By Sarah Kent And Alex MacDonald
GENEVA--Trafigura Beheer BV is pushing to exert greater control
over one of the world's largest zinc refiners, its latest attempt
to solidify influence over a company that produces the commodities
it trades.
Trafigura is proposing two directors for the board of Nyrstar
NV, a Belgium-based zinc refiner in which it owns a 15% stake.
Shareholders vote on the board slate Wednesday. Nyrstar's existing
board and management oppose one of the candidates, saying he is too
closely associated with Trafigura to hold an independent director's
seat.
Last year, Trafigura based in the Netherlands, built up its
stake in Nyrstar after a steep drop in the latter's share price
following a rights issue. Trafigura has called the stake a
"strategic investment." Analysts figure Trafigura wants access to
the rights to trade the zinc Nyrstar produces, as well as to supply
its refineries with zinc concentrate.
Trafigura is the world's third-largest independent trading house
by revenue, behind Glencore PLC and Vitol Holding B.V. These three,
and many of their smaller peers, have built up holdings of physical
assets like pipelines, terminals, mines and refineries. That gives
them more control over things like production and delivery, and
more knowledge and information about supply and demand. All that
can help decision making when it comes time to buy and sell
everything from oil to soybeans.
Glencore has been the most aggressive acquirer of the group,
buying up mining giant Xstrata in 2013 for $29.5 billion. Trafigura
has tended to focus on logistical assets, like terminals and
pipelines, rather than oil fields, refineries or mines.
More recently, though, Trafigura has sought to make strategic
investments in producing companies, then aggressively leverage that
into influence on the board. Last year, it sought shareholder
support to oust the board of Spanish copper mining company EMED
Mining Public Ltd., after building a holding of about 19% in the
company.
The move came after Trafigura grew frustrated with EMED's slow
progress financing and developing its copper project in southern
Spain, according to people familiar with the situation. EMED's mine
is about 20 miles from Trafigura's Agua Teñidas copper mine.
Trafigura is building a processing plant that would benefit from
additional volumes. In the end, four EMED directors--including the
CEO and chairman--stepped down as part of a $30 million bridge-loan
agreement, funded in part by Trafigura. EMED declined to
comment.
In a recent bond prospectus, Trafigura said it was seeking to
build on its Spanish assets to create a stand-alone, midsize mining
company, without elaborating on its strategy in regards to EMED.
Trafigura added that its investments "are focused on identifying
and harnessing opportunities that provide complementary volume flow
to its trading business, open up new markets and create recurrent,
sustainable income sources."
With Nyrstar, Trafigura said it saw an opportunity to buy into a
business with an attractive outlook, based on its expectations that
zinc prices are heading up in the long term. But it also said it
saw the potential for operational improvements, and Trafigura's
sizable position in the zinc market could benefit both parties.
"It was a strategic investment...but when we sit back we think
we can add value given that we have one of the largest zinc
concentrate trading books," Chief Executive Jeremy Weir, told
reporters recently.
Nyrstar is opposed to the appointment of Martyn Konig, chief
investment officer for T Wealth Management SA, a private investment
vehicle used by some of Trafigura's senior management. His ties to
Trafigura make him unacceptable as an independent director, Nyrstar
says.
"Mr. Konig has clear ties to Trafigura as evidenced by his
involvement in the private company which manages Trafigura's senior
executives' personal finances," said Julien De Wilde, Nyrstar's
chairman, in a statement.
Trafigura says Mr. Konig's relationship with the trading house
wouldn't compromise his independence, and that he has years of
experience that make him well-qualified to sit on the board.
Write to Sarah Kent at sarah.kent@wsj.com and Alex MacDonald at
alex.macdonald@wsj.com
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