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FOR: NORANDA INCOME FUND

Noranda Income Fund Announces Agreements With Glencore Canada for Purchase of Concentrate and Sale of Metal

Mar 8, 2018 - 07:45 ET

SALABERRY-DE-VALLEYFIELD, Québec, March 08, 2018 (GLOBE NEWSWIRE) -- Noranda Income Fund (TSX:NIF.UN) (the “Fund”) has reached agreements pursuant to which Glencore Canada will supply the Fund with all of its zinc concentrate requirements and purchase all of the Fund’s zinc metal for the four year period ending April 30, 2022.  The agreements are being entered into in the ordinary course of the Fund’s business and has been unanimously approved by the independent trustees of Noranda Operating Trust, after consultation with their independent industry consultants.

The Fund will buy the zinc concentrate and sell the zinc metal for the twelve-month period ending April 30, 2019 based on fixed market terms for both concentrate and metal. Thereafter, the terms will be agreed annually in-line with prevailing market conditions and in consultation with the Independent Trustees’ independent industry consultants.

“The agreements provide us with a certainty of supply for the next four years which will allow us to execute our investment plan to increase capacity and reduce our unit operating costs in what continues to be a tight market for zinc concentrates,” said Eva Carissimi, President and CEO of the Fund. Through our most recent negotiations, the Fund has the option to diversify its supplier base beginning in 2020. The Fund can decide to exercise this option depending on market conditions,” stated Jean Pierre Ouellet, Chair of the Board of Trustees. “The Fund will continue to monitor the market in anticipation of this option.”

To illustrate the impact of the market terms under the agreements on the Fund, management has forecasted Adjusted EBITDA1 for the twelve-month period ending December 31, 2018 to be US$16 to US$20 million. This forecast is an estimate that may not be indicative of future results, which will be impacted by future prices of zinc metal as well as other factors such as levels of production, foreign exchange, zinc premiums and by-product prices.

* The assumptions used for the forecast were:
Zinc price (US$ per pound) $1.50
US$/CAD$ exchange rate $0.80
Copper price (US$ per pound)$2.72
Zinc metal production and sales (tonnes)250,000 to 260,000
Zinc cathode tolled (tonnes)20,000
Zinc concentrate and secondary feed processed (tonnes)477,000 to 496,000

 

The market terms have not been disclosed, as the terms are commercially sensitive as reflected in the contractual requirement and market practice that the pricing information be kept confidential.

On January 31, 2017, in light of the prevailing market conditions now facing the Fund, the Board of Trustees announced the suspension of monthly distributions to unitholders.  There is no assurance that monthly distributions will resume in the future.

Forward-Looking Information

This press release contains forward-looking information and statements within the meaning of applicable securities laws. Forward-looking information involves known and unknown risks, uncertainties and other factors, which may cause actual events, results or performance to be materially different from any future events, results or performance expressed or implied by the forward-looking information, and as a result, the Fund cannot guarantee that any forward-looking statements or information will materialize.

Such risks and uncertainties include, but are not limited to, the effect of general business and economic conditions, market prices for zinc metal, foreign exchange rates, the Fund's ability to operate at normal production levels, the Fund's capital expenditure requirements and other general risks and uncertainties set out in the Fund's continuous disclosure documents on available on SEDAR at www.sedar.com.

Forward-looking information contained in this press release is based on, among other things, management's current estimates, expectations, assumptions, plans and intentions, which management believes are reasonable as of the current date, and which are subject to a number of risks and uncertainties. Except as required by law, the Fund does not undertake to update these forward-looking statements or information, whether written or oral, that may be made from time to time by the Fund or on the Fund's behalf.

Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". Noranda Income Fund owns the electrolytic zinc processing facility and ancillary assets (the "Processing Facility") located in Salaberry-de-Valleyfield, Québec. The Processing Facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of zinc customers are located. It produces refined zinc metal and various by-products from sourced zinc concentrates. The Processing Facility is operated and managed by Canadian Electrolytic Zinc Limited, a wholly-owned subsidiary of Glencore Canada Corporation.

Further information about Noranda Income Fund can be found at
www.norandaincomefund.com.

For further information, please contact:
Michael Boone
Vice President and Chief Financial Officer, Canadian Electrolytic Zinc Limited
Noranda Income Fund's Manager
416-775-1561
info@norandaincomefund.com

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Adjusted EBITDA is used by the Fund as an indication of cash generated from operations.  Adjusted EBITDA is not a recognized measure under International Financial Reporting Standards and therefore the Fund’s method of calculating Adjusted EBITDA is unlikely to be comparable to methods used by other entities.  It is calculated by starting from earnings (loss) before finance costs and income taxes and adjusting for all of the non-cash items such as depreciation, gain or loss on the sale of assets and changes in fair value of embedded derivatives. In addition, an adjustment is made to reflect the net change in the rehabilitation liabilities (reclamation (recovery) expense less site restoration expenditures) and the net change in employee benefits (non-cash employee benefit expense less employer contributions).



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