Noranda Income Fund
TSX : NIF.UN

Noranda Income Fund

November 08, 2011 08:00 ET

Noranda Income Fund Reports Third Quarter Earnings Before Interest and Income Taxes of $20.5 Million

SALABERRY-DE-VALLEYFIELD, QUÉBEC--(Marketwire - Nov. 8, 2011) - Noranda Income Fund -

Q3 2011 and Subsequent Highlights:

  • On July 28, 2011 the Fund completed its refinancing.
  • With the financing in place, the Fund announced a cash distribution for the month of September 2011 of $0.04167 per Priority Unit, the first such monthly distribution since June 2009. The distribution was paid on October 25, 2011.
  • Cash flow from operating activities before changes in working capital was $18.9 million compared to $16.9 million in the third quarter of 2010.
  • Earnings before interest and income taxes were $20.5 million compared to $5.7 million in the third quarter of 2010.
  • Premiums averaged 5.8 cents US per pound compared to an average of 4.7 cents US per pound in the third quarter of 2010.
  • Byproduct revenues from the sale of copper in cake and sulphuric acid were $11.7 million compared to $9.3 million in the same quarter a year ago.
  • Bank and other loans (current and non-current) as at September 30, 2011 were $130.8 million, reduced by $59.4 million from year-end 2010 and by $15.8 million from the end of the second quarter of 2011.
  • Subsequent to the third quarter, the Fund announced a cash distribution for the month of October of $0.04167 per Priority Unit. The distribution is payable on November 25, 2011 to Priority Unitholders of record as at the close of business on October 31, 2011.
Conference Call and Webcast:
November 8 at 1:00 p.m. EDT
Dial in number: 416-340-2216
Toll-free North American number: 1-866-226-1792
In addition, you can listen to the teleconference and view the slide presentation from the Noranda Income Fund website http://www.norandaincomefund.com/.
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 5678 023# and you will be prompted for your name and company.
The recording will be available until midnight on November 22, 2011.

Noranda Income Fund (the "Fund") (TSX:NIF.UN) reported earnings before interest and income taxes of $20.5 million for the third quarter of 2011, compared to $5.7 million in the same quarter a year ago. The $14.8 million increase was mainly due to higher byproduct revenues, processing fee and premiums partially offset by a stronger Canadian dollar.

Earnings before interest and income taxes were $57.5 million for the first nine months of 2011 compared to $36.7 million for the first nine months of 2010. The $20.8 million increase was mainly due to higher byproduct revenues, processing fee and premiums, partially offset by a stronger Canadian dollar.

Third Quarter Year-To-Date
$ millions 2011 2010 2011 2010
Revenues 160.9 152.9 506.5 474.4
Net Revenues* 88.0 60.6 239.6 208.5
Earnings before interest and income taxes 20.5 5.7 57.5 36.7
* Revenues less raw material purchase costs

"The Fund had a good quarter. With the long-term refinancing now in place and the resulting elimination of the prohibition on cash distributions to Unitholders that existed under the bridge facility, the Board of Trustees declared a cash distribution to Priority Unitholders of $0.04167 in September and October," said Mario Chapados, President and CEO of the Fund's Manager. "While growth in the US economy is expected to ease as a result of the debt crisis in Europe and slower growth in China, the outlook for zinc and sulphuric acid remains steady."

Now that the Fund has stable financing in place until 2016, management and the Board of Trustees have turned to address the challenges which face the Fund with the expiration of the Supply and Processing Agreement ("SPA") in 2017. Pursuant to the SPA, the Fund is currently guaranteed a supply of zinc concentrate sufficient to operate the refinery at full capacity. As the Fund approaches the end of the SPA in 2017, its capacity to make distributions may be negatively affected by the need to establish out of its available cash flows, cash reserves to meet its obligations at that time. This analysis is ongoing and, as a consequence, the Board of Trustees will review its decision regarding distributions on a monthly basis.

There is no assurance that monthly distributions will continue in the future, and if they do continue, there is no assurance that, the monthly distribution will remain at the level of its most recent, October 2011 distribution.

Under the terms of its Trust Indenture, the Fund is required on December 31st of each year to distribute to its unitholders an amount equal to the Fund's taxable income for the year, to the extent that such amount has not already been distributed in the year. To the extent that such distributions cannot be made in cash, they are required to be made by an in-kind distribution of Fund units, whereby the tax obligation is effectively transferred from the Fund to the unitholders. Immediately following an in-kind distribution pursuant to the Trust Indenture, the Priority Units are automatically consolidated such that the number of outstanding Priority Units after the consolidation is the same number of Priority Units outstanding immediately prior to the in-kind distribution. See the Fund's December 17, 2010 press release for further information.

The Fund generated approximately $33 million of taxable income in the nine-month period ended September 30, 2011 and declared cash distributions of $1.6 million. As a result, the Fund currently expects it will be required to make an in-kind distribution at the end of 2011. The amount of the in-kind distribution will depend on the Fund's financial results for the remainder of the year, as well as any decision on future distributions for the remaining two months of the year.

The Independent Committee of the Board of Trustees, together with the Board of Trustees, are currently considering the impact of taxation and other consequences should the Fund convert to a corporation, while also considering the impact to the Fund and its unitholders of remaining as a trust.

The Fund has been negotiating a new labour contract with the United Steel Workers of America, Local 6486. The current contract expired October 31. Negotiations started on September 2, 2011 and continued until November 7 when the Fund decided to request the appointment of a conciliator from the Québec Ministry of Labour who will continue to support the negotiation process. The plant continues to operate under normal conditions.

A full version of the third quarter 2011 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/investorcentre/financials.html today, November 8, 2011, and they will be available on www.sedar.com on November 9, 2011. 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.

FORWARD-LOOKING INFORMATION

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws, including statements on when it intends to provide an update on distributions and statements regarding the current outlook for its metal and sulphuric acid businesses. The Fund provides this information on its businesses because they comprise some its key drivers. Readers are cautioned that this information may not be appropriate for other reasons.

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. You should not place undue importance on forward-looking statements or information and should not rely upon such information as of any other date. 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.

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. As a result, the Fund cannot guarantee that any forward-looking statements or information will materialize. For further details concerning the risks, uncertainties and other factors which may cause actual events, results or performance to be materially different from those expressed or implied by the forward-looking statements and information, reference should be made to the Fund's most recent Annual Report and Annual Information Form, copies of which are available on www.sedar.com.

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 CEZinc 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 CEZ processing facility is operated and managed by Canadian Electrolytic Zinc Limited.

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

Contact Information

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