by an electromagnetic
field created by electrical windings or inductors.
part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
JORC Code The 2004 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.
kt Thousand tonnes.
Leachate The liquid produced when water percolates through any permeable material.
Leaching A process using a chemical solution to dissolve solid matters.
Lead sulphate A white crystal or powder compound of lead, sulphur and oxygen. It often forms at and is most readily seen at the terminals of lead acid car batteries. In Nyrstar it generally describes a residue produced in the leach stage of zinc smelters.
Life-of-mine Number of years that an operation is planning to mine and treat ore, taken from the current mine plan.
LME London Metal Exchange.
Lost time injury rate Twelve-month rolling averages of the number of lost time injuries per million hours worked, and include all employees and contractors across all operations.
Matte Mixed sulphide compound
produced in a furnace; at the Port Pirie smelter matte is a lead-copper-sulphur material.
Measured Mineral Resource That part of a mineral resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Mineral Reserve The economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.
Mineral Resource A concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilised organic material including base and precious metals, coal, and industrial minerals in or on the Earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.
Mt Million (metric) tonnes.
Net smelter return ("NSR") "Net
smelter return" (or "NSR") is the gross revenue (total revenue minus production costs) that the owner of a mining property receives from the sale of the mine's metal/non metal products less transportation and refining costs.
NI 43-101 The Canadian Securities Administrators National Instrument 43-101 Standards of Disclosure for Mineral Projects.
Ore Mineral bearing rock.
Oxidation The process by which minerals are altered by the addition of oxygen in the crystal structures.
Oxide washing Process to remove halides from zinc secondaries.
Paragoethite Form of goethite made as a by-product of zinc production, so named since the process differs from the normal "goethite process".
Payable metal Mining's Payable metal contribution is the metal price received for the payable component of the primary metal contained in concentrate before it is further processed by a smelter.
Pb Chemical symbol for Lead.
Premiums Smelters' premiums is the premium charged on top of the base LME price for the sales of refined zinc and lead metals.
Probable Mineral Reserve The economically mineable part of an indicated and, in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
Proven Mineral Reserve The
economically mineable part of
a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
Recordable injuries Any injury requiring medical treatment beyond first aid.
Recordable injury rate Twelvemonth rolling averages of the number of recordable injuries per million hours worked, and include all employees and contractors across all operations.
Reductant The element in a reduction-oxidation (redox) reaction that reduces the other element involved in the reaction to a lower oxidation state. For example converting the lead in lead oxide to lead metal in a blast furnace uses the carbon contained in coke as a reductant.
Refining Charge or RC A negotiated fee that may be linked to metal prices, paid by the miner or seller of precious metals to a smelter as a concession on the cost of the metal concentrate or secondary feed materials that the smelter purchases.
RLE process Roast-Leach-Electrowin; technology used for the production of zinc and which combines the roasting, leaching and electrowinning processes. See also definition of each individual process.
Roaster In zinc production, a fluid-bed furnace used to oxidise zinc sulphide concentrates; operates typically at 930-970"C; air injected through the furnace bottom 'fluidises' the bed of fine combusting solids.
Roasting The process of burning concentrates in a furnace to convert the contained metals into a more readily recovered form.
Secondaries See: Secondary feed materials.
products of industrial processes such as smelting and refining that are then available for further treatment/ recycling. It also includes scrap from metal machining processes and from end-of-life materials.
SHG Special High Grade Zinc; minimum 99.995% zinc; premium quality, used by die casters; traded on the LME; attracts a price margin over lower grades.
Silica The chemical compound silicon dioxide, also known as silica, is the oxide of silicon.
Sinter A hard, porous, agglomerated intermediate material made by oxidation at moderately high temperature of sulphide concentrates, fluxes and returns on a grate conveyor termed a sinter machine.
Slag Mixture of oxides produced in molten form in a furnace at high temperature.
Smelting Chemical reduction of a metal from its ore by fusion.
Softening Oxidation process that removed arsenic and antimony from lead bullion; so named as arsenic and antimony make lead into a hard alloy.
Solvent extraction Method used in hydrometallurgy for metal recovery and/or purification; metal(s) are transferred to and from a selective organic liquid that is dissolved in a type of kerosene.
Spent electrolyte Electrolyte discharged from the electrolysis cells; compared with the feed electrolyte, the solution has a lower level of the metal being electrowon (i.e., zinc, copper) and correspondingly elevated acid level.
Stripping Removal of metal from material on which it has precipitated or been adsorbed, e.g., gold from carbon
or zinc from cathodes.
Sulphate A salt or ester of sulphuric acid.
Sulphide concentrate The product, usually of the flotation process, in which sulphide particles are removed from the crushed rock, containing predominantly sulphide minerals.
Sulphides Minerals consisting of a chemical combination of sulphur with metals.
t Metric tonne.
Tailings Material rejected from a treatment plant after the recoverable valuable minerals have been extracted.
negotiated fee that may be linked to metal prices, paid by the miner or seller to a smelter as a concession on the cost of the metal concentrate or secondary materials that the smelter purchases.
TC is is a positive gross profit element for the smelters and a deduction in the gross profit for mines.
UG Underground.
Zn Chemical symbol for zinc.
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