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| Nyrstar estimates its A$514 million redevelopment project at Port Pirie will increase plant throughput by about 50%. |
Nyrstar announced on May 16 the signing of a binding agreement with the government of South Australia and the Australian Export Finance and Insurance Corp. (EFIC) for the final funding and support package for the redevelopment of Nyrstar’s Port Pirie, South Australia, smelter into an advanced metals recovery and refining facility.
Nyrstar estimates plant throughput at Port Pirie will increase by about 50% upon completion. Increased furnace flexibility will add significant value by allowing the processing of a wider range of high-value and high-margin concentrates and residues from Nyrstar’s network of smelters. Concentrates from the company’s mines and residues from its zinc smelting network are expected to account for approximately 50% of feed material requirements.
The redevelopment project includes construction of a new and increased-capacity sulphuric acid plant. During the feasibility process, Nyrstar explored the potential for a third party to build, own, and operate the acid plant; however, the company concluded it would be more beneficial for it to retain full operational control and subsequent marketing benefits.
When the redevelopment project is complete, Port Pirie will have capacity to produce a range of metals, including about 250,000 metric tons per year (mt/y) of refined lead, 40,000 mt/y of zinc in fume, 7,000 mt/y of copper in matte, and 25 million oz/y of silver doré, containing about 100,000 oz/y of gold. The zinc plant at the site will be shut down.
Construction work on the Port Pirie project will begin in early 2015, and the redeveloped facility is scheduled to be fully operational by the end of 2016.
Capital cost for the project is estimated at about A$514 million, supported by an innovative, three-part funding package. First, Nyrstar’s direct contribution will total about $A103 million. Second, third-party project level financing guaranteed by EFIC and the government of South Australia will contribute about A$291 million. And third, Nyrstar intends to enter into a transaction for the forward sale of silver output from the redeveloped Port Pirie facility for an upfront payment of about A$120 million.
Nyrstar forecasts operating costs/mt of market metal at Port Pirie will decline by about 20% in local currency terms once the project is fully operational, which will in turn drive improved EBITDA and free cash flow. The company expects the project to generate a post-tax leveraged IRR of 25% to 30%, using internal economic and flat metal price assumptions for the duration of the project.
