Nyrstar announces 2011 Half Year Results
27 July 2011
Solid Financial Performance
* Underlying EBITDA of ?123 million, a 8% increase from H2 2010 (?114 million)
* Successfully completed rights offering for ?490 million in March 2011
* Successfully closed a public offering of bonds for ?525 million in May 2011
Record smelting output with continued growth in mining production
* Record half year zinc metal production of 561,000 tonnes from the smelting
* Contribution of ?29 million from "unlocking untapped value" initiatives in
the smelting segment through the identification of recoverable silver
* Continued progress in mining ramp-up with zinc in concentrate production
(including deliveries from the Talvivaara streaming agreement) up 58% in H1
2011 compared to H2 2010
Actively delivering on our upstream integration strategy
* Successfully completed the acquisition of the Campo Morado mining operation
in Mexico for approximately ?296 million in January 2011
* Announced binding agreement to acquire Breakwater Resources for a total
offer value of approximately ?442 million in June 2011
* Zinc integration increased from 31% to 43% based on full production of
existing assets and including Breakwater Resources
* Continue to actively explore opportunities to achieve medium-term zinc
integration target of 50%
* Extended Commodity Grade Off-take Agreement with the Glencore Group
Commenting on the first half results, Roland Junck, Chief Executive Officer of
"In the first half of 2011 we have continued to grow in terms of our financial
results, our scale of operations, and our level of ambition. We achieved an
underlying EBITDA of ?123 million, with solid contributions of ?26 million and
?117 million from our mining and smelting segments respectively.
The zinc price, as well as the prices for a number of our key by-products,
whilst remaining volatile improved on average between H2 2010 and H1 2011 in US
dollar terms, and to a lesser extent in Euro terms due to the weakening of the
US dollar against the Euro currency during this period.
We are continuing to aggressively deliver on our strategy of upstream
integration. With the expected closing of the Breakwater acquisition in Q3 2011
and full ramp-up of our mining operations expected by the end of 2012, our zinc
integration level will reach 43% by such time, which would make us a top 5
global zinc mining company based on 2010 global production according to Brook
Hunt. The Breakwater acquisition is in line with our strategy to selectively
pursue opportunities in mining, and presents an exciting opportunity to get
within striking distance of our medium-term zinc integration target of 50%.
To support our upstream integration strategy, including the acquisition of
Breakwater, and to further diversify our funding sources, we were delighted to
successfully implement two major financing initiatives in H1 2011. Both the
rights offering for ?490 million and the public bond offering for ?525 million
were not only strongly supported by our shareholders and the market, but also
demonstrate clear support for Nyrstar's strategy and our ability to deliver
value accretive transactions.
We remain confident in the fundamental medium to long term outlook for the zinc
market and believe that Nyrstar, as the world's largest zinc metal producer and
through its continued upstream integration, is well positioned to leverage off
these strong zinc market fundamentals.
During the first half, we re-entered the BEL 20 Index and are also now included
in the Eurostoxx 600 index. Our inclusion in both of those indices validates our
strategy for growth and our performance, along with the importance of Nyrstar
within the Belgian and European markets. We are working hard to continue
delivering on our strategic transformation and are thankful to our shareholders
for their continued support."
The Company delivered a solid financial performance in H1 2011, with underlying
EBITDA of ?123 million, growing by 8% compared to ?114 million in H2 2010. This
consisted of a ?26 million and ?117 million contribution, respectively, from the
mining and smelting segments, with ?(20) million in the other and eliminations
The zinc price, whilst volatile, rose 7% to an average of US$2,323/tonne in H1
2011, from an average of US$2,163/tonne in H2 2010. However, the Company's
financial performance was negatively impacted by the depreciation of the US
Dollar against the Euro, with the US dollar falling by 5% to an average of 1.40
in H1 2011. As such, the Euro denominated zinc price increased only marginally
by 2% in H1 2011. Other metal prices also increased during H1 2011 and were also
negatively impacted by the weakening of the US dollar.
In H1 2011, mining underlying EBITDA per tonne was ?324 compared to H2 2010
at ?338. This result achieved notwithstandning the higher C1 cash costs
associated with the ramp-up phase, highlights the higher profitability of mining
as compared to smelting (the underlying EBITDA per tonne of which remained
relatively flat at ?209 (up from ?207 in H2 2010)). The Company expects a
further improvement in mining underlying EBITDA per tonne as its mining
operations reach full production (as expected by the end of 2012), with a
consequent reduction in C1 cash costs. The average C1 cash cost for Nyrstar's
zinc mines (including the Talvivaara zinc stream) was US$1,515 per tonne of
payable zinc in H1 2011 and is expected to continually improve over the course
of 2011 and 2012 to our stated target of less than $1,000 per tonne.
Zinc in concentrate production from Nyrstar's mining segment (including
deliveries under the Talvivaara streaming agreement) was 79kt in H1 2011, a
substantial 58% increase on H2 2010, but less than the previously published
guidance of 95kt. The shortfall in production was mainly caused by the delivery
of lower volumes than anticipated from Talvivaara, temporary equipment
availability issues at East Tennessee Mines in Q2 2011 and reduced mill head
grades at some of the mining operations.
Nyrstar's mining operations fall into three categories. The first category
consists of mines operated by Nyrstar which were acquired in a state of care and
maintenance, or early ramp-up stage (e.g. the Coricancha and Puccarajo mines
(Peru) and the Tennessee Mines (US)). Despite a number of challenges that have
been encountered which are normal in a ramp-up phase, substantial progress
continued to be made during H1 2011 towards the stated goal of full production
by the end of 2012. The second category consists of mines operated by Nyrstar
which were acquired at an advanced stage of production (e.g. the Campo Morado
mine (Mexico), and Contonga mine (Peru)). Production performance of these mines
during H1 2011 was in line with the Company's expectations. For these first two
categories, the volume of ore milled in H1 2011 increased significantly by 42%
from H2 2010 (with Middle Tennessee increasing 58%). Recovery rates remained
stable, however, mill head grades in a number of instances decreased
(particularly in the latter half of H1 2011). The decrease in head grade is in
part due to the lack of life-of-mine plans and to a lack of investment in mine
planning by previous mine owners. During H1 2011 Nyrstar has been actively
delineating the reserves and resources of these mines and developing robust
life-of-mine plans that will be implemented over the next 12 months and are
expected to deliver further growth in production and earnings consistent with
previous guidance. The third category consists of mines which are not operated
by Nyrstar, namely the Talvivaara streaming agreement. Whilst volumes delivered
under the streaming agreement during the half year were not as high as guidance
previously provided by Talvivaara, Nyrstar remains confident that Talvivaara
will continue to increase its delivery volumes consistent with its guidance to
reach full production by the end of 2012.
As a result of the significant progress made in Nyrstar's mining operations
during H1 2011 and the various initiatives that have been implemented, Nyrstar
maintains its full year zinc in concentrate production guidance of 215kt.
Nyrstar expects to provide an updated production guidance for full year 2011 as
part of its Q3 Interim Management Statement following the expected closing of
the Breakwater acquisition.
Nyrstar's mines also produced significant volumes of other metals that are
becoming an increasingly valuable contributor to mining segment earnings.
Approximately 13,300 troy ounces of gold in concentrate, 1,273,000 troy ounces
of silver in concentrate, 1,000 tonnes of lead in concentrate and 2,800
tonnes of copper in concentrate were produced in H1 2011.
In H1 2011, Nyrstar's smelting segment achieved record half year zinc metal
production of approximately 561,000 tonnes. Production in H1 2011 was 2% higher
than in H2 2010 (the previous record half year), primarily due to the increased
production at the Balen smelter (Belgium) and the Hobart smelter (Australia).
Lead production at the Port Pirie multi-metals smelter (Australia) demonstrated
continued improvement during H1 2011 with production up 11% to 102kt due to
sustained improvements of the sinter plant and blast furnace operations.
As part of the Company's strategic plan, Nyrstar2020, both the smelting and
mining segments have started to deliver a number of tangible financial benefits.
In addition to "upstream integration", the Nyrstar2020 plan focuses on
"excellence in Nyrstar's existing business", aimed at creating an externally
focused business driven by commercial, operational and financial excellence; and
"unlocking untapped value" by exploring the opportunities available to Nyrstar
to grow and strengthen its business, principally by exploring untapped value in
Nyrstar's polymetallic raw materials and by-product streams.
Nyrstar has today announced that the expiry time of the offer to acquire
Breakwater Resources Ltd. has been extended from 29 July 2011 until 25 August
2011. The extension of the offer is due to the regulatory approval process and
related review periods of the requisite competition authority filings, and the
approval required under the Investment Canada Act. All submissions have been
made and are being reviewed by the relevant authorities in the normal course.
Nyrstar and Breakwater are working closely with each of the regulatory
authorities and no issues have been raised. Both Nyrstar and Breakwater expect
that the requisite approvals will be received prior to 25 August 2011. All other
terms and conditions of the offer described in Nyrstar's offer and circular
dated 23 June 2011 remain the same.
Management will present these results to the investment community on 27 July at
08:00 British Summer Time, 09:00 Central European Time. The presentation will be
webcast live on the Nyrstar website, www.nyrstar.com, and will also be available
 Mining segment underlying EBITDA per tonne of zinc in concentrate produced.
 Smelting segment underlying EBITDA per tonne of zinc metal produced.
 C1 cash costs are defined by Brook Hunt as: the costs of mining, milling and
concentrating, on-site administration and general expenses, property and
production royalties not related to revenues or profits, metal concentrate
treatment charges, and freight and marketing costs less the net value of by-
 Milled head grade is metal content of mined ore going into a mill for
 75% of the silver produced by Campo Morado is subject to a streaming
agreement with Silver Wheaton Corporation whereby only $3.90 per oz is payable.
Manager, Investor Relations
T: 41 44 745 8157
M: 41 79 722 2152
T: 41 44 745 8154
M: 41 79 722 84 66
T: 32 14 449 646
M: 32 473 637 892
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Source: Nyrstar via Thomson Reuters ONE
Unternehmen: Nyrstar - ISIN: BE0003876936