Nyrstar Reports First-Half Loss on Low Price, Treatment Fees

Nyrstar NV, the largest producer of refined zinc, reported a first-half loss on lower prices and fees charged to process the metal, missing analyst estimates.

The net loss was 28.9 million euros ($35.5 million) after a profit of 20.4 million euros a year earlier, the Balen, Belgium-based company said today in a statement. Earnings before interest, taxes, depreciation, amortization and special items declined 9.8 percent to 111 million euros, missing the 125.3 million-euro average of six analyst estimates compiled by Bloomberg. Ebitda dropped 22 percent from the previous half.

Sales declined 8.2 percent to 1.49 billion euros.

Profits were weakened by “a very challenging macro environment, with weak metal prices and lower treatment charges,” Nyrstar said. The fees this year fell to $191 a ton based on a zinc price of $2,000 a ton, from $229 at $2,500. The charges contributed 176 million euros in the first half, 14 percent less than a year earlier, Nyrstar said.

The stock rose 16 percent to 3.89 euros by the close of Brussels trading, paring its loss for the year to 36 percent.

“The mining ramp-up continues to hit production targets,” said Richard Knights, an analyst at Liberum Capital Ltd. “We think Nyrstar looks particularly interesting here, having fallen 53 percent from its peak of 2012. Spot zinc prices falling to 81 cents a pound have been the major reason for the underperformance and are now comfortably into the top-end of the cost curve and we think unsustainable.”

Average zinc prices for three-month delivery in London slid 15 percent to $1,989 a metric ton from the period a year before.

Mine Purchases

The company completed the ramp up of its Langlois mine in Quebec, Canada, producing about 17,000 tons of zinc concentrate in the first half, according to the statement. Nyrstar expects the mine to continue increasing production in the second half to reach an annual output capacity of 50,000 tons, it said.

Nyrstar has paid about 1.1 billion euros for mines and asset stakes from Greenland to the U.S., Peru, Chile and Mexico since 2009 to benefit from margins that are higher than smelting. Mined zinc production rose 23 percent to 151,000 tons, accounting for 50 percent of Ebitda, compared with 32 percent in the previous half, Nyrstar said.

The cash cost of zinc mining rose to $1,255 a ton in the first half from $1,095 a ton in the previous six months, Nystar said in the statement. The cost of smelting operations increased 7 percent from the previous half to 568 euros a ton, it said.

Reducing Debt

“The average C1 cash costs at our mines were up 15 percent on second half 2011 due primarily to the ramp-up completion at the Langlois mine, the optimization of the Tennessee Mines, a change in production mix and lower by-product prices,” it said. “Cash costs are expected to reduce over the medium term to $1,000 per tonne or less.”

Nyrstar cut debt by 100 million euros to 618 million euros by the end of June, it said. “We continue to focus on controlling costs and ensuring a reduction in debt as we face further short term volatility,” Nyrstar said.

Refined zinc output fell to 538,000 tons from 561,000 tons a year earlier and the company plans to produce 1.1 million tons this year, Nyrstar said. Gold production in the period more than tripled to 42,500 ounces from a year earlier.

Silver output more than doubled to 2.66 million ounces and copper rose to 7,000 tons from 2,800 tons.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE