Legal stoush looms between SA Government and Nyrstar over Port Pirie smelter
The South Australian Government has threatened legal action after Belgian metals processor Nyrstar said it would defer repayments on a loan to upgrade the Port Pirie smelter.
The $660 million redevelopment opened in January, using a loan underwritten by the former Labor government following negotiations with independent Geoff Brock.
In the deal with Nyrstar, the Government underwrote a guarantee for the $291.25 million in external finance raised by the company, which now sits as a liability on the state’s balance sheet.
South Australian Treasurer Rob Lucas said the company had indicated it planned to defer payments to its international financiers until November 2019, pushing back the first 18 months of a five-year schedule of repayments.
He described the contract that did not require the company to make loan repayments at set intervals as “unusual”.
Independent Geoff Brock, Premier Jay Weatherill and Tom Koutsantonis announced the smelter upgrade in May 2014. (ABC News: Eloise Fuss)
Money expected to flow this year
Mr Lucas told State Parliament Nyrstar had exceeded its forecast ramp-up and operational performance after completing the upgrade, with money set to start flowing from the project this year.
The company’s May advice to the stockmarket said at least $60 million of earnings was expected in the second half of this year, $145 million in 2019 and $190 million in 2020.
Because of this, Mr Lucas said the company should proceed with its first loan payment of $37 million, scheduled for May 28.
“The Government has been advised that Nyrstar’s Board of Directors has decided this payment will not be made, due to cost overruns, delays in completion of the project and reaching full production, and the consequential impact on earnings uplift from the project, to Nyrstar,” Mr Lucas said.
“Nyrstar has notified the Government that the payment of $37 million scheduled for 28 May 2018 will be deferred.
“The deferral of this $37 million payment was surprising as Nyrstar, through its financial disclosures, has repeatedly and publicly indicated it intended repaying the funding arrangement in accordance with the agreed schedule of payments.”
Mr Lucas said the Government had issued a letter of demand on Nyrstar’s parent company in Belgium to pay the funds to the Port Pirie smelter.
“Nyrstar has advised that it considers that it is not compelled to transfer this money, a position the state does not accept,” he said.
“As such we find ourselves in dispute with the real prospect of litigation.”
Opposition mining spokesman Tom Koutsantonis, who as treasurer in the former Labor government oversaw the underwriting of the guarantee, said the arrangements were not unusual.
“This is just a question of they are not making enough profit, so they want to defer the payments,” Mr Koutsantonis said.
“The Treasurer has launched a missile at the bow of this global company that employs hundreds, if not thousands of people in South Australia to try and make a political point.”
Nyrstar has been contacted for comment.
Why the upgrade?
Nyrstar’s operation in Port Pirie is one of the world’s largest primary lead smelters, which has long been a concern for Port Pirie residents due to concerns about lead pollution.
The State Government monitors lead exposure in the regional city’s children, with high blood lead levels impacting on growth, behaviour and ability to learn.
The upgrade was planned primarily to improve lead emission levels and expand the processing capabilities of the site.
It was announced two months after the 2014 election, in which Mr Brock, an independent whose electorate includes Port Pirie, helped Labor secure government.
The most recent report from SA Health shows an 0.2 microgram per decilitre increase in the average blood lead level of children tested in Port Pirie.