Project Update - Port Pirie Redevelopment
The Company has undertaken a comprehensive review of the Port Pirie Redevelopment project to ensure that the scope, flow sheet and commissioning will provide Port Pirie with industry leading performance.
Management's review has confirmed that the Port Pirie Redevelopment is the right strategy for the Company as it will have a significant positive long-term effect on Nyrstar's operations and deliver a substantial earnings uplift. However, the review also identified that rework is required to the fabrication of key module components, delaying the start of hot commissioning. Also as part of the review, a number of engineering improvements have been identified that will unlock additional value. Port Pirie is at a stage where the identified improvements can still be implemented effectively ahead of the hot commissioning milestone.
Consequently, the TSL furnace hot commissioning will be postponed by 6 months to September 2017. This time will be primarily used to do the rework referred to above and to enhance the slag tapping process on the TSL furnace. Ancillary benefits include the completion of further advanced training of plant personnel as well as improved start-up sequencing of the TSL furnace and tie-in to the existing operations. To further reduce ramp-up risk, the Company intends to continue operating the existing sinter and acid plants in parallel with the ramp-up of the TSL furnace and new acid plant. The total estimated cost to complete the project is expected to increase from AUD 563 million to AUD 660 million, an increase of approximately EUR 70 million.
The review has confirmed that the incremental EBITDA uplift from the redevelopment, using 2016 as a basis, will increase from the previous full ramp-up guidance of EUR 80 million per annum and is expected to be in the region of EUR 40 million in 2018, EUR 100 million in 2019 and EUR 130 million per annum from 2020. The modelling specifics for the Port Pirie Redevelopment EBITDA uplift are disclosed in the Company's "Introduction to Modelling" presentation available on the Company's website.
Commenting on the revised guidance for the Port Pirie Redevelopment, Hilmar Rode, Chief Executive Officer, said: "The Port Pirie Redevelopment is a large, complex project which absolutely remains the right strategic decision for the Company. The revised furnace start-up date will not only ensure the successful completion of the project, but also deliver improved returns of approximately EUR 130 million per annum, compensating for the increased capital cost and more prudent ramp-up schedule."