Noranda Income Fund Unit T.NIF.UN

RE:RE:RE:RE:RE:TD and Mkt prices

[Bigbird9999]

Yup.  Under market terms NIF wil pay for 85% of the Zn in con but the plant recovers 97.5% of the Zn in con.  This means that NIF recovers about 77 kg (155  lbs) of free Zn in every tonne of con.  They treat about 500000 tonnes per year of con so they are getting about 38500 tonnes for free.  They sell this "free zinc" in USD at LME (today $2400 per tonne) plus the 8 cent per lb premium ($175 per tonne) = $2575 per tonne = ~$3400 CAD per tonne times 38500 tonnes = $130 million CAD.  If the LME price of zinc moves up by $100 to $2500 the revenue to NIF increases by about
$5 million CAD.  As they have stated, we can expect earnigs to be volatile.

If we ignore the speculators, the price of Zn metal goes up or down depending supply of metal.  Metal can be in short supply because there is not enough metal being mined.  This is the case today.  Demand for metal is higher than the amount being mined.  so the price of metal goes up.  There is more smelter capacity than mine capacity so concentrate is scarce and the treatment charges go down as the smelters compete with one another to get enough feed..  

But this is a fluid situation.  As the price of metal goes up, dormant mines (and new mines) start up because the high value of Zn makes them economic.  You might recall that Glencore shut down about 500000 tpa of Zn metal (1,000,000 tonnes of con) capacity in early 2016 because the price of Zn was only $1500.  This capacity could be brought back on line very quickly (a few months).  If this were announced today we would certainly see a big jump in projected market term TCs and probably a down tick in the LMEprice. 

Meanwhile you can bet that a multitude of small mines are doing everything they can to increase production to take advantage of the current high price.

BB