Group underlying EBITDA of EUR 162 million for the first nine months of 2017, an increase of 35% on the first nine months of 2016, primarily due to a 42% increase in the average zinc price (USD 1,955/t to USD 2,783/t), and a substantial earnings increase in Mining, partially offset by lower treatment charge terms, reduced production at Port Pirie and reduced free metal price exposure due to the call option price in the zinc price collar hedging structure
Metals Processing underlying EBITDA of EUR 162 million, up EUR 19 million period-on-period, driven primarily by higher commodity prices, partially offset by lower zinc treatment charges, reduced lead and by-product production and unplanned product outages at Budel; and
Substantially improved Mining underlying EBITDA of EUR 33 million, up EUR 31 million period-on-period, driven by higher commodity prices, lower treatment charges, a positive contribution from the successful restart of the Middle Tennessee Mines, partially offset by the negative EBITDA contribution of the Myra Falls mine which commenced re-start activities in August 2017
Balance sheet strengthened
Net debt excluding zinc metal prepay and perpetual securities of EUR 1,138 million at the end of September 2017, an increase of EUR 152 million from 30 June 2017, predominantly due to amortisation of the silver and zinc prepays, working capital outflow due to higher commodity prices and capex expenditure in-line with guidance. Net debt inclusive of zinc metal prepay and perpetual securities of EUR 1,387 million at the end of September 2017, an increase of EUR 144 million on 30 June 2017
Successful placement of leverage neutral EUR 400m notes due 2024 in March 2017 and EUR 100m upsize of SCTF facility in April 2017, further issuance of EUR 100m notes due 2024 and tender for 2018 convertible bonds in September 2017 to enhance credit, extend maturities and improve liquidity
Major milestones reached at the Port Pirie Redevelopment, in line with guidance
successful commencement of hot commissioning at the end of September 2017; and
subsequent commencement of furnace heat-up on 25 October 2017 and achievement of first feed to the new TSL furnace on 30 October 2017
Zinc smelting optimisation review completed in Q3 2017 with substantial improvements in production and operating costs identified which will be gradually implemented
Latin American mining operations sales completed and divestment process now concluded with the North American mining portfolio to be held as a core component of the Nyrstar business and optimised; Middle Tennessee Mines ramp-up and Myra Falls restart on schedule
Safety improvements across the group with four of Nyrstar's sites recordable injury free in Q3 2017
Commenting on the third quarter 2017 interim management statement, Hilmar Rode, Chief Executive Officer said:
"We have continued to deliver on our clear strategic priorities. A major milestone was reached at the Port Pirie Redevelopment with the successful start of hot commissioning at the end of September and yesterday the first feed to the new TSL furnace, EUR 100m upsizing of the 2024 notes issuance and completion of the zinc smelting optimisation review. Against this backdrop and despite some unplanned production outages during the quarter at Budel, the production results for the zinc smelting and mining operations were robust and in-line with guidance.
The financial performance of the Company has been supported by the strong zinc market fundamentals, with the zinc price average 31% higher in Q3 2017 compared to a year ago. However, the Company has continued to be faced with headwinds from the lower zinc benchmark treatment charge, the translational earnings impact of the material weakening of the US dollar against the Euro and the impact of 70% of the free metal zinc price exposure being capped by the current collar hedge at USD 2,543/t through to the end of the year. We will continue to deliver the transformation of the Company through the implementation of our strategic priorities, reducing the sensitivity of the business to these headwinds.
Substantial further earnings uplift is expected from the North American mining operations in the remainder of 2017 and into 2018. Given this anticipated performance improvement, we have decided to retain the North American mines, which are integrated, have scale and are strategically important to Nyrstar.
As we conclude 2017 and move into 2018, the strategic priorities for the Company will be to deliver the Port Pirie Redevelopment ramp up to design capacity; increase production and reduce operating costs within our zinc smelter network in-line with the full potential review completed in Q3 2017; continue to deliver a substantial earnings uplift from the North American mining operations and maintain a strong and flexible balance sheet."
Management will discuss this statement in a conference call with the investment community on 31 October 2017 at 10:00am Central European Summer Time. The presentation will be webcast live and will also be available in archive. The webcast can be accessed via https://edge.media-server.com/m6/p/bu5wemuz
For further information please visit the Nyrstar website: www.nyrstar.com