UPDATE 2-Nyrstar Q3 zinc output slips, eyes more cuts
* Zinc production falls in Q3
* Eyes further production cuts in 2009
* Cuts net debt during Q3 by over 110 mln euros to 14 mln
* Shares down 0.9 pct, outperforming sector index
* No short-term plans for share buyback
(Adds CEO comments, share price, analyst comment)
BRUSSELS, Nov 18 (Reuters) - Belgium's Nyrstar (NYR.BR), the world's biggest producer of zinc, said on Tuesday zinc output fell in the third quarter and warned of further production cuts in 2009 amid a gloomy economic outlook.
"If the present economic environment persists, further production cuts will be made in 2009. All options to improve performance are on the table," Nyrstar Chief Executive Paul Fowler said in a statement.
Nyrstar shares were down 0.9 percent at 2.54 euros at 1210 GMT after opening three percent higher, against a 3.1 percent fall in the DJ Stoxx European basic resources index .SXPP.
"Given the good management of the difficult market environment... Nyrstar should end the year in a (positive) net cash position, which gives it room for manoeuvre to pass through the crisis. This is probably supporting the share price," Bank Degroof analyst Bernard Hanssens said.
The group said net debt declined by over 110 million euros to 14 million euros in the third quarter.
"Nyrstar also benefited from treatment charge settlements following final 2008 contract negotiations. This is better than assumed," Hanssens said.
Analysts had previously expected the group to launch a share buyback scheme as a potential positive trigger for the shares, which have fallen by more than 85 percent from their flotation price of 20 euros, but the company has decided against such a move in the short term, given the bleak economic outlook.
"We will look at these things again, but in a period of unprecedented volatility it is pretty hard to make a case for a share buyback," Fowler told a news conference.
Hanssens agreed that, given the deteriorating economic climate, it was better for the group to keep the cash and maintain flexibility during any slowdown.
Zinc market metal production fell to 258,500 tonnes in the third quarter, down year on year and a 7 percent fall from the April to June period. Zinc cathode output was 4 percent down quarter on quarter.
Nyrstar, which said it did operate profitably in the third quarter, said zinc production for 2008 was now projected to be up about 1 percent. The group had previously targeted a rise in zinc output of 3 percent in 2008.
The group said zinc prices were 16 percent lower quarter on quarter and 45 percent down from year-ago levels as the commodity boom came to an end.
Nyrstar said it was seeking to maintain total operating costs at close to 2007 levels despite increasing energy prices.
Nyrstar said treatment charges for both zinc and lead concentrates declined as LME metal prices fell by 16 percent and 17 percent respectively compared to the second quarter.
It added that negotiations on 2009 treatment charges for long-term contracts were not expected to begin before 2009.
Premiums on zinc weakened from the second quarter and the group expects recent improvements to be short-lived as the global economic crisis continues to unfold.
Nyrstar, formed from combining the zinc smelting assets of Belgium's Umicore (UMI.BR) and Australia's Zinifex ZFX.AX, floated in October 2007 and churns out over 1 million tonnes a year, more than Korea Zinc 01030.KS and Xstrata (XTA.L). (Reporting by Antonia van de Velde; Editing by Jon Loades-Carter and Simon Jessop)
