Trafigura awaits Nyrstar ruling as minority investors in zinc producer fight on

Nyrstar’s Balen smelter operations in Belgium. Image courtesy of Nyrstar NV

Three years after Trafigura Group took control of Nyrstar, minority investors in Europe’s largest zinc smelter are set to discover whether they can challenge the company’s conduct during that deal in a Belgian court.

On Tuesday, a judge in the city of Turnhout will decide whether Belgium’s courts have jurisdiction to rule over lawsuits brought against Trafigura by the 70 shareholders who hold less than a 2% equity interest in the business through Nyrstar NV. Those investors allege the trading house took advantage of its position as Nyrstar’s largest shareholder, infringing governance rules and corporate law.

“When the group started out we agreed that we might lose everything, but it would be worth it if we can make a difference in changing Belgium to provide better protection for the interests of minority shareholders,” said Kris Vansanten, one of the leaders of the investor group. “I’m more and more convinced that it’s worth the fight.”

Trafigura formally took control of Belgium’s Nyrstar in July 2019, through a restructuring it says was necessitated by the financial stress caused by the firm’s unsustainable debt levels and was approved by UK and US courts. Nyrstar racked up debt after making acquisitions at the peak of the mining supercycle in 2011.

The minority investors allege Trafigura helped push the company to the brink of bankruptcy by entering supply contracts skewed heavily in the commodity trader’s favor and by withholding key credit lines from Nyrstar.

“Trafigura is defending itself in the current court proceedings which it regards as without any merit whatsoever,” a spokesperson for the company said in a statement. “The commercial and financial agreements entered into by Nyrstar with Trafigura were on market-based terms and were not the cause of Nyrstar’s financial situation.”

The minority shareholders have raised fresh concerns about the conduct of both Trafigura and Nyrstar.

Documents made public in a June court pleading show Nyrstar discovered a potential 20 million-ton high-grade zinc ore-body at its Langlois mine in Canada in 2018, information that was not disclosed to the market. The mine has been put on care and maintenance since 2019 as a result of deteriorating ore grades, Trafigura said. While early-stage drill results can often hold inaccuracies, the investors say the discovery was material given the company’s precarious financial situation.

The shareholders also allege Trafigura delayed a prepayment facility linked to a metal supply contract it took over from rival Glencore Plc, which constrained Nyrstar’s cash position.

Previous court disclosures include a letter from advisers to Nyrstar’s board that said Trafigura threatened in 2018 to block Nyrstar from drawing on a key loan facility, accelerating a credit crunch that ultimately led to the trading giant’s takeover of the company. Trafigura now owns more than 98% of Nyrstar.

The minority investors also have lawsuits pending with directors of Nyrstar, the company’s former auditor Deloitte, and Belgium’s regulator, the Financial Services and Markets Authority.

(By Archie Hunter and Pablo Fernandez Cras)

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