Noranda Income Fund Unit T.NIF.UN

RE:RE:RE:RE:Oh no, more smelter cuts possible! TC spot 200/ton !

[Bigbird9999]

lpj makes a good point.

"Next Glencore shoe to drop will be some usurous working capital facility as credit facility isn't big enough with the price and expansion volume increase at the inventory levels CEZ has been running."

At year end, they only had $15 million room left ($165 drawn) on the $180 million abl.  The plant operates with an inventory of 2 - 4 months of zinc production = 50,000 - 100,000 tonnes in order to blend the feed and handle the choppy deliveries of concentrate.  This inventory is financed by debt drawn against the ABL line. 

Q4 inventory was $173 million ~$25 million WIP and FG = ~8000 tonnes (which remains pretty constant) and ~$150 million RM.  Over the past 6 quarters Zn in RM (concentrate) has varied from ~40,000 - 90,000 t with a value of $125 - $250 million @Q4 LME.   Worst case is they increase inventory to 4 months which at todays prices will increase the inventory to $280 million ($100 million) over the available ABL limit.  Even a slight inventory increase of say 15000 tonnes (2 1/2 weeks) will push the inventory value to $230 million ($50 millionover the ABL limit).  So, like ljp said we can expect some sort of new financing scheme which will, of course, benefit only  Glencore to appear any time now.

However, as lpj points out this will all unwind in Q2 and if LME and TCs are maintained close to today's levels there will be huge earnings generated later this year.
GLTA
BB