Nyrstar: First Quarter 2018 Interim Management Statement

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Overig advies 03/05/2018 07:12
Group underlying EBITDA[1] of EUR 54 million for Q1 2018, EUR 3 million lower than Q1 2017. Nyrstar benefited from a 23% increase in the zinc price and ramp-up of the Middle Tennessee Mines which was offset by reductions in treatment charge terms, a substantial weakening of the USD/EUR from 1.06 to 1.23, negative earnings contributions of the Myra Falls Mine whilst in start-up and reduced free metal price exposure due to the zinc price collar hedging
Metals Processing underlying EBITDA of EUR 49 million, down EUR 14 million year-on-year, driven primarily by lower realised zinc treatment charges and zinc metal production, partially offset by higher commodity prices; and
Substantially improved Mining underlying EBITDA of EUR 16 million, up EUR 11 million year-on-year, driven by higher commodity prices and the successful restart of the Middle Tennessee mines, partially offset by the EUR 8 million negative EBITDA contribution from the restart of the Myra Falls mine
Net debt excluding zinc metal prepay and perpetual securities of EUR 1.351 billion at the end of Q1 2018, an increase of EUR 249 million on 31 December 2017 driven predominantly by working capital outflow mainly due to higher commodity prices and amortisation of prepays. Net debt inclusive of zinc metal prepay and perpetual securities of EUR 1.592 billion at the end of Q1 2018, an increase of EUR 229 million on 31 December 2017
Port Pirie Redevelopment ramp-up progressing well
Ramp-up is ahead of schedule with important milestones achieved on operating time, volume of material treated and proportion of residue in feed
Earnings uplift in-line with guidance provided at the start of 2017 against a 2016 basis, with at least EUR 40 million expected in H2 2018, EUR 100 million in 2019 and EUR 130 million in 2020
Restart of the Myra Falls mine commenced in August 2017 and is progressing in-line with schedule for zinc production by the start of H2 2018
Chris Eger to step down as Chief Financial Officer in the summer of 2018 after a comprehensive transition period; Michel Abaza, currently Corporate Treasurer at Safran Group, to take over. Please see biography for Michel Abaza included at the end of this document

Commenting on the first quarter 2018 interim management statement, Hilmar Rode, Chief Executive Officer said:
"We have made substantial progress on the Port Pirie Redevelopment ramp-up, the restart of the Myra Falls mine and have also advanced our other strategic priorities in Q1 2018. Production performance across the group during the quarter was in-line with full year guidance. No material unplanned outages were experienced at the operations and the mines had a 42% increase in zinc in concentrate production year-on-year as a result of the successful ramp-up of the Middle Tennessee mines.

Following the successful start of hot commissioning at the Port Pirie Redevelopment and first feed to the new TSL furnace at the end of 2017, during Q1 2018 we have been able to ramp-up the TSL furnace more quickly than anticipated in terms of operating time, volume of material treated and the proportion of high margin residues in the feed. For the month of April 2018 the residue consumed in the TSL feed was 55% of the overall feed mix, which exceeds the fully ramped-up target of 40% residue in the feed.

The financial performance of the Company continues to be supported by strong zinc market fundamentals, with the quarterly zinc price 23% higher in Q1 2018 compared to a year ago. Offsetting some of this support has been lower zinc treatment charge terms, 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 3,094/t through to the end of the first half of this year. We continue to expect a substantial improvement in earnings and a move to positive free cash flow generation in H2 2018 with the ramp-up of the Port Pirie Redevelopment, the restart of the Myra Falls mine and ongoing improvements in operational performance at the mining and smelting operations.

After two and a half years as the Chief Financial Officer at Nyrstar, Chris Eger has communicated to the Board over the past months that he has decided to leave Nyrstar in the summer to pursue other opportunities. We undertook a thorough search process and have appointed Michel Abaza as CFO to take over from Chris. Michel has over 20 years' experience in treasury, capital markets, financial reporting and M&A and joins us from the Safran Group where he was the Corporate Treasurer. Michel will start at Nyrstar in the coming months and will work with Chris to ensure an orderly handover. We thank Chris for his hard work and dedication which has been instrumental in strengthening Nyrstar's balance sheet and placing Nyrstar on a much stronger financial footing to enable the transformation of the business.

Management will discuss this statement in a conference call with the investment community on 3 May 2018 at 9:00am 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/6brkechn

EUR million (unless otherwise indicated)
Q1 Q1 % 2017 2018 Change

Metals Processing 931 957 3%
Mining 49 77 57%
Other (48) (77) 60%
Group Revenue 932 957 3%

Underlying EBITDA
Metals Processing Underlying EBITDA 63 49 (22%)

Mining Underlying EBITDA 5 16 220%
Other and Eliminations Underlying EBITDA (11) (11) -
Group Underlying EBITDA 57 54 (5%)
Underlying EBITDA margin 6% 6% -

Metals Processing 56 24 (57%)
Mining 8 28 250%

Other 2 - -
Group Capex 65 53 (18%)
Loans and borrowings, end of the period 1,045 1,550 48%
Less cash and cash equivalents, end of period 58 199 243%
Net Debt Exclusive of Zinc Prepay and Perpetual Securities 986 1,351 37%
Zinc Prepay 147 55 (63%)
Perpetual Securities 139 186 34%
Net Debt Inclusive of Zinc Prepay and Perpetual Securities 1,272 1,592 25%

Metals Processing Production
Zinc metal ('000 tonnes) 261 252 (3%)
Lead metal ('000 tonnes) 35 39 11%

Mining Production
Zinc in concentrate ('000 tonnes) 23 33 42%
Copper in concentrate ('000 tonnes) 0.3 0.5 41%
Silver ('000 troy ounces) 117 108 (8%)
Gold ('000 troy ounces 0.3 0.4 25%

Zinc price (USD/t) 2,780 3,421 23%
Lead price (USD/t) 2,278 2,523 11%
Silver price (USD/t.oz) 17.42 16.78 (4%)
Gold price (USD/t.oz) 1,219 1,331 9%
EUR/USD average exchange rate 1.06 1.23 15%
EUR/AUD average exchange rate 1.40 1.57 12%

Revenue for Q1 2018 of EUR 957 million was up 3% on Q1 2017, primarily driven by higher zinc and lead prices which were up 23% and 11% respectively, higher mining production partially offset by deteriorating benchmark zinc treatment charge terms.

Group underlying EBITDA of EUR 54 million in Q1 2018, a decrease of 5% on Q1 2017, due to lower treatment charges a weakening of the US dollar versus the Euro, largely offset by higher commodity prices.

Capital expenditure was EUR 53 million in Q1 2018, representing a decrease of 18% year-on-year driven by a substantial EUR 32 million capex reduction in Metals Processing with the completion of the Port Pirie Redevelopment at the end of 2017, partially offset by a EUR 20 million increase in total capex spend in mining compared to Q1 2017 with the restart of the Myra Falls mine.

Net debt at the end of Q1 2018, excluding the zinc metal prepay and perpetual securities, was 23% higher compared to the end of 2017 at EUR 1,351 million (EUR 1,102 million at the end of 2017). Net debt increased during the quarter due to a cash outflow from capex spend of EUR 53 million, interest and tax payments of EUR 55 million, a temporary reduction in prepays of EUR 50 million mainly from the planned maintenance outage at Port Pirie at the start of Q2 2018 and a working capital outflow of EUR 155 million. The net debt inclusive of the zinc metal prepay and perpetual securities at the end of Q1 2018 was EUR 1,592 million, up 17% compared to the end of 2017. Cash balance at the end of Q1 2018 was EUR 199 million compared to EUR 67 million at the end of 2017 with liquidity at the end of Q1 2018 of EUR 479 million.

The zinc concentrate 2018 benchmark treatment charges have been settled at the end of April 2018 with a base TC of USD 147 per dmt (dry metric tonne) of concentrate. The 2018 benchmark zinc concentrate treatment charge represents a base TC decrease of approximately 15% on the 2017 headline treatment charge of USD 172 per dmt.

Similar to 2017, the vast majority (90-95%) of Nyrstar's concentrate requirements for 2018 are priced at benchmark terms or by reference to the benchmark with a discount applied. The average discount to the benchmark realized by Nyrstar in Q1 2018 has been in-line with that achieved in Q1 2017 at approximately USD 40 per tonne. The same discount is expected to be realized over the course of 2018.

"Prevent Harm" is a core priority of Nyrstar. The Company is committed to maintaining safe operations and to proactively managing risks including with respect to people and the environment. At Nyrstar, we work together to create a workplace where all risks are effectively identified and controlled and everyone goes home safe and healthy each day of their working life.

Continuing the positive trend seen in 2017, during Q1 2018, there was a significant reduction in the severity of injuries with the frequency rate of cases with time lost or under restricted duties (DART) decreasing by 15% compared to Q1 2017 and the frequency rate of cases requiring at least a medical treatment (RIR) decreasing by 3% compared to Q1 2017. Four of our sites continue to operate DART free in 2018.

No environmental events with material business consequences or long-term environmental impacts occurred during the period.

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tijd 10.54
Nyrstar EUR 5,54 -26ct vol. 511.390

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