By John Martens
Nov. 18 (Bloomberg) -- Nyrstar NV, the world's largest zinc producer, will cut output of the metal at smelters in Belgium and the Netherlands by 28 percent and may make further cuts next year to maintain cash generation and reduce debt.
Zinc production will rise 1 percent this year, down from an earlier target of a 3 percent increase, the Balen, Belgium-based company said today in a statement. Third-quarter output of the metal declined 7 percent and zinc production in the nine months through September increased 2 percent to 799,800 metric tons.
``We are now more focused than ever on cost-effective production and prudent cash management,'' Chief Executive Officer Paul Fowler said in the statement. ``At current low zinc prices, lower levels of production at Budel and Balen achieve a better financial result, while simultaneously reducing stock levels.''
Nyrstar is cutting a quarter of its Belgian workforce and selling a stake in an unprofitable smelter in Kunming, China to preserve cash generation needed for maintenance spending. The company may have to accept lower fees for extracting zinc from raw material shipped from mines next year as miners cut back output because of declining prices for the metal used to galvanize steel.
Nyrstar added less than 1 cent, or 0.1 percent, to close at 2.56 euros yesterday in Brussels. The shares have fallen 84 percent this year, giving Nyrstar a market value of 256 million euros ($323 million).
`Trough Year'
``We're now banking on 2009 to become the trough year for the company,'' Wouter Vanderhaeghen, a Brussels-based KBC Securities NV analyst who recommends buying Nyrstar, wrote in a note to clients yesterday. ``While the concentrate market was in a surplus situation this year, forecasts are suggesting the market to turn into a deficit next year.''
Net debt fell to 14 million euros on Sept. 30 from 126 million euros on June 30 as working capital was reduced because of falling zinc prices, Nyrstar said today.
Zinc for immediate delivery on the London Metal Exchange averaged $1,781.09 in the third quarter, based on daily closing prices. That's 45 percent less than in the same period a year earlier. The contract fell 2.8 percent to $1,156 yesterday.
OZ Minerals Ltd. may cut output at its Century project in Australia, the world's second-biggest zinc mine, Chief Executive Officer Andrew Michelmore said in an interview Oct. 21. Melbourne-based OZ Minerals supplies about half of Nyrstar's feedstock.
Strategic Resource Acquisition Corp., which supplies raw material known as concentrate to Nyrstar's smelter in Clarksville, Tennessee, said Oct. 9 it will suspend production at the nearby Gordonsville mine pending a rebound in zinc prices and access to funding.
To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net
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