Reality Check: Is Nyrstar’s $300 Million Loss a Real Crisis or Just Creative Accounting?

Is Nyrstar really suffering a $300 million loss due to historically low zinc processing wages, as a recent article in De Tijd seems to suggest? (https://lnkd.in/eTyDYiNH) This is doubtful. The article, based on Trafigura's latest annual report, cites "extremely challenging market conditions", such as zinc processing wages apparently at an all-time low.

This raises two questions: (i) to what extent are these figures reliable? and (ii) if the figures are correct, would this prove that Nyrstar is effectively the poor relation of salmon, narrowly saved from bankruptcy by Trafigura in a painful restructuring in 2019, and that there can be no question of alleged fraud?

Regarding the first question

The reported loss appears to be more of a write-down of the Australian operations. This could be an indication that the valuable waste streams that Trafigura took over for nothing in 2019 have finally been processed, which would then be a 𝘱𝘰𝘴𝘪𝘵𝘪𝘦𝘷𝘦 𝘤𝘢𝘴𝘩 𝘧𝘭𝘰𝘸 𝘷𝘢𝘯 300 𝘮 𝘪𝘭𝘫𝘰𝘦𝘯 𝘻𝘰𝘶 𝘰𝘱𝘨𝘦𝘭𝘦𝘷𝘦𝘳𝘥 𝘩𝘦𝘣𝘣𝘦 𝘯 rather than an actual loss. This would confirm what the Swiss public prosecutor cited in the recent Trafigura trial in Switzerland: 𝘥𝘦 𝘦𝘹𝘵𝘦𝘳𝘯𝘦 𝘤𝘰𝘮𝘮𝘶𝘯𝘪𝘤𝘢𝘵𝘪𝘦 𝘷𝘢 𝘯 𝘛𝘳𝘢𝘧𝘪𝘨𝘶𝘳𝘢 𝘴𝘵𝘳𝘰𝘰𝘬𝘵 𝘷𝘢𝘢𝘬 𝘯𝘪 𝘦𝘵 𝘮𝘦𝘵 𝘥𝘦 𝘪𝘯𝘵𝘦𝘳𝘯𝘦 𝘳𝘦𝘢𝘭𝘪𝘵𝘦𝘪𝘵, 𝘮𝘦𝘵 𝘮𝘪𝘴𝘭𝘦𝘪𝘥𝘪𝘯𝘨 𝘦𝘯 𝘰𝘣𝘴𝘵𝘳𝘶𝘤𝘵 𝘪𝘦 𝘢𝘭𝘴 𝘣𝘢𝘴𝘪𝘴𝘪𝘯𝘨𝘳𝘦𝘥𝘪ë𝘯𝘵𝘦𝘯. Our own Financial Services and Markets Authority (FSMA) comes to the same conclusion in its extensive reports on Nyrstar's external communications.

The reliability and significance of the figures quoted therefore deserve at least some nuance.

Regarding the second question

The zinc market is a 𝘤𝘺𝘤𝘭𝘪𝘴𝘤𝘩𝘦 market. It is perfectly normal for treatment and refining charges to fluctuate and for periods of low zinc treatment and refining charges (which is difficult for zinc smelters such as Nyrstar) to alternate with periods of high zinc treatment and refining charges (and high profitability). The chart below shows that since 2018, Nyrstar has enjoyed several boom years - in line with the figures for competitors such as Korea Zinc.

In a Nyrstar media campaign currently running in De Tijd and L'Echo (the timing of which is rather curious in view of an expected verdict on 9 January in the main proceedings before the court in Turnhout), Nyrstar proudly announces that it has recently invested almost 500 million in the company. This seems to indicate that Trafigura sees a lot of potential in the future.

---