Industrial and financial assets

In 2020, strategic investments and alliances with carefully selected counterparties continued to further extend the scope of our activities and service offer.

Trafigura Mining Group

Trafigura 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. The Mining Group generates equity value for Trafigura Group and traded volumes for our metals trading books, and provides advisory and support services to the rest of the Group.

Globally, this was a challenging year for the majority of our mining assets. The COVID-19 crisis had a far-reaching impact – both directly, where mines were explicitly ordered to suspend operations, and indirectly, by creating difficulties in logistics or in moving people.

Separately, MATSA, our Spanish 50:50 copper joint venture with Mubadala, regrettably suffered two fatal accidents, its worst safety performance on record. Production on site was also heavily impacted by a regional forest fire in August which forced the temporary suspension of activities and evacuation of the area. The accidents have prompted a comprehensive and wide-ranging reevaluation of safety culture at the site and an employee consultation process is ongoing.

Despite these challenges, MATSA remains our flagship operation with copper equivalent production approaching 100,000 metric tonnes per annum, a production rate similar to last year. The site continues to benefit from a high-quality, long-life mineral reserve and an ever-increasing mineral resource thanks to successful exploration campaigns.

The Catalina Huanca mine in Peru was the worst affected by COVID-19; it was being forced to suspend operations twice during the year. Otherwise, it operated efficiently each time mining was allowed to resume, with management reopening operations quickly and safely. Catalina Huanca is currently transitioning to a new, largescale mining method known as sub-level open-stoping, which is similar to the technique in use at MATSA and will significantly and safely reduce operating costs.

The Castellanos zinc and lead mine, a joint venture between Trafigura and Cuban parastatal Geominera, had a very difficult year. COVID-related restrictions relating to the movement of people into and out of the site impacted efficiency and created bottlenecks in the supply of spare parts and in maintenance operations. The site still managed to process 1.1 million tonnes of ore, against the original design capacity of one million tonnes.

The Ipe iron ore mine in Brazil’s Minas Gerais province performed well and benefitted from higher iron ore prices. The life of the operation has been extended from the original planned closure date of 2021 to 2024, thanks to the ingenuity of our local staff. Meanwhile, construction on our Tico Tico project, the long-term extension of Ipe, is expected to start in 2021.

The Mining Group has continued to manage the Canadian mine belonging to Nyrstar Group, which was absorbed into Trafigura in July 2019, two months before the start of this financial year. We placed the Langlois mine in Quebec in December 2019 under care and maintenance in line with the mine closure plan, and are ramping up the Myra Falls mine in British Columbia, working on structural and organisational improvements.

Trafigura Mining Group continues to focus on implementing and improving high operational standards across our portfolio in areas such as safety, maintenance, human resources, geology and mining, budgeting, community relations and environmental and project management.

Galena Asset Management

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.

During 2020, Galena's investments benefitted from strategic decisions put in place to meet the ongoing challenges arising from the global pandemic and its impact on logistical chains.

Galena Private Equity Resources Fund

This fund was launched in 2012, became fully invested in 2017 and holds 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.

In January 2020, Galena Asset Management assisted Wolverine Fuels in refinancing their debt to provide additional comfort in terms of cash flows. Continued support from Trafigura was crucial, in the form of a new USD100 million revolving credit facility.

Terrafame

Terrafame currently represents Galena Asset Management’s single largest investment. The company performed well in 2020, continuing to deliver strong growth on all fronts, with improved production, higher net sales and stronger profitability.

The company has reached an agreement with Galena Asset Management and its other investors on funding arrangements and further financing to ensure the continued development of its operations during the uncertain market conditions and to finalise the implementation of the nickel sulphate project. Output from the latter will help meet growing demand for the use of nickel sulphate in electric vehicles batteries.

Galena Multistrategy Fund

This fund, established with an initial allocation of USD45 million in November 2018 to invest in liquid, commodity-related strategies across multiple asset classes, performed relatively well in a complicated global commodity and macro environment. This year has been particularly challenging across asset classes as correlations broke normal patterns and volatilities remained high.

Upstream opportunities

The recent price dislocation in the oil market has dramatically increased the M&A activity in the upstream sector. Galena Asset Management will select the most attractive opportunities from a risk adjusted perspective and that can be optimised in terms of production efficiency.

Renewables

In line with Trafigura’s investment programme in the renewables sector, Galena Asset Management will work with Trafigura to provide investment opportunities in this arena for external investors.

Impala Terminals

Impala Terminals owns and operates a variety of port, logistical, storage and transportation assets that support Trafigura’s commodity trading business in the Americas, Europe, the Middle East and Africa. These assets are held separately from those included in Trafigura’s joint venture with IFM Investors formed in 2018.

Impala Terminals reported a robust performance across the majority of its operations, despite the overall global decrease in the flow of goods and recurrent supply-chain challenges caused by the COVID-19 pandemic.

Throughout the year, Impala Terminals invested significantly in training, protective equipment and additional on-site operational measures to ensure the continued safe working conditions for its staff, contractors and customers. Regrettably, despite the existence and application of these preventative measures, a crewmember on one of Impala Terminals’ Colombian fluvial operations contracted COVID-19 in May 2020 and subsequently passed away in July 2020.

Impala Terminals’ African assets in Zambia and the Democratic Republic of the Congo (DRC) had a busy year with business expanding briskly, including the growth of traditional copper export flows and newer import volumes, principally chemicals for use in the growing African mining industry. Impala established new office and storage space in the Ndola and Kolwezi warehouses in Zambia and the DRC, respectively. Furthermore, it increased regular bi-directional rail services to ports in Angola, South Africa and Tanzania. In 2021, Impala will continue to focus on growing volumes and its import business.

In Colombia, where Impala Terminals operates an inland port at Barrancabermeja and a barging operation from the Atlantic ports of Barranquilla and Cartagena, the government has pledged to dredge the Magdalena River by mid-2021, which will enable deeper draughts and increased volumes of cargo. Despite the current limited barge payload, due to river depth, Impala Terminals was still able to transport over 1.3 million metric tonnes of oil, dry and product cargoes from Barrancabermeja port in 2020. From 2021, now that Barrancabermeja is registered as an international port, Impala Terminals' Colombian operations will be able to export coffee beans by container.

In Chile, Impala’s four sites, in Coquimbo, Arica, Antofagasta and Copiapo, expanded steadily throughout 2020. Storage capacity grew to 200,000 metric tonnes to support Trafigura’s concentrates trading business and Chilean and Bolivian exports from mining companies. In 2020, Impala serviced more than 700,000 metric tonnes of concentrates, 400,000 metric tonnes of which was exports from and deliveries to local smelters on behalf of Trafigura. The Trafigura-funded terminal at the Codelcoowned port of Barquito is expected to come on line in the first quarter of 2021 and the facility will be managed by Impala Terminals. It will also seek to expand capacity in the north of the country to cater for Trafigura’s growing business in the region.

In Bolivia, operations were hampered by a six-week closure as a result of government measures to contain the spread of COVID-19. Since this time, operations have resumed as normal.

Meanwhile, at the Burnside terminal in the US state of Louisiana, the drop in the volume of US coal exports and a challenging alumina market caused a 40 percent fall in throughput volumes compared to 2019, prompting significant cost cuts. Looking forward, Burnside plans to diversify its offering by entering new product cargo markets and will seek to transform part of the site into a photovoltaic solar farm.

In Dubai, Impala Terminals Middle East upgraded and expanded its facility and diversified cargoes handled. The impact of the COVID-19 pandemic was minimised due to the diversity of services provided and goods handled and the strategic location of the port.

Impala Terminals continues to manage the challenges associated with climate change and the transition to a low-carbon economy. It will continue to measure and manage its emissions, in line with Trafigura Group's climate change strategy.

Nyrstar

Trafigura became 98-percent shareholder of leading zinc and lead processing business Nyrstar in July 2019 after a financial restructuring, and the company was fully integrated into the Trafigura balance sheet at the end of that month.

In its first year consolidated into the Trafigura Group, Nyrstar made solid progress through operational improvements and an investment programme to restore production stability. However, the Division showed a net loss of USD146 million, reflecting the ongoing recovery from financial difficulties of recent years. Given the distressed situation of Nyrstar before the acquisition date of 31 July 2019, prior result figures are not comparable to the current year performance.

A key priority for Nyrstar under new ownership was to restore stable production which had been seriously impacted by the company's prior financial difficulties. Capital investment during the year amounted to USD280 million, with a similar figure planned for FY2021. This has enabled Nyrstar to replace important plant and equipment after years of under-investment, and to undertake improvement projects that will generate operational cost savings and efficiency improvements.

All of the company’s European smelters maintained production despite the market disruptions resulting from the global pandemic. The Port Pirie smelter in South Australia raised production to its design rate and is on course to reach availability targets in 2021. However, overall output and financial targets for the year were not achieved owing to production interruptions as a result of equipment failures.

Highlights from the year include:

• A new, streamlined corporate office in Budel, Netherlands, close to one of its major operations with a significant reduction in head office costs;
• Successful completion of integration with Trafigura’s commercial teams in purchasing feedstocks and marketing refined metal, leading to better plant utilisation and more consistent performance for customers;
• Significant logistical efficiencies, including a shift from road to rail transport in Belgium and the use of containers to move product between Port Pirie and the company’s other Australian smelter in Hobart, Tasmania;
• The development of a number of solar and wind powered renewable energy projects across a number of Nyrstar sites;
• A renewed focus on safety and environmental performance, including reduced emissions and improving water quality. Nyrstar has committed to reducing lead in air from the Port Pirie smelter by 20 percent;
• Development of a culture of teamwork and collaboration, enabling Nyrstar to get the most out of its expert and experienced employees as well as new senior management recruits.

Overall, thanks to strong financial backing from Trafigura, Nyrstar is on a much stronger footing going into 2021, with enhanced confidence in the future and strengthened relations with customers as a result of more consistent delivery performance.

TFG Marine

TFG Marine is a new joint venture company that Trafigura established in 2020 with two of the world’s largest shipowners, Frontline Ltd and Golden Ocean Holdings Ltd, to build a strong position in the global bunker fuel market, through the procurement and supply of marine fuels for its shareholders and affiliated entities as well as third parties.

In its first eight months of operation, the company, 75-percent-owned by Trafigura, grew rapidly, building on its established market position in West and South Africa to add operations in Asia, the Americas and northwest Europe. The latter includes bunkering operations in the English Channel, and in the major Amsterdam- Rotterdam-Antwerp hub.

TFG Marine has also developed its procurement business, purchasing approximately 250,000 metric tonnes of fuel per month in over 250 bunkering ports globally. Another key highlight of the year was obtaining a bunkering licence in Singapore in May. The city-state accounts for close to 20 percent of the world’s bunker market. TFG Marine has already established a strong position and plans to grow volumes significantly during FY 2021.

By the end of September 2020, less than eight months after inception, TFG Marine was operating in 12 physical bunkering locations supplying 540,000 metric tonnes of marine fuel per month, or 6.5 million metric tonnes per year globally, equating to approximately 300 trades per month. The joint venture was able to add significant volumes by bringing in two further exclusive purchasers of bunker fuel, Norway-based Avance Gas, one of the world’s leading VLGC shipowners, and Flex LNG, a carrier based in Bermuda and listed on the Oslo Stock Exchange.