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FOR: NORANDA INCOME FUND

Noranda Income Fund Reports First Quarter Cash Provided by Operating Activities of $18.4 Million and Declares May Cash Distribution

May 14, 2012 - 19:08 ET

SALABERRY-DE-VALLEYFIELD, QUEBEC--(Marketwire - May 14, 2012) - Noranda Income Fund (the "Fund") (TSX:NIF.UN) reported solid first quarter cash provided by operating activities before net changes in non-cash working capital items, supported by the highest premiums since the first quarter of 2008 and near-record sulphuric acid netbacks. Adjusted EBITDA(1) increased to $29 million from $22.7 million in the same quarter a year ago.

Q1 2012 and Subsequent Highlights:

  • Cash provided by operating activities before non-cash working capital items of $18.4 million (up 38% from Q1 2011 - $13.3 million)
    • Premiums at 7.5 cents US per pound were the highest since Q1 2008
    • Near-record sulphuric acid netback of US$74 per tonne (Q1 2011 -US$59 per tonne)
  • Declared monthly cash distributions of $0.04167 per priority unit (each a "Priority Unit") for the months of January to May 2012
Annual General Meeting
May 15th, 2012 at 1 pm EST
Location: Gallery Room at the TSX Broadcast & Conference Centre, The Exchange Tower, 130 King Street West, Toronto, Ontario

Come and join us at the TSX Broadcast and Conference Centre, or listen to the AGM and view the slides from the Investor Centre/Conference Calls section of the Fund website: http://www.norandaincomefund.com/investor/presentations.html or click on this link: http://events.digitalmedia.telus.com/noranda/051512/index.php

Conference Call and Webcast:
May 16 at 9:00 a.m. EST
Dial in number: 416-340-8527
Toll-free North American number: 1-877-240-9772
In addition, you can listen to the teleconference and view the slide presentation from the Noranda Income Fund website: http://www.norandaincomefund.com/investor/conference.html or click on this link:
http://events.digitalmedia.telus.com/noranda/051612/index.php
Recording of the Conference Call:
Dial in number: 905-694-9451 or
Toll-free North American number: 1-800-408-3053.
The pass code is 7440 279# and you will be prompted for your name and company.
The recording will be available until midnight on May 30, 2012.

Financial and Operating Highlights

Earnings before income taxes were $15.6 million in the first quarter of 2012, compared to $16.7 million in the same quarter a year ago. The $1.1 million decrease was mainly due to lower zinc sales and lower copper prices, partially offset by higher premiums and sulphuric acid netbacks, lower production costs and lower finance costs.

In the first quarter of 2012, the provisional pricing feature in the Supply and Processing Agreement negatively impacted earnings before income taxes by $3.7 million. In the first quarter of 2011, the provisional pricing feature in the Supply and Processing Agreement positively impacted earnings before income taxes by $10 million.

Cash provided by operating activities before changes in non-cash working capital in the first quarter of 2012 was $18.4 million compared to $13.3 million in the first quarter of 2011. During the first quarter of 2012, non-cash working capital increased by $24.0 million due to an increase in accounts receivable and inventories and a decrease in income taxes payable, partially offset by an increase in accounts payable and accrued liabilities. During the first quarter of 2011, non-cash working capital decreased by $30.5 million due to a decrease in accounts receivable, an increase in accounts payable and accrued liabilities and the impact of the change in the fair value of the embedded derivative related to the zinc concentrate payable.

A full version of the first quarter 2012 Management's Discussion and Analysis ("MD&A") and the Unaudited Interim Financial Statements will be posted on the Fund's website, http://www.norandaincomefund.com/investor/financials.html today, May 14, 2012 and they will be available on www.sedar.com on May 15, 2012. Readers should be advised that the summarized communication presented in this press release is limited in its disclosure. It is not a suitable source of information for readers who are unfamiliar with the Fund, and it is not in any way a substitute for reading the Unaudited Interim Financial Statements and MD&A because a reader relying on this summary alone might overlook decision critical information.

May Cash Distribution

The Fund also announced today that the Board of Trustees of Noranda Operating Trust has approved a distribution for the month of May 2012 of $0.04167 per Priority Unit payable on June 25, 2012 to Priority unitholders of record as at the close of business on May 31, 2012.

There is no assurance that monthly distributions will continue in the future, nor is there any assurance that, if they do continue, the level or frequency of such monthly distributions will not vary from the level of the most recent monthly cash distributions.

Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". The Noranda Income Fund owns the electrolytic zinc processing facility and ancillary assets (the "CEZinc processing facility") located in Salaberry-de-Valleyfield, Québec. The CEZinc 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 byproducts from zinc concentrates purchased from mining operations. The CEZinc processing facility is operated and managed by Canadian Electrolytic Zinc Limited.

Except where otherwise indicated, all amounts in this press release are expressed in Canadian dollars.

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

SELECTED FINANCIAL AND OPERATING INFORMATION
First Quarter
($ thousands) 2012 2011
Statements of Comprehensive Income Information
Revenues 145,756 180,972
Raw material purchase costs 78,479 99,925
Revenues less raw material purchase costs 67,277 81,047
Other expenses:
Production 40,118 46,155
Selling and administration 5,284 5,628
Foreign currency gain (1,639 ) (2,417 )
Loss (gain) on derivative financial instruments (913 ) 1,450
Depreciation of property, plant and equipment 7,622 8,833
Rehabiliation recovery (819 ) (451 )
Earnings before finance costs and income taxes 17,624 21,849
Finance costs, net 2,047 5,167
Earnings before income taxes 15,577 16,682
Current and deferred income tax expense 5,431 5,716
Earnings attributuable to Unitholders and Non-controlling interest 10,146 10,966
Distributions to Unitholders 4,688 -
Current income tax recovery on distribution (1,367 ) -
Increase in net assets attributable to Unitholders and Non-controlling interest 6,825 10,966
Other comprehensive income (loss) (583 ) (404 )
Comprehensive income 6,242 10,562
Statements of Financial Position Information Mar. 31, 2012 Dec. 31, 2011
Cash and cash equivalents 1,758 1,497
Inventories 71,594 61,017
Accounts receivable 98,957 92,803
Property, plant and equipment 273,490 277,135
Total assets 455,646 447,389
Accounts payable and accrued liabilities 65,686 60,795
Total bank and other loans 105,077 94,216
Total liabilities excluding net assets attributable to unitholders 245,260 243,245
First Quarter
Statements of Cash Flows Information 2012 2011
Cash provided by operating activities before net change in working capital items 18,364 13,269
Net change in working capital items (23,994 ) 30,509
Cash provided by operating activities (5,630 ) 43,778
Cash used in investing activities (4,651 ) (4,298 )
Cash used in financing activities 10,542 (35,717 )
Net increase in cash and cash equivalents 261 3,763
Distributions declared per Priority Unit 0.12501 -
First Quarter
Key Performance Drivers 2012 2011
Zinc concentrate processed (tonnes) 132,141 128,045
Zinc grade (%) 53.5 53.9
Zinc recovery (%) 96.7 96.5
Zinc metal production (tonnes) 62,813 63,953
Zinc metal sales (tonnes) 62,273 69,373
Processing fee (cents/pound) 39.2 38.9
Zinc metal premium (US$/pound) 0.075 0.062
By-product revenues ($ millions) 12.4 13.1
Copper in cake production (tonnes) 737 858
Copper in cake sales (tonnes) 747 881
Sulphuric acid production (tonnes) 110,286 106,737
Sulphuric acid sales (tonnes) 110,333 105,612
Average LME copper price (US$/pound) 3.77 4.38
Sulphuric acid netback (US$/tonne) 74 59
Average LME zinc price (US$/pound) 0.92 1.09
Average US/Cdn. exchange rate 1.00 0.99
* 1 tonne = 2,204.62 pounds

Adjusted Earnings before Distributions to Unitholders, Finance Costs, Income Taxes, Depreciation and Amortization ("Adjusted EBITDA")

Adjusted EBITDA is used by the Fund as an indication of cash generated from operations. Adjusted EBITDA is not a recognized measure under IFRS and therefore the Fund's method of calculating Adjusted EBITDA is unlikely to be comparable to methods used by other entities.

The Fund's Adjusted EBITDA is calculated by starting with earnings before finance costs and income taxes and adjusting for all of the non-cash items such as depreciation, rehabilitation expense, net change in employee benefits, changes in fair value of embedded derivatives and non-cash gains/(losses) on derivative financial instruments. A reconciliation of earnings before finance costs and income taxes to Adjusted EBITDA for the first quarter of 2012 compared to the first quarter of 2011 is provided below:

Adjusted EBITDA
First Quarter
($ thousands) 2012 2011 Variance
Earnings before finance costs and income taxes $ 17,624 $ 21,849 $ (4,225 )
Depreciation of property, plant and equipment 7,622 8,833 (1,211 )
Net change in rehabiliation liability (1,017 ) (452 ) (565 )
Loss on derivative financial instruments 364 1,503 (1,139 )
Change in fair value of embedded derivatives 3,716 (9,989 ) 13,705
Loss on sale of assets 218 726 (508 )
Net change in employee benefits 450 257 193
$ 28,977 $ 22,727 $ 6,250
(1) Adjusted EBITDA (as defined below) is non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore the Fund's method of calculating Adjusted EBITDA is unlikely to be comparable to methods used by other entities. Please see reconciliation of earnings before finance costs and income taxes to Adjusted EBITDA at the end of this press release.


FOR FURTHER INFORMATION PLEASE CONTACT:

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



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