Noranda Income Fund Unit T.NIF.UN

RE:RE:RE:RE:RE:RE:RE:Some sizeable trades lately

[ljp0101]

Someone wanted out in size prior to end Q3, presumably a fund. Line got cleaned up and we're back to minimal volume.

You are all missing the problem here. NIF is stuck in a toxic contract with Glencore that is effectively giving them Glencore's choice of spot and annual TCRC with a floor that gives NIF zeroish FCF (so they don't idle). No other ex-China plant is mostly on spot and there seems to be a structural 50-100/t discount for spot vs annual. And NIF can't exit the contract because they don't have the contractural right to do so. And they can't liquidate because the remediation estimate consumes all their assets. And they can't sell CEZ to anyone but Glencore because who wants to own a plant they don't control. I wonder about the legality of this contract given the onorous terms but no one is effectively advocating against it.

So the status quo investment thesis is NIF puts up all the capex to keep the plant cost competitive and doesn't earn its cost of capital but there will be one year in ten when the market gets tight and there's a very nice dividend, which was supposed to be two years ago. Or the zinc TCRC pricing mechanism changes away from annual so that Glencore pays NIF the same terms other Western plants get, which I think happens at some point in the future as it's done in other commodities. And you need Extract to not close up shop because their only out is selling to Glencore in a takeunder.

Metal Bulletin said a week ago that spot TCRCs are 75-88/t with the energy news, which is still terrible.