SALABERRY-DE-VALLEYFIELD, QUEBEC--(Marketwired - Nov. 3, 2016) - Noranda Income Fund (TSX:NIF.UN) (the "Fund") announced today that it has received written notification from Glencore Canada indicating that it will renew the Supply and Processing Agreement of zinc concentrate for a period of five years through May 2, 2022. In accordance with the terms of the current Supply and Processing Agreement, under the renewed term commencing on May 3, 2017, Glencore Canada will arrange, as Agent on behalf of the Fund, for the purchase of the zinc concentrate required by the Fund. The Fund is expecting that such purchases will be at market terms. Purchase arrangements, including market terms, have yet to be agreed. The transition to market terms will represent a significant change from the fixed processing fee the Fund has benefited from since its inception. As a result of the change to market term pricing, the Fund's financial results will differ materially, beginning in the second quarter of 2017. Glencore Canada will continue to act as Manager of Noranda Operating Trust and of the Partnership and as Administrator of the Fund, in accordance with the Operating and Management Agreement, the Management and Services Agreement and the Administration Agreement, respectively, which have all been extended for a period of five years ending on May 2, 2022.
"Renewing our Supply and Processing Agreement with Glencore Canada represents a significant milestone and removes a considerable amount of uncertainty for our operations," said Ms. Eva Carissimi, President and Chief Executive Officer of Canadian Electrolytic Zinc Limited, the Fund's Manager. "We have made concerted efforts over the past two years to control unit costs and improve efficiency at the plant and the Fund's transition to market terms means that we will have to continue to do so."
With the renewal of the Supply and Processing Agreement, the main challenge now facing the Fund will be to continue to operate its Processing Facility at a profit once market terms take effect May 3, 2017. The Fund's Board of Trustees is mindful of the expected negative impact that the transition to market term pricing will have on the Fund's operations, including its ability to sustain its distribution policy. The Board of Trustees is carefully reviewing the Fund's reserves and will augment the reserves if necessary.
The Fund expects to report its financial results for the third quarter 2016 on November 11 before the markets open, and expects to include a discussion on its near-term outlook as well as the possible impact that the transition to market terms will have over the longer term.
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, 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.
Except where otherwise indicated, all amounts in this press release are expressed in Canadian dollars.
Further information about Noranda Income Fund can be found at www.norandaincomefund.com