17/04/2013

BONJOUR....NYRSTAR

ON ATTENDAIT CECI DEPUIS DES SEMAINES....PAS MAL...

 

 

 

 

Published: 13:05 CEST 16-04-2013 /Thomson Reuters /Source: Nyrstar /XBRU: NYR /ISIN: BE0003876936

 

Nyrstar reaches settlement with Glencore on Commodity Grade Off-take Agreement and shareholding

 

 

 

16 April 2013

 

Nyrstar today announced that it has reached a negotiated settlement with Glencore International AG ("Glencore") in relation to its Commodity Grade Off-take Agreement (the "Off-Take Agreement") for the sale and marketing of commodity grade zinc metal produced by Nyrstar within the European Union, and Glencore's 7.79% shareholding in Nyrstar. This follows the requirement for Glencore to end these aspects of its relationship with Nyrstar as part of the remedy package agreed by the European Commission in relation to Glencore's proposed merger with Xstrata Plc ("Xstrata").

 

Summarised, under the terms of the settlement the following has been agreed:

 

  • By 31 December 2013 Nyrstar will cease to sell to Glencore commodity grade zinc metal produced at Nyrstar's smelters located within the European Union (Auby, Balen/Overpelt and Budel).
  • With respect to the above, Glencore has agreed to pay Nyrstar a termination fee of EUR 44.9 million.
  • The sale of commodity grade zinc and lead produced from Nyrstar's smelters outside of the European Union (Clarksville, Hobart and Port Pirie) will continue as before under the Off-take Agreement.
  • Nyrstar has agreed to acquire Glencore's entire shareholding of 7.79% of common shares for EUR 3.39 per share (a discount of approximately 10% to the 5-day volume weighted average price, and 5% to the closing share price, of Nyrstar shares on 15 April 2013), for a total cash consideration of EUR 44.9 million.

 

Nyrstar will hold the acquired shares as treasury stock and will look to place the shares with suitable investors over time.

 

The above settlement will become final upon the successful completion of Glencore's merger with Xstrata, which is expected to be in approximately two weeks.

 

Nyrstar is in the process of determining the most suitable channel(s) to market and sell the commodity grade zinc metal produced at its European smelters. Options available to Nyrstar include bringing the marketing and sales of this volume in-house, tendering this volume to third parties or entering into partnering arrangements, with numerous enquiries having been made on the availability of this metal over the past months. Nyrstar will provide an update on the outcome of this process in due course.

 

Commenting on the settlement, Roland Junck, Nyrstar's Chief Executive Officer said,

 

"The settlement reached between Nyrstar and Glencore represents a positive outcome for both parties. Nyrstar has been adequately compensated for the amendment to its Commodity Grade Off-take Agreement and at the same time has been able to secure Glencore's shareholding, which will allow us to place those shares with suitable investors over a timeframe which Nyrstar will determine. We will continue to have a commercial relationship with Glencore through the sale of our commodity grade zinc and lead from our non-European smelters and through the sale of concentrates between the two companies.

 

We are reviewing the options available to us with respect to the marketing and sale of the commodity grade zinc metal produced at our European smelters. We have entered into discussions with a number of interested parties to potentially tender the volume or enter into partnering arrangements.  We are also reassessing the value of bringing this function back in-house as the volume also provides a unique opportunity for us to create further value by leveraging our commercial acumen, market insight and scale."

 

 - end -

ET VOICI CE QU'EN PENSE DEGROOF..

Elegant d

eals

settlement

with Glencore on European zinc

and on Glencore

’s stake in Nyrstar

 

The facts:

 

Yesterday Nyrstar a

nnounced

that deals were reached with Glencore

in relation to its off

-

take agreement for the sales and marketing of commodity

grade zinc metal produced by Nyrstar it the European Union and to Glencore‟s

7.79% stake in Nyrstar.

 

Our analysis:

 

As far as the

off

-

take agreement is concerned,

under the terms of

the settlement the following has been agreed

:

 

 

Glencore will continue to market Nyrstar‟s commodity

-

grade zinc produced at

its European plants but only until December 2013. Thereafter, Nyrstar has to

find

 

other solutions for the marketing of its commodity

-

grade zinc produced in

the

EU. Glencore will pay EUR 44.9m as a break

-

up

fee to end its long

-

term

zinc off

-

take agreement with Nyrstar

 

(it was scheduled to end in 2018).

 

 

Glencore will continue to market

N

yrstar‟s

commodity

-

grade zinc produced

outside of the

EU (zinc & lead produced in Australia and in the USA) until

2018

.

 

As far as Glencore‟s 7.79% stake in Nyrstar is concerned, it was agreed that

Nyrstar will use the break

-

up fee paid by Glencore to acqui

re Glencore‟s entire

shareholding in Nyrstar. This represents an acquired price of EUR 3.35 per

Nyrstar share (a discount of about 10% of the 5

-

day volume weighted average

price). The intention of Nyrstar is to hold these shares until it finds suitable inv

e

s-

tors over time.

 

Now Nyrstar has until the end of 2013 to address the question of the marketing of

its commodity grade zinc produced in EU. This represents approximately

350

 

ktpa. Options available include bringing the marketing and sales of this vo

l-

ume

in

-

house; tendering this volume to third parties or entering into partnering

arrangements. The latter is in our view the most likely solution. Bringing the ma

r-

keting and sales of these volume in

-

house would not only increase the fix costs

structure, but it

 

would also significantly increase the NWC (by about USD

 

65m at

current zinc price level).

 

With these two agreements, significant stock specific headwinds are nearly fully

addressed at reasonable conditions, we believe. Unfortunately, over the recent

weeks

 

other headwinds emerged, not only with the drop of commodity metal pri

c-

es (zinc, lead & copper), but also of some key precious metals for Nyrstar (gold

and silver). This may have significant impacts on the mines C1 cash costs. This

led us to adopt a more

conservative scenario for the metal prices for both FY13

and FY14. As a result, our forecasted underlying EBITDA for FY13

-

14 were cut by

17.2% and 14.8% to EUR 271m and EUR 371m, respectively. As a result, our TP,

which is based on a mix of DCF and peers m

ultiples, is also cut to EUR

 

4.20

(from EUR

 

5.0).

 

Conclusion & Action:

 

We believe that with these two deals, Nyrstar has nearly

fully addressed two key stock specific headwinds in reasonable conditions.

Ho

w

ever, recent pressures on metals prices (commodit

ies but also in precious

metals)

led us to adopt a more conservative scenario for metal prices for both

FY13 and FY14. As a result

 

forecasted underlying EBITDA for FY13

-

14 were cut

by 17.2% and 14.8%

, respectively and our TP by 16% to EUR 4.20. HOLD

 

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