May 16, 2014 / 5:02 PM / 3 years ago

UPDATE 1-Nyrstar agrees funding for Australian lead smelter upgrade

3 Min Read

* Works will expand lead smelting capacity

* Zinc smelting will cease, plant to close in 2015

* Plant is a major local employer (Adds details on processing capacity, jobs)

BRUSSELS, May 16 (Reuters) - Belgium's Nyrstar, the world's largest zinc smelter, said it had agreed a funding package with the Australian government to upgrade and expand its 125-year-old lead smelter in Port Pirie, Australia.

Nyrstar said the investment would transform the smelter into an advanced metals recovery and refining centre, which would process concentrates from the company's mines and residues from its zinc smelters. Completion is set for the end of 2016.

The upgrade will enable the plant, which processed less than 180,000 tonnes of lead in 2013, to produce up to 250,000 tonnes of the refined metal, which is used in batteries.

It will also have the capacity to produce 7,000 tonnes of copper in matte, 40,000 tonnes of zinc in fume, 25 million ounces of silver dore and 100,000 troy ounces of gold.

The total cost of the redevelopment will be 514 million Australian dollars ($480.6 million), higher than the initial estimate of A$351 million because Nyrstar will construct a new sulphuric acid plant on the site.

Nyrstar also said it would cease production at its zinc smelter at the Port Pirie complex by the end of July and close it by the end of 2015.

Output volumes have been deteriorating and costs rising at the plant, which has the highest cost of Nyrstar's six zinc smelters.

The Port Pirie complex directly employs 800 people, or 17 percent of the working population of South Australia, and about 2,500 people directly or indirectly, the company said.

The impact on jobs is not yet known, but overall job losses are unlikely, a company spokeswoman said.

The decision to upgrade the plant came after a strategic review of Nyrstar's processing facilities, which found the technology and the process needed to be redesigned to improve efficiency and reduce costs.

A review of Nyrstar mining operations is currently underway.

Nyrstar said it would contribute A$103 million on the overhaul, and the remained would come from a special purpose vehicle (SPV). The SPV will seek around A$291 million in financing from third parties and will benefit from a guarantee from Australia's export credit agency.

A further A$120 million will come from the forward sale of future silver production.

Nyrstar said the redevelopment would generate a post-tax leveraged internal rate of return of 25-30 percent. It said capital expenditure this year would be 290-335 million euros. It had previously forecast 265-335 million euros. (Reporting by Philip Blenkinsop and Silvia Antonioli; editing by Luke Baker and Jane Baird)

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