Commodity trading company Trafigura has signed a binding term sheet to extend a $650m working capital facility to cash-strapped zinc and lead producer Nyrstar.
Trafigura is a major shareholder in Nyrstar and the rescue package will allow the latter to improve its liquidity position.
Since 30 October, the mining company has been facing a financial crisis with worsening liquidity position that had an adverse impact on its normal functioning.
However, Nyrstar cannot use the new funding to repay its bonds or mounting debt. The line of credit secures the company’s ongoing working capital needs.
The new $650m working capital facility, which consists of a $450m metals prepayment tranche and a $200m suppliers credit package, will become fully effective towards the end of the month and replaces the company’s existing $250m working capital facility agreement with Trafigura.
It is secured against financial guarantees, pledges over shares in certain subsidiaries, fixed assets and inventory and receivables.
Furthermore, Nyrstar Sales & Marketing has reached a $220m interim prepayment agreement with Trafigura. The prepayment will support Nyrstar until the new facility becomes effective and will be secured by financial guarantees and shares in Nyrstar Port Pirie.
In a statement, Nyrstar said: “Whilst the company has taken every effort to mitigate this impact, the company considered it prudent and necessary to pursue an alternative financing arrangement on an accelerated basis in order to secure the group’s funding needs.
“The company welcomes the support provided by the new $650m facility with Trafigura, both strengthening the group’s liquidity position and demonstrating Trafigura’s continuing commitment to Nyrstar.”
Meanwhile, the miner is going ahead with its plans to retrench 120 employees and contractors at its Port Pirie operations in Australia.
Nyrstar’s mining operations are located in the US and Canada. The assets include East Tennessee and Middle Tennessee mines in the US and Langlois and Myra Falls mines in Canada.