Nyrstar Explores Trading-House Deals After Trafigura Lifts Stake
(Bloomberg) — Nyrstar NV, the world’s largest refined-zinc producer, is abandoning plans to trade more metals in-house in favor of deals with commodity traders such as its biggest shareholder Trafigura Beheer BV.
“We will be more open to explore other opportunities working with trading houses,” Heinz Eigner, acting chief executive officer of Belgium-based Nyrstar, said in a phone interview Thursday.
Nyrstar will halt its strategy to grow in-house trading operations as profit margins from marketing metals from its mines failed to offset the costs of running a sales force, Eigner said. Bob Katsiouleris, group general manager for commercial operations, left the company on Jan. 16 as Nyrstar announced plans to review its overhead structure and integrate its marketing and sales team.
The move to curb in-house trading opens the door to potential deals with Trafigura, the world’s second-largest metals trader. Eigner took over as CEO when Roland Junck resigned in November, three weeks after Trafigura raised its stake in the zinc producer to 15.3 percent.
Capital requirements for in-house trading operations are “quite significant,” said Eigner, and Nyrstar has a period of major capital expenditure ahead. “We probably cannot at the same time pursue a strategy to take significant further volumes in house.”
As commodity producers struggle with falling prices, trading houses are increasing investments in physical metals and mining assets. Trafigura, based in Amsterdam and with major trading operations in Geneva, wants to secure long-term supplies of copper, zinc, lead and iron ore.
Noble Choice
Nyrstar chose Noble Group Ltd., Asia’s largest commodity trader, to market part of its European output. The 2013 agreement replaced a deal with Glencore Plc, the largest metals trader, which continues to sell Nyrstar’s zinc and lead produced outside the European Union.
“The Glencore agreement is running for another couple of years and we are happy with the relationship and there is no reason to explore other opportunities,” Eigner said.
Trafigura has previously said it invested in Nyrstar in light of its positive view of the zinc market. Victoria Dix, a Geneva-based spokeswoman for the company, declined to comment.
Nyrstar welcomes “any new shareholder that’s going to express confidence in our strategy,” Eigner said in relation to Trafigura.
Last year, Trafigura moved to oust the chairman and board of EMED Mining Public Ltd., in which it owns an 18 percent stake. EMED said on Dec. 24 it had agreed to accept a $30 million bridge loan from a group of lenders including Trafigura. As part of the financing, four board members resigned and EMED appointed a new chairman and CEO.
Trafigura wants to combine EMED’s Rio Tinto copper mine with its nearby Aguas Tenidas operation in southwest Spain.
The trading house also operates the Catalina Huanca mine in Peru and is active in or has stakes in mining operations in Angola, Democratic Republic of Congo and Latin America, according to its website.
–With assistance from Agnieszka de Sousa in London.
To contact the reporters on this story: Andy Hoffman in Geneva at ahoffman31@bloomberg.net; Firat Kayakiran in London at fkayakiran@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Dylan Griffiths, Alex Devine
