Industrial and financial assets

Trafigura’s Mining Group has invested in a portfolio of mines in Africa, Latin America, North America and Europe, ranging from wholly-owned facilities to joint ventures and minority investments. As well as generating equity value for Trafigura Group and traded volumes for our metals trading books, it provides advisory and support services to the rest of the Group. The Mining Group had a satisfactory year, with a strong performance at MATSA mines in Spain accompanied by optimisation at the Castellanos joint venture in Cuba, an improved outturn at Catalina Huanca in Peru and consolidation at our Mineração Morro do Ipê iron ore operations in Brazil.

MATSA, our 50:50 copper joint venture with Mubadala, had a solid year for production and for metallurgical yield, with increased cost control contributing to a satisfactory financial result. We continued to invest in IT and automation, and combined with the improvements made last year, this should help the MATSA mines to further increase productivity next year, underlining resilience in the face of expected lower metal prices.

The Castellanos zinc and lead mine, a joint venture between Trafigura and Cuban parastatal Geominera, overcame some operational issues to achieve a significant improvement in plant performance, both in terms of overall throughput and concentrate quality, closing the year with favourable budgets. Total production rose to the original capacity level of 1 million tonnes, while ongoing work on increasing the capacity during the year has now raised potential production to 1.2 million tonnes for 2020.

In Brazil, the tailings dam incident at Vale’s Brumadinho mine impacted production at our Ipê mine directly and indirectly. Production was reduced to 1.5 million tonnes of iron ore compared to 1.9 million tonnes budgeted in 2019. We continued engineering work on Tico Tico, the future expansion of Ipê, and are ready to start construction of the new processing plant on receipt of the construction permits, with a view to commencing production in 2021. The current Ipê operation and the future Tico Tico project do not use dams to store the tailings; tailings are filtered and deposited as dry stacks, hence eliminating the risks associated with tailing dams.

Galena Asset Management, Trafigura’s wholly owned investment subsidiary, operates a number of funds investing in mining and related assets and offers thirdparty investors the opportunity to invest alongside Trafigura on an equal basis.

Galena Private Equity Resources Fund

This fund launched in 2012 and became fully invested in 2017, holding positions in three assets: Finnish nickel, zinc and cobalt producer Terrafame; Utah-based bituminous coal producer Wolverine Fuels; and the Mawson West copper mine in the Democratic Republic of the Congo.

Terrafame II Investment Vehicle

This fund was established to undertake a second investment in Terrafame, with the aim of adding a new production unit for nickel sulphate, a product in growing demand for use in batteries for electric vehicles. This fund closed with investment of USD225 million during 2019.

Galena Multistrategy Fund

This fund was established with an initial allocation of USD45 million in November 2018 to invest in liquid, commodity-related strategies across multiple asset classes.

Impala Terminals assets include a multimodal barging operation and inland port on the Magdalena River in Colombia. The governments intention to proceed with the dredging of the Magdalena River remains in place. The dredging of the river will enable deeper draughts, which will result in increased volumes of liquid cargo carried by our barging fleet.

In Africa, warehouse facilities at Lubumbashi, DRC, Dar es Salaam, Tanzania and Ndola, Zambia were all operating with increased volumes and a large new warehouse facility was opened near Lubumbashi to handle increasing volumes of copper exports from the DRC.

The Burnside bulk logistics export terminal on the Mississippi River in Louisiana, US, was operating well and launched a development project to diversify cargos handled in light of the drop in US coal exports.

Other assets include a growing footprint in Bolivia and Chile which handle concentrates and a multiproduct warehouse in Dubai, United Arab Emirates.

Impala Terminals Joint Venture

The asset management team of the recently formed joint venture with IFM Investors provides support to local management of all the other Impala Terminals assets to ensure that consistent and high quality standards, policies and practices are upheld across both entities.

On 31 July 2019, Trafigura became 98 percent owner of the operating business of Nyrstar, the world’s second largest producer of zinc metal, following a financial restructuring agreement with Nyrstar’s creditors and bondholders. As a result, the business is now consolidated within the Trafigura Group balance sheet.

Nyrstar is a major global industrial company employing more than 4,000 people around the world and producing approximately 1.1 million tonnes of zinc metal and 200,000 tonnes of lead metal annually.

Nyrstar was burdened with an inappropriate capital structure with an unsustainably heavy debt load and encountered increasing financial difficulties. In the second half of 2018, Nyrstar’s operational and financial performance deteriorated significantly, leading to a loss of market confidence and liquidity and necessitating a fundamental capital restructuring.

The restructuring involved many financial stakeholders. The goal of the restructuring was to deliver a viable financial structure for the Nyrstar business going forward. This restructuring was recognised as being the only realistic option available to Nyrstar, and the scheme was sanctioned by the UK courts on 31 July 2019, having taken into account the interests and priority of claims of all the financial stakeholders and with the support hereof.

The agreement reached among Nyrstar’s creditors in July enabled Nyrstar to focus on turning around its operations.

As the change of ownership took effect, Trafigura appointed Daniel Vanin, a seasoned company executive with 40 years’ experience in the metals industry, including leadership of mining and smelter development projects, as CEO of Nyrstar’s operational business. Other senior appointments followed, including a new CFO, who joined Nyrstar from the smelting division of Boliden.