OCTOBER 2014
Second 2014 Interim Management Statement
Disclaimer
This presentation has been prepared by the management of Nyrstar NV (the "Company"). It does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to subscribe for, underwrite or otherwise acquire, any securities of the Company or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.
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Heinz Eigner Chief Financial Officer
Michael Morley Chief Corporate and Development Officer, Senior Vice President, Metals Processing
Bob Katsiouleris Senior Vice President, Marketing, Sourcing and Sales
Acting SVP Mining
Highlights
Continued solid operational performance for Metals Processing
- Zinc market metal production of 269,000 tonnes in Q3 2014, up 1% quarter-on-quarter; 821,000 tonnes in 9M 2014, up 4% year-on-year1
- Improving operational performance for Mining
- Zinc in concentrate production (own mines) of 70,000 tonnes in Q3 2014, up 4% quarter-onquarter; 210,000 tonnes in 9M 2014, up 3% year-on-year
- Full year production guidance maintained
- Remain on track to deliver against previously announced annualised Project Lean savings target of EUR 75m by the end of 2014
- Q3 2014 average zinc price of USD 2,311/t, up 11% quarter-on-quarter
- Near term zinc price trading conditions remain volatile. Nyrstar remains confident in the underlying fundamentals of the zinc market in the medium term
- Zinc premia and treatment charge outlook favourable for smelters
- Nyrstar successfully completed its Comprehensive Strategic Financing to continue its strategy execution while enhancing the Company's financial position
- In early October Nyrstar successfully completed the forward sale of a portion of the incremental future silver production of the redeveloped Port Pirie for AUD 120 million, which is the second component of the funding package for the Redevelopment
Improving zinc price conditions; near term trading volatility remains
LBMA silver & gold prices USD / OZ
LME zinc inventories continue to decline while zinc prices improve in anticipation of a growing supply deficit
- LME zinc stocks peaked in December 2012 at 1.235 Mmt and have since fallen 46%
- Questions around off-warrant inventories remain
YTD zinc prices vs. premia evolution
- Zinc price climbed significantly above last year's level, with the market anticipating a widening supply-demand gap
- Outlook for premia going forward is positive
Global economic outlook: underlying fundamentals remains positive particularly for markets that drive metal demand
Expectations of global business confidence by region
Balance of Respondents Expecting Conditions to Improve, %, Q3 2014
Expectations of global business confidence over time
Market sentiment (Source: August Economist/Financial Times "Global Business Barometer survey")
- In Q3 2014, 36% of respondent's believed the global economy would improve – down from > 50% in Q1 2014
- 46% believed it would stay the same and 18% saying it would get worse
By Region
- Growth in Asia and Africa remains strong
- Improving confidence in North America and Europe
- Conflict in Eastern Europe and the Middle East negatively impacted sentiment
By End-use market
- Automotive and manufacturing sectors expected to show the most improvement
- Construction and consumer goods growth solid
- Energy & resource sector remains positive
- Chemicals industry softening in light of increasing energy costs
Metals Processing: delivering solid operational performance
Quarter on Quarter
Year on Year
Metals Processing: delivering solid operational performance
Quarter on Quarter
Year on Year
Silver
Gold
t Indium
Port Pirie: total capital costs of AUD 514m unchanged; on track for commissioning during 2016
Construction
- Completion of site offices to accommodate construction management personnel
- Completion of site earthworks and service installation ahead of starting the first stage of the construction of a temporary accommodation camp for 400 contractors
- Commencement of new site workshop enabling existing building to be demolished to make way for the new oxidation furnace
Procurement and contracting
- A significant number of key contracts were awarded including agreements for the construction of the temporary accommodation camp and the new site workshop; general and furnace piling; sulphuric acid plant piling and the sulphuric acid plant design and supply; as well as the blast furnace and copper crossing furnace ("CDF") engineering design services contract
- A review was also conducted on the furnace design and supply contract, and work remains on schedule
Engineering
- Nearly 50% of the engineering work for the project was completed by the end of September; includes work on the site layout and equipment specifications
- A number of significant layout design reviews were conducted; includes work on the feed preparation area, infrastructure and furnace area
- A number of HAZOP reviews were also completed
Q3 highlights Temporary accommodation for contractors
Geotechnical drilling underway for oxygen plant
Start of floor replacement for new workshop
Port Pirie: total capital costs of AUD 514m unchanged; on track for commissioning during 2016
Q4 highlights
Construction
- First stage of the temporary accommodation camp is expected to be completed as is the new site workshop
- Demolition of the existing workshop in preparation for the installation of the new oxidation furnace
- Preparation of the construction area for the oxygen plant will commence
- Piling works for the sea water cooling system, water and gas services and infrastructure buildings will commence
- Installation of the Redevelopment plant connections will be completed during the planned blast furnace shut in November
On procurement and contracts
Significant number of additional contracts are expected to be awarded including those for the oxygen plant (Build-Own-Operate); high voltage electrical recirculation; furnace waste heat boiler supply; evaporative cooling tower supply; electro static precipitator supply; coal grinding plant supply; furnace fans supply; coal injection plant supply; demineralised water plant supply; heat exchangers supply; and conveyor systems supply contract
On procurement and contracts
Around 75% of the engineering work for the project is expected to be complete by year-end
Other growth projects: SSR on track and on budget
Q3 highlights
Deconstraining smelters
- Post Century projects enter implementation phase: on track for completion in H1 2015
- Other deconstraining projects move into implementation phase; on track for completion in H1 2015
Q4 targets
- Post Century demolition & plant modification works at Hobart & Budel
- Plant modifications at Auby to allow increased indium throughput & recovery
- Complete test campaign with respect to installation of oxygen enrichment in roasting
- Port Pirie (post-Redevelopment) projects to move from feasibility to development phase, and others to enter feasibility phase
Q4 targets
- Commission redeveloped Hoyanger fumer
- Complete final feasibility report for additional fuming capacity in Europe and for this project to move into development phase
Adding fuming capacity
Q3 highlights
- Work continued on redevelopment of Hoyanger fumer: on track to be completed by the end of 2014
- Continued evaluating options for additional fuming capacity in Europe; feasibility report on track to be completed by the end of 2014
Q3 highlights
Expanding minor metals
- Zinc plant at Port Pirie closed on schedule; shipments of fumes to both Hobart and Auby received and successfully processed
- Expansion of indium metal production at Auby moved into implementation phase; on track to be completed by H2 2015
- Other projects progressed as scheduled
Q4 targets
- Continue works with respect to the implementation phase of the expansion of indium metal production at Auby
- At Clarksville, complete final feasibility report for new facility to enable recovery of valuable historical residues for treatment at Nyrstar's fumers
Mining: improving operational performance
Quarter on Quarter
Mining: improving operational performance
Quarter on Quarter
Comprehensive Strategic Financing: completed
Completed debut high yield EUR 350 million Notes Offering
Successfully completed EUR 252 million Rights Offering
Successfully completed ca. EUR 600 million targeted capital raise
- EUR 350 million Senior Unsecured Notes maturing in 2019 priced at 98.018% with a coupon of 8½% per year
- Notes received credit rating "B3 (stable)" by Moody's and "B- (stable)" by Standard & Poor's ratings services
- Extension of debt maturity profile
- Access to new capital market established
- Raised new equity in successful 1:1 fully-underwritten Rights Offering
- New shares with preferential subscription rights for existing shareholders
- Nyrstar's share capital increased to EUR 34,004,508.80, and the number of shares representing Nyrstar's share capital increased to 340,045,088 shares
- Strengthen Nyrstar's balance sheet and fund investment needs
- Use of proceeds:
- EUR 147 million used to repurchase part of the outstanding 2015 retail bonds
- EUR 100 million used to repurchase a portion of 2016 retail bonds
- EUR 200 million CAPEX requirement over next 2 years for Nyrstar's continued transformation through SSR investments
- EUR 68 million for Nyrstar's direct contribution to Port Pirie Redevelopment
- Reduce Net debt (towards a medium term targeted Net debt / EBITDA ratio of 2.5x), and for general corporate purposes
2014 Guidance
Production
Mining
Metal
in
concentrate |
Range |
mines)1
Zinc
(own |
280,000
–
310,000
tonnes |
| Lead |
15,000
–
18,000
tonnes |
| Copper |
12
,000–
14,000
tonnes |
| Silver2 |
4,750,000
–
5,250,
000
troy
ounces |
| Gold |
65,000
–
70,000
troy
ounces |
Metals processing
| Metal |
Range |
| Zinc |
1.0–1.1
million
tonnes |
Smelter planned maintenance shuts
Smelter & production step
impacted |
Timing and
duration |
Estimated
impact |
Auby
–
roaster |
Q4: 2 weeks |
nil |
Port Pirie
–
lead plant |
Q4:
4 weeks |
4200-6000t |
CAPEX
|
EURm |
| Mining |
105–115 |
| Sustaining |
40 –
45 |
Exploration
and
Development
and
Growth |
65 –
70 |
Metals
Processing |
155–180 |
| Sustaining |
75 –
80 |
Growth
(SSR
investment) |
20 -
30 |
Port
Pirie
Redevelopment |
60 -70 |
| Group |
260-295 |
- Disciplined CAPEX approach
- Non-growth CAPEX in 2014 expected to be flat or lower year on year
- Production guidance based on maximising EBITDA and free cash flow by targeting optimal balance between production and Sustaining CAPEX
- Estimated impact of maintenance shuts on 2014 production, have been taken into account when determining zinc metal guidance for 2014
1 Excluding zinc deliveries under the Talvivaara Streaming Agreement.
2 75% of the silver produced by Campo Morado is subject to a streaming agreement with Silver Wheaton Corporation whereby only USD 3.90/oz is payable. In Q3 2014, Campo Morado produced approximately 270,000 troy ounces of silver.
Investor Relations
Amy Rajendran Head of Investor Relations D: +41 (0)44 745 81 03
E: [email protected]
Corporate Communications
Greg Morsbach Head of Corporate Communications D: +41 44 745 8295
E: [email protected]
Appendix
EBITDA sensitivity
| Parameter |
Variable |
Estimated annualised
EBITDA
impact |
Estimated annual
EBITDA impact |
|
|
EURm |
EURm |
|
|
H1 2014 |
FY 2013 |
| Zinc price |
+/-
USD100/t |
+30 / -29 |
+28 / -28 |
| Lead price |
+/-
USD100/t |
+2 / -2 |
+2 / -2 |
| Copper price |
+/-
USD500/t |
+6 / -6 |
+6 / -6 |
| Silver Price |
+/-
USD1/troy ounce |
+4 / -4 |
+4 / -4 |
| Gold Price |
+/-
USD100/troy ounce |
+5 / -5 |
+6 / -6 |
| USD / EUR |
+/-
EUR0.01 |
+18 / -18 |
+18 / -18 |
| AUD / EUR |
-/+ EUR0.01 |
-3 / +3 |
-3 / +3 |
| Zinc TC |
USD25/dmt1
+/- |
+29 / -29 |
+28 / -28 |
| Lead TC |
USD25/dmt1
+/- |
+5 / -5 |
+5 / -5 |
- Calculated by modeling Nyrstar's H1 2014 underlying operating performance. Each parameter is based on an average value observed during that period and is varied in isolation to determine the annual EBITDA impact
- Particular care needs to be taken when applying the sensitivities.
Metals Processing: performance by site
Metals Processing: operational performance by site
Quarter on Quarter
Contonga
El Toqui
22
Quarter on Quarter
Myra Falls
Year on Year
Campo Morado
Silver in concentrate k toz
El Mochito
Contonga
Silver in concentrate
El Toqui
Gold in concentrate k toz
Year on Year
Langlois
Myra Falls