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Nyrstar’s Advanced Metal Recovery strategy could transform zinc smelting business

Smelting companies stuck with lower TC prices and outdated smelters may have a brighter future if Nyrstar’s Advanced Metal Recovery strategy works for one of the world’s largest zinc producers.

One of the world’s largest zinc metals producers, Belgium’s Nyrstar NV, is relying on a business model that draws external stakeholders, such as state and federal governments, into helping to finance Nyrstar’s commercial and industrial improvements throughout its network of mines, smelters and advanced metal recovery facilities on several continents.

In a presentation to the BMO 22nd Global Metals & Mining Conference in Hollywood, Florida, Nyrstar CEO Roland Junck said the former pure zinc smelting company went into mining in 2009, eventually expanding to a third business segment that integrated its industry and commercial systems.

To achieve this goal, Nyrstar converted one of its larger zinc smelters into what Junck called “a real business opportunity”—transmetals recovery. The transition was prompted in part by an antiquated pricing system which has resulted in smelting treatment costs that are so low, smelters are either forced to produce more metals or close.

Junck contends modern smelters must capture as much as possible from the concentrates they currently process, such as more varieties of metals and/or residue products. Nyrstar’s solution to this problem is its Advanced Metal Recovery Segment, a luxury afforded the company by its acquisition of more mines on several continents.

Nyrstar produced 1.084 million metric tons of zinc metal in 2012, down 4% from 1.025 million metric tons in 2011.  The company expects to produce 1 million to 1.1 million metric tons of zinc this year.

For instance, in the second half of last year, Nyrstar earned more from its zinc mining operations than from its traditional zinc smelting operations. “This reinforces our backward integration strategy as mining is proven to be structurally more profitable per tonnes than smelting,” Junck noted earlier this month.

However, Nyrstar still reported a $127.3 million net loss in 2012.

The company is also expanding its footprint to include copper, gold, silver and lead mining. Its investment criteria require assets that must be operating or capable of operating within a short period; have a short payback period, and low operating costs and capex.

Higher mined production affords Nyrstar the ability to examine and reconstruct its metals recovery facilities. More than 50% of the feed to the Advanced Metal Recovery Segment comes from Nyrstar’s own assets, Junck noted. The wide range of high margin metal bearing feed materials afforded by the metal recovery segment also gave the company access to more markets for its products.

The company also tested an asset optimization strategy through its Mining for Value program, which reduced costs at its Tennessee Mines in the United States from $2,500 per ton to $1,700 per ton. The ultimate goal is a cost of $1,500 per ton. The program is just getting underway at Nyrstar’s Mexican operations and will be expanded to Chile and Peru, according to Junck.

Although the growth of the mining segment and the optimization of assets are delivering improved financial performance for Nyrstar, the company’s smelting segment continues to remain under pressure due to cost inflation, and increasing sustainable capital costs.

Junck said Nyrstar is currently working in partnership with the South Australian State Government and the Australian Federal Government and its Export Finance and Insurance Corporation to obtain financing through an innovative funding and support package.

The A$350 million Port Pirie advanced metals recovery center transformation project will invest in new technology to upgrade the zinc smelting facility to an advanced poly-metallic processing and recovery facility capable of processing a wide range of high value, high margin raw materials and resulting in an improved environmental footprint and a step change reduction in airborne metal and dust pollution.

Financing and loans guarantees totaling up to A$155 million are being facilitated by the Australian governments, according to Junck. The final investment package is expected to be completed by the end of this year with the commissioning of the transformed plant in 2016.

Junck contends “accessing diverse funding options will ensure [Nyrstar’s] balance sheet continues to support strategic transformation.” 

 
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