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Noranda Income Fund Unit T.NIF.UN


Primary Symbol: NNDIF

Noranda Income Fund is a Canadian based income trust. The fund owns the electrolytic zinc processing facility and ancillary assets located in Salaberry-de-Valleyfield, Quebec. It produces refined zinc metal and by-products from sourced zinc concentrates. The fund's long-term objective is to maximize unitholder value and provide monthly distributions to unitholders.


OTCPK:NNDIF - Post by User

Post by JasonBillyon Apr 11, 2022 10:22am
199 Views
Post# 34593460

TDW Action Note 11 April 22

TDW Action Note 11 April 22
TDW Action Note copy/pasted below FWIW, not including all the numbers. Apologies for transgressing copyright rules.
 
Noranda Income Fund
(NIF.UN-T) C$1.68
 
Operational Issues Impact Q1; Rest of Year Expected to Normalize
 
Event
Noranda  released  Q1  production  Friday  after  market  close,  which  was  below
expectations, and reduced full year guidance as a result.
 
Impact: MIXED
 
Q1  zinc  production  was  57.6k  tonnes,  ~14%  below  our  estimate  of  66.8k  tonnes.
The first quarter was impacted by increased COVID-19-related absenteeism as well
as  cold  weather  impacting  maintenance  activities  resulting  in  a  record  number  of
electricity curtailments. However, based on the new 2022 guidance, the company is
expecting production to normalize during the remainder of the year, with the second
half expected to benefit from strategic expansion projects.
 
Despite the lower production in Q1, we are increasing our 2022 and 2023 estimates
to reflect the significant rise in both zinc TCs and zinc metal premiums over the past
three months.
 
Q1/22 zinc production of 57.6k tonnes was below our estimate of 66.5k tonnes. Sales were 66.3k tonnes (TD: 66.5k tonnes).
2022  guidance  now  255-265k  tonnes - 
down from previous guidance of 270-280k tonnes. The mid-point of the new guidance range would imply average production of ~67.5k tonnes for the remaining three quarters, an indication they expect  production  to  normalize  (and  likely  increase  in  the  second  half  the  year with the strategic expansion projects completed).
Spot TCs rise again in March:
Spot TCs rose again in March to $175/t (based on Wood MacKenzie). This is up from significantly from $85/t in December. The rising TCs largely relate to smelter curtailments in Europe due to high electricity prices; a situation we believe could get worse given the ongoing war in Ukraine.
Zinc  premiums  also  surging:
Amid  very  tight  markets  for  refined  zinc, spot premiums in North America have spiked to a record $0.26/lb. This is up from $0.10/lb in 2021. Noranda is expected to have exposure to these rising premiums in the new contractual period (starting May 1), although the terms are not disclosed. We have increased our realized premiums estimates as a result.
 
TD Investment Conclusion
We are maintaining our BUY recommendation and increasing our target price to C$2.50 from C$1.85 previously. Our valuation continues to be based on a 3.5x EV/EBITDA multiple on our 2022 estimates.
 
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