Share PriceSince the company announced a temporary shutdown to fix some problems in the cell house and will likely have to replace the whole cell house for a longer term fix at a cost of US$100 million, the share price collapsed from $1.10 to the current level of $0.40. Why? In my opinion, fear of bankruptcy, where are they going to get the $100 million and Glencore. All legitamete concerns. I had them myself until after seeing the financial results for the 3rd Q and listening to the conference call today.
Could they go bankrupt? Not a chance, in my opinion. They just reported an operating cash flow before working capital changes of $41 million for the 3rd Q under difficult operating circumstances. Once the short term fixes are in place, which could be in a matter of 4 weeks, the plant will be extremely profitable at current TC's and zinc prices. They will probably have a loss in the 4thQ as they will have been operating for a month or so. The experts on TC's, CRU and Wood Mackenzie, are estimating that TC's in 2023 will average around $300/t. Current benchmark and spot TC's are $230/t and $255/t respectively. In a normal operational year, the company treats about 550,000 of concentrate per year and in 2021 when spot TC's averaged about $85/t, Noranda they reported an operating cash flow of about $10 million.
How are they going to get the $100 million to replace the cell house by the end of 2024, which would probably be the earliest that it could happen. At current and forecast TC's, they could probably finance most of it from internally generated funds, plus, once the banks see how much money they are making for a few quarters, they will be all over them to loan them money. Banks love lending money to companies that may not need it. The fall back position would be the Quebec government or the Caisse,who love lending money to Quebec based companies if it helps employment.
what about Glencore? Anyone following Noranda over the past several years is well aware of how they have blatantly screwed Noranda's shareholders other than Glencore. This too may change if enough of us get together and nominate and elect a truly independent board of trustees.
What about valuation! At a current price of $0.40 the shares are trading at a 72% discount to net-net working capital per share and less than one tenth of book value per share. Discounts like this are usually accorded to companies that are losing gobs of money and are on the verge of going bankrupt. Noranda just reported an operating cash flow of $41 million, which is 2X's their market capitalization.
Given the outlook for TC's by the experts, I do not think that even Glencore can screw this one up. If it is all a ploy to steal the company for a fraction of what it is worth, they will have their asses sued off.