SALABERRY-DE-VALLEYFIELD, QUEBEC — (Marketwired) — 11/11/14 — Noranda Income Fund (the „Fund“) (TSX: NIF.UN)
Q3 2014 Highlights
„Operations were back to normal and zinc metal production was strong after a challenging first half of the year.“ said Eva Carissimi, President and Chief Executive Officer of the Fund. „With the silica project commissioned, we are now able to focus on optimizing process control.“
Distribution Policy and Outlook
When not restricted, and as may be considered appropriate by the Board, the Fund–s policy is to make monthly distributions to Unitholders. In determining whether there shall be a distribution and the level thereof, the Board reviews periodically the Fund–s financial performance, business environment and prospects, and determines the appropriate level of reserves. There is no assurance that distributions will continue in the future, nor is there any assurance that if they do continue, the level or frequency of such distributions will not vary from the level of the most recent monthly cash distribution.
The initial term of the Supply and Processing Agreement ends on May 2, 2017, and with it the favourable pricing of concentrate supply comes to an end. There is a risk that zinc concentrate in quantities and the blend of qualities necessary for the smelter to operate profitably may not be available after May 2, 2017. The Fund is considering several scenarios including the possibility that operations be discontinued. As a result, reserves may be required in advance of May 2017, including to provide for the costs related to a potential discontinuance of operations, with a corresponding effect on cash available for distributions.
Financial and Operating Highlights (Comparing the three months ended September 30, 2014 to September 30, 2013)
Earnings before income taxes in the three months ended September 30, 2014 was $13.4 million compared to earnings of $13.9 million in the same period of 2013. The $0.5 million decrease was mainly due to lower zinc metal sales and by-product revenues, higher concentrate acquisition costs and reclamation expense, partially offset by higher premiums and a weaker Canadian dollar.
Cash used by operating activities in the three months ended September 30, 2014 was $20.9 million, including a negative $30.6 million increase in non-cash working capital. In the same period of 2013, cash provided by operating activities was $26.0 million, which was positively impacted by a $10.1 million decrease in non-cash working capital. Cash distributions of $4.7 million were declared in the third quarter of both 2014 and 2013.
For the three months ended September 30, 2014, non-cash working capital increased by $30.6 million due to an increase in inventories and accounts receivable, partially offset by an increase in accounts payable and accrued liabilities:
During the quarter, the $30.6 million increase in non-cash working capital was funded by borrowing from the Fund–s asset-backed credit facility.
Financial and Operating Highlights (Comparing the nine months ended September 30, 2014 to September 30, 2013)
Earnings before income taxes in the nine months ended September 30, 2014 were $21.9 million compared to $55.7 million in the same period of 2013. The $33.8 million decrease was mainly due to lower zinc metal sales and by-product revenues and higher concentrate acquisition costs and reclamation expenses offset by higher premiums and a weaker average Canadian dollar compared to the US dollar.
Cash used by operating activities in the nine months ended September 30, 2014 was $20.6 million, including a negative $51.8 million increase in non-cash working capital. In the same period of 2013, cash provided by operating activities was $69.5 million, which was positively impacted by a $21.0 million decrease in non-cash working capital. Cash distributions of $14.1 million were declared in the first nine months of both years.
For the nine months ended September 30, 2014, non-cash working capital increased by $51.8 million, largely due to an increase in inventories partly offset by an increase in accounts payable and accrued liabilities and by a reduction in accounts receivable:
During the nine months ended September 30, 2014, the $51.8 million increase in non- cash working capital was funded by borrowing from the Fund–s asset-backed credit facility and a drawdown in cash.
Conference Call and Webcast:
November 11th, 2014 at 12:00 p.m. ET
In addition, you can listen to the teleconference and view the slide presentation from the Conference Call section of the Noranda Income Fund website: or click on this link: http://www.gowebcasting.com/6115
Recording of the Conference Call:
The pass code is 6640 569# and you will be prompted for your name and company.
The recording will be available until midnight on November 25th, 2014.
A full version of the third quarter 2014 Management–s Discussion and Analysis („MD&A“) and the unaudited Interim Condensed Consolidated Financial Statements will be posted on and on the Fund–s website at today, November 11, 2014. 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 third quarter unaudited Interim Condensed Consolidated Financial Statements and MD&A because a reader relying on this summary alone might overlook critical information required to make an investment decision.
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, Quebec. 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 .
SELECTED FINANCIAL AND OPERATING INFORMATION
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 from earnings 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, changes in fair value of embedded derivatives and non- cash gain or loss 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).
The Fund–s Adjusted EBITDA is currently supported by the stability of the Supply and Processing Agreement. It is expected that the Fund–s Adjusted EBITDA will be subject to more variability once this agreement expires in May 2017.
A reconciliation of Adjusted EBITDA for the three months and nine months ending September 30, 2014 compared to the same periods in 2013 are provided below:
Contacts: Michael Boone Vice President and Chief Financial Officer Canadian Electrolytic Zinc Limited Noranda Income Fund–s Manager 416-775-1561
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