Nyrstar board grilled on Trafigura ties in 10-hour marathon meeting

Shareholders grilled Nyrstar’s directors about the independence of the board and fairness of contracts between Nyrstar and Trafigura – Image courtesy of Nyrstar

Trafigura Group Ltd. and Nyrstar NV directors met the fury of a small group of shareholders at a marathon meeting on Tuesday, in which investors accused the commodities trader of unfair dealings that led to the downfall of Europe’s biggest zinc smelter.

A group of Nyrstar’s minority shareholders have alleged that supply and offtake contracts with Trafigura were overly favorable to the trading house

In a meeting that dragged on for 10 hours, the shareholders grilled Nyrstar’s directors about the independence of the board and fairness of contracts between Nyrstar and Trafigura, its biggest customer, supplier and shareholder. Chairman Martyn Konig was asked repeatedly about his and the board’s “moral standards.”

Konig said that, from a personal perspective, agreeing to join Nyrstar’s board was “the worst decision I have ever taken on in my life.”

“I have the highest moral standards and I protect my independence and I have always been independent,” he added. “I’m sorry, but it really gets to me when you criticize my moral standards.”

Trafigura took control of Nyrstar earlier this year as part of a restructuring process that all but wiped out other shareholders, including many of those present at the meeting in Antwerp, Belgium. The investors now own stakes in a new firm that controls about 2% of Nyrstar and Trafigura, the world’s second-biggest metals trader, holds the rest.

‘A circus’

“This is a circus. There is no protection of minority shareholders,” Kris Vansanten, a Nyrstar shareholder and founder of Quanteus Group, told the board of directors.

Shareholders that owned 25.57% of Nyrstar were present at the meeting, a figure that includes the 24% stake held by Trafigura.

Konig also serves as an adviser to T Wealth, the family office that manages investments for Trafigura’s senior executives. Before joining the Nyrstar board, he was chief investment officer of T Wealth. Konig said he had taken all of his compensation from Nyrstar in company shares and “not a penny” in cash.

“I am in the same position as you,” he told the shareholders.

A group of Nyrstar’s minority shareholders have alleged that supply and offtake contracts with Trafigura were overly favorable to the trading house. Nyrstar has previously said the terms reflected market conditions, as well as the company’s weakened financial state and need for additional investment, which Trafigura provided.

Konig said on Tuesday that Nyrstar’s board signed off on the discount that the company gave Trafigura for zinc treatment charges in 2018, following the recommendation of management.

Nyrstar’s downfall

Nyrstar’s history of financial troubles dates back to around 2010, when management embarked on a debt-fueled run of mining acquisitions. As zinc prices plummeted 26% in 2018, the company started bleeding cash and it became clear that it wouldn’t be able to make a bond repayment. Nyrstar has said asset writedowns, “severe deterioration” in the global economy and lower zinc treatment charges were among the reasons for its collapse.

Last month, Belgium’s financial services regulator said it opened a formal investigation into whether Nyrstar provided sufficient information to shareholders. The company’s auditor Deloitte has also previously warned that incomplete disclosures relating to supply deals with Trafigura could affect Nyrstar’s financial reports.

On Tuesday, Laurent Arnauts, a lawyer representing the shareholder group, peppered the board and auditor with questions. He has said they will file a lawsuit against Trafigura seeking about 1.5 billion euros ($1.7 billion) in damages.

The shareholders have demanded the company release a confidential report by KPMG, which Nyrstar says concluded that its contracts with Trafigura were negotiated at arms length.

“We paid for it. We paid you millions of euros. Please share the information that you have,” said Vansanten, the Nyrstar investor.

Konig said the company was bound by confidentiality agreements, but would consider making the report available. The report cost the company about 40,000 euros, he said.

Shareholders rejected a resolution that would have released former Chief Executive Officer Hilmar Rode for liabilities related to his performance during the financial year. A similar motion for Christopher Cox and Jesus Fernandez, both directors with links to Trafigura, was approved.

(By Andy Hoffman, with assistance from Mark Burton)

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