Noranda Income Fund Unit T.NIF.UN

RE:Noranda earns $7.8-million (U.S.) in Q3

[ljp0101]

Headline earnings were misleadingly good and included a bunch of garbage hedging / provisional pricing / rehabiliation liability accretion that doesn't reflect underlying economics. Still, they executed well in quarter - great recoveries and byproduct prices were good - and grew adjusted EBITDA handsomely on lower adjusted revenue. That said, adjusted EBITDA (5.7) less finance cost (1.9) less D&A (3.7) was essentailly breakeven and that's the underlying performance.

Management comments seemed about right - good potential for next year but TCRCs haven't moved yet, zinc demand impact from goings on isn't clear and is a source of uncertainty, and competitive position versus Europe is good. 4Q will be better with higher free metal prices but the hoped for TCRC turnaround will be next year if it materializes.

Europe really seems to have a structural power cost problem. What's not clear yet is how they intend to address it for heavy industry and I tend to think there will be a mix of subsidies and closures, which is helpful but not sure if it will be enough.

CEZ is positioned nicely for next year and beyond with low cost power, the expansion and dirty concentrate projects coming online, and reduction in North American refined zinc production with Flin Flon closing soon. But the question as always is will this benefit NIF shareholders or Glencore. Glencore winning again with NA physical premiums doubling but NIF receiving a fixed premium from Glencore until May next year...