Nyrstar Advances After Offering Short-Term Support to Talvivaara

Nyrstar NV rose in Brussels, ending a 10-day slump, as the smelter offered short-term support to supplier Talvivaara Mining Co. and said it wouldn’t breach financing agreements in the event of an impairment.

Nyrstar advanced as much as 12 percent, the biggest gain since Sept. 14, 2012, after losing almost a third of its value in two weeks. The company was up 9.5 percent at 2.30 euros as of 1:52 p.m. in Brussels.

Talvivaara, a Finnish nickel miner with an off-take agreement with Nyrstar, on Nov. 15 filed for a corporate reorganization to raise funds and avoid bankruptcy. Nyrstar in 2010 agreed to pay $335 million for all of Talvivaara’s zinc concentrate until 1.25 million metric tons is delivered. It received 13,700 tons this year to the end of October.

“Talvivaara’s filing for corporate restructuring created a lot of speculation on its sustainability and the impact for Nyrstar,” Wouter Vanderhaeghen, an analyst at KBC Securities NV in Brussels, wrote today in a note. “In a worst case scenario where Talvivaara goes bankrupt, we believe that Nyrstar would lose around 10 percent to 15 percent of its” earnings before interest, tax, depreciation and amortization.

Talvivaara, which has suffered from weakening nickel prices and a slow production ramp-up at its mine in northern Finland, failed to raise additional cash from investors for a voluntary reorganization, it said last week. Some investors declined to provide more funds and others decided to wait until a corporate reorganization is completed, Talvivaara said.

Balance Sheet

An impairment to the Talvivaara asset on Nyrstar’s balance sheet wouldn’t lead to a breach of financing arrangements, the smelter said today. Nyrstar’s outstanding bonds don’t have covenants and it’s “comfortably” within balance sheet-related covenants on a 400 million-euro revolving facility.

Its 525 million euros of 5.375 percent notes due May 2016 rose 3.279, or 32.79 euros per 1,000-euro face amount, to 74.196 today, according to prices compiled by Bloomberg.

Nyrstar has been in discussion with Talvivaara since it filed for restructuring and is seeking to provide operational and “other support” to the Finnish miner, it said today. “Any other support that would be offered by Nyrstar would only be limited and short term in nature, and would be subject to a number of conditions that Nyrstar believes are necessary to restructure the company and its operations.”

Bankruptcy would result in 1,600 lost jobs, Talvivaara Chief Executive Officer Pekka Pera said last week. He declined to say whether it received or sought any acquisition approaches.

Talvivaara withdrew a 2013 output forecast of 18,000 tons in July after producing 4,508 tons of nickel in the first half. It produced 2,595 tons of the metal and 5,645 tons of zinc in the third quarter. At current prices, it needs to produce 30,000 tons of nickel a year to be profitable, Pera said.