The South Australian government is considering legal action against Belgian metals processor Nyrstar after its decision to delay repayments on a loan which helped fund an upgrade to its smelting operations at Port Pirie.
Treasurer Rob Lucas says the company has indicated it will delay the first $37 million repayment to its financiers which is due on May 28.
Mr Lucas has described this as surprising and says it potentially impacts on the government, as the previous Labor administration provided a guarantee for $291.25 million in external finance for the project which was completed in January this year.
He says the company's board has blamed cost overruns, delays in completion of the project, delays in reaching full production and their impact on earnings for its decision.
Yet, the treasurer said only two weeks ago Nyrstar indicated it would adhere to the five-year schedule for repayments.
"Nyrstar's decision to defer the first of these repayments has prompted the state government to demand in writing that Nyrstar Group members comply with their obligations," Mr Lucas told state parliament on Thursday.
He said Nyrstar had also indicated it was likely to defer additional payments until November 2019, estimated at around $81 million, or $118 million in total, which was likely to compound the exposure of South Australia through the guarantee issued by the former government.
Mr Lucas said, as a result, there was a "real prospect" of litigation.
"As Treasurer, I intend to defend the state's position and we as a government reserve our right to take all steps that may be necessary to ensure Nyrstar meets its contractual obligations," he said.