Noranda Income Fund
TSX : NIF.UN

Noranda Income Fund

November 11, 2013 15:56 ET

Noranda Income Fund Reports Third Quarter Earnings Before Income Taxes of $13.9 Million

SALABERRY-DE-VALLEYFIELD, QUÉBEC--(Marketwired - Nov. 11, 2013) - Noranda Income Fund (the "Fund") (TSX:NIF.UN) had a solid third quarter. The Fund's financial results continue to be supported by the stability of the Supply and Processing Agreement.

Q3 2013 Highlights:

  • Earnings before income taxes were $13.9 million (Q3 2012 - $8.7 million)

  • Zinc metal production was 61,331 tonnes (Q3 2012 - 60,615 tonnes)

  • Zinc metal sales were 66,420 tonnes (Q3 2012 - 60,953 tonnes)

  • Zinc premiums averaged 8.4 cents US per pound (Q3 2012 - 7.6 cents US per pound)

  • Sulphuric acid netback remained strong at US$73 per tonne (Q3 2012 - US$79 per tonne)

  • Monthly cash distributions from July to October 2013 were $0.04167 per priority unit (each a "Priority Unit"); continuing the consistent monthly distributions since they were resumed in September 2011

  • The Fund's debt was $58.4 million (net of deferred financing fees), down from $95.5 million at the end of December 2012

Conference Call and Webcast:

November 12th, 2013 at 8:30 a.m.

Dial in number: 416-340-9547
Toll-free North American number: 1-800-772-8997

In addition, you can listen to the teleconference and view the slide presentation from the Conference Call section of our website: http://www.norandaincomefund.com/investor/conference.html or click on this link: http://www.gowebcasting.com/5088

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 4213 015# and you will be prompted for your name and company. The recording will be available until midnight on November 26th, 2013.

Long-Term Strategy

Work on the long-term strategy for the Fund continues with the services of an industry consultant who is assisting the Independent Committee in identifying possible alternative sources of zinc concentrate after the expiry of the Supply and Processing Agreement in 2017.

2013 Capital Spending

The main focus of the 2013 capital spending program is the silica removal project. By the end of September 2013, $6.0 million had been spent. Commissioning remains scheduled for the summer of 2014.

The 2013 capital expenditure forecast has been reduced to $40.4 million from $46 million as some of the work and expenditures associated with the silica removal project has shifted to the first quarter of 2014.

Financial and Operating Highlights (Third quarter 2013 compared to the third quarter 2012)

Earnings before income taxes in the third quarter of 2013 were $13.9 million compared to $8.7 million in the same quarter a year ago. The $5.2 million increase was mainly due to stronger premiums and zinc metal sales, higher processing fee and the impact from derivative financial instrument (gain) loss, partially offset by negative concentrate payable settlement adjustments (see the third quarter 2013 Management's Discussion and Analysis ("MD&A") for further details).

Cash provided by operating activities in the third quarter of 2013, before net changes in non-cash working capital items, was $15.8 million compared to $15.1 million during the same period of 2012. Cash distributions of $4.7 million were declared in both the 2013 and 2012 quarterly periods. During the third quarter of 2013, non-cash working capital decreased by $10.1 million due to a decrease in accounts receivable and inventories and an increase in accounts payable and accrued liabilities. During the third quarter of 2012, non-cash working capital decreased by $14.2 million due to an increase in accounts payable and accrued liabilities.

Financial and Operating Highlights (Nine months of 2013 compared to nine months of 2012)

Earnings before income taxes in the first nine months of 2013 were $55.7 million compared to $36.0 million in the same period a year ago. The $19.7 million increase was mainly due to stronger premiums and zinc metal sales and higher processing fee, positive concentrate payable settlement adjustments and the impact from movement in the exchange rate, partially offset by lower by-product revenues (see the third quarter 2013 MD&A for further details).

Cash provided by operating activities in the first nine months of 2013, before net changes in non-cash working capital items, was $48.5 million compared to $47.2 million during the same period of 2012. Cash distributions of $14.1 million were declared in both the first nine months of both years. During the first nine months of 2013, non-cash working capital decreased by $21.0 million due to a decrease in inventories and accounts receivable, partially offset by a decrease in accrued liabilities. During the first nine months of 2012, non-cash working capital increased by $2.8 million due to a decrease in income taxes payable and an increase in inventories, partially offset by an increase in accounts payable and accrued liabilities and a decrease in accounts receivable.

OTHER DEVELOPMENTS

On November 5, 2013, Manuel Álvarez Davila resigned from the Board of the Noranda Operating Trust. A replacement candidate is expected to be appointed soon. On behalf of the Board, John Swidler, Chair, would like to thank Manuel for his wise counsel during his tenure as a Board member.

A full version of the third quarter 2013 MD&A and the unaudited Interim Condensed Consolidated Financial Statements will be posted on www.sedar.com and on the Fund's website at http://www.norandaincomefund.com/investor/financials.html today, November11, 2013. 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 second quarter unaudited Interim Condensed Consolidated Financial Statements and MD&A because a reader relying on this summary alone might overlook decision critical information.

FORWARD-LOOKING INFORMATION

This press release contains forward-looking information and statements within the meaning of applicable securities laws, including statements on 2013 capital expenditures and the commissioning of the silica removal project. 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 the Noranda Income Fund can be found at www.norandaincomefund.com

SELECTED FINANCIAL AND OPERATING INFORMATION
Third Quarter Year-to-date
($ thousands) 2013 2012 2013 2012
Statements of Comprehensive Income Information
Revenues 148,460 128,555 461,092 426,897
Raw material purchase costs 72,001 70,810 218,842 222,044
Revenues less raw material purchase costs 76,459 57,745 242,250 204,853
Other expenses:
Production 46,596 38,803 136,906 126,735
Selling and administration 4,421 4,715 15,262 15,765
Foreign currency (gain) loss (2,016 ) (2,522 ) 5,086 (2,094 )
Loss (gain) on derivative financial instruments 3,333 (1,896 ) (87 ) (2,581 )
Depreciation of property, plant and equipment 9,433 7,905 27,566 24,440
Rehabilitation (recovery) expense (659 ) 168 (3,164 ) 656
Earnings before finance costs and income taxes 15,351 10,572 60,681 41,932
Finance costs, net 1,444 1,827 5,003 5,972
Earnings before income taxes 13,907 8,745 55,678 35,960
Current and deferred income tax expense 3,098 2,690 11,737 12,655
Earnings attributable to Unitholders and Non-controlling interest 10,809 6,055 43,941 23,305
Distributions to Unitholders 4,688 4,688 14,063 14,063
Current income tax recovery on distribution - (1,367 ) - (4,101 )
Increase in net assets attributable to Unitholders and Non-controlling interest
6,121


2,734


29,878


13,343

Other comprehensive income (loss) 1,154 (1,304 ) 7,034 (2,834 )
Comprehensive income 7,275 1,430 36,912 10,509
Statements of Financial Position Information September 30, 2013 Dec. 31, 2012
Cash and cash equivalents 15,190 1,303
Inventories 64,331 91,697
Accounts receivable 86,087 98,347
Income taxes receivable 5,025 4,801
Property, plant and equipment 265,446 270,867
Total assets 443,058 477,629
Accounts payable and accrued liabilities 56,496 72,448
Total bank and other loans 58,355 95,509
Total liabilities excluding net assets attributable to unitholders 171,138 242,621
Third Quarter Year-to-date
Statements of Cash Flows Information 2013 2012 2013 2012
Cash provided by operating activities before cash distributions and net change in non-cash working capital items
20,525


19,772


62,599


61,261

Cash distributions (4,688 ) (4,688 ) (14,063 ) (14,063 )
Net change in non-cash working capital items 10,133 14,194 20,988 (2,847 )
Cash provided by operating activities 25,970 29,278 69,524 44,351
Cash used in investing activities (7,738 ) (5,730 ) (17,655 ) (16,133 )
Cash used by financing activities (4,179 ) (19,853 ) (37,982 ) (23,630 )
Net increase in cash 14,053 3,695 13,887 4,588
Cash distributions declared per Priority Unit 0.12501 0.12501 0.37503 0.37503
Third Quarter Year-to-date
2013 2012 2013 2012
Zinc concentrate processed (tonnes) 122,216 120,899 379,907 372,887
Zinc grade (%) 53.2 54.5 53.2 54.2
Zinc recovery (%) 97.3 97.1 97.3 96.6
Zinc metal production (tonnes) 61,331 60,615 198,030 188,949
Zinc metal sales (tonnes) 66,420 60,953 204,559 192,890
Processing fee (cents/pound) 39.5 39.2 39.5 39.2
Zinc metal premium (US$/pound) 0.084 0.076 0.084 0.075
By-product revenues ($ millions) 9.2 9.2 29.8 31.0
Copper in cake production (tonnes) 330 584 1,330 1,736
Copper in cake sales (tonnes) 373 307 1,599 1,541
Sulphuric acid production (tonnes) 97,700 100,259 306,761 308,965
Sulphuric acid sales (tonnes) 97,964 95,344 305,269 312,939
Average LME copper price (US$/pound) 3.21 3.50 3.35 3.61
Sulphuric acid netback (US$/tonne) 73 79 72 74
Average LME zinc price (US$/pound) 0.84 0.86 0.87 0.88
Average Cdn/US exchange rate 1.038 0.995 1.024 1.002
* 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 International Financial Reporting Standards ("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 from earnings before finance costs and income taxes and adjusting for all of the non-cash items such as depreciation, (gain) loss on the sale of assets, changes in fair value of embedded derivatives and non- cash gain on derivative financial instruments. In addition, an adjustment is made to reflect the net change in the rehabilitation liability (reclamation (recovery) expense less site restoration expenditures) and the net change in employee benefits (non-cash employee benefit expenses less employer contributions).

A reconciliation of Adjusted EBITDA that compares the third quarter and first nine months of 2013 to the same periods in 2012 can be found in the table below:

Adjusted EBITDA Q3/2013 Q3/2012 Change
($ thousands)
Earnings before finance costs and income taxes $ 15,351 $ 10,572 $ 4,779
Depreciation of property, plant and equipment 9,433 7,905 1,528
Net change in rehabilitation liability (791 ) 164 (955 )
Loss (gain) on derivative financial instruments 484 (1,073 ) 1,557
Change in fair value of embedded derivatives 223 5,402 (5,179 )
Loss (gain) on sale of assets 41 (420 ) 461
Net change in employee benefits (253 ) (485 ) 232
$ 24,488 $ 22,065 $ 2,423
Adjusted EBITDA YTD/2013 YTD/2012 Change
($ thousands)
Earnings before finance costs and income taxes $ 60,681 $ 41,932 $ 18,749
Depreciation of property, plant and equipment 27,566 24,440 3,126
Net change in rehabilitation liability (3,530 ) 466 (3,996 )
Gain on derivative financial instruments (4,926 ) (2,200 ) (2,726 )
Change in fair value of embedded derivatives (1,006 ) 10,263 (11,269 )
Gain on sale of assets (521 ) (112 ) (409 )
Net change in employee benefits (585 ) (1,164 ) 579
$ 77,679 $ 73,625 $ 4,054

Contact Information

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