Recently, Nyrstar was in the process of setting up centralised treasury operations and introducing a new business model in which the company’s metal inventory throughout the production and sales process would be owned by a central commercial entity. In addition to this entity, the treasury organisation was further developed in order to centralise the company’s daily cash position fully.

Problem…

The metals business is primarily USD-based, but Nyrstar’s conversion activities – turning concentrate into metal – are carried out by plants in Europe, Australia and the US, giving rise to some currency discrepancies.

Prior to reviewing the business model, Nyrstar’s plants processed their collections and payments locally and independently. The introduction of the central commercial entity was considered as an opportunity to streamline global cash management and manage the group’s liquidity globally, with the following objectives in mind:

• Funds to be managed out of the Belgian treasury headquarters.
• Set up a centralised cash management structure for all global group companies.
• Increase efficiency in collection processes and liquidity management.
• Maximise straight through processing.
• Reduce the cost of transaction processing.
• Improve group overview of cash management activities.

Nyrstar issued a Request for Proposal for the cash management business in each of its main currencies, looking for a best-in-class solution to address all of the above requirements. At the end of 2008, Deutsche Bank was mandated to become the global clearer for Nyrstar’s USD business and to implement the proposed structure.

…Solved

The first part of the solution was to set up USD accounts for making payments relating to the purchase of concentrate and receiving collection flows relating to the company’s worldwide sales. Accounts were opened in Singapore and the US and managed centrally from the Belgian headquarters. Westpac, Deutsche Bank’s partner bank in Australia, being the incumbent bank of Nyrstar’s Australian plant, was maintained and integrated in the structure. All of Nyrstar’s accounts with Deutsche Bank are accessible via Deutsche Bank’s online portal ‘db direct internet’, meaning that the treasury headquarters in Belgium have control over the group’s cash, as requested.

In response to Nyrstar’s needs, Deutsche Bank implemented a ‘USD sweep with the sun’ solution, taking advantage of time zone differences as follows:

1. USD receivables in Asia are collected on accounts in Deutsche Bank Singapore and are visible via Deutsche Bank’s electronic banking platform, db direct internet.
2. At end-of-day Singapore time (SGT), all available funds are zero balanced to the local concentration account.
3. Excess cash in the local concentration account is transferred intra-day to the global USD concentration pool at Deutsche Bank New York. As the funds are credited in the early morning (EST), funds can be used for daily payments in New York or for short-term cash management needs.
4. At end-of-day New York time (EST), all available funds are zero balanced to the local concentration account. Excess cash is then automatically invested overnight.

The new global USD cash concentration structure provided by Deutsche Bank has achieved Nyrstar’s objectives of increasing the efficiency of collections and liquidity management, maximising straight through processing, reducing the cost of processing and improving the overall visibility of the company’s cash management. “The fact that Deutsche Bank was proposing a ‘sweep with the sun’ solution allowed the treasury in Belgium to deal with USD supplier and customer flows in the different time zones,” concludes Bert Heylen, Group Treasurer, Nyrstar.