RE: financialsYes the earnings are good; but Xstrata is negotiating hard or should I say Hardball.
See the Xstrata release in response (I believe) to a question by Roland Kyper (spelling of name?) of Clearwater capital. The link to one publication of this release is below.
https://www.msnbc.msn.com/id/43423032
I see this as part of a strategy on the part of Xstrata to keep the price of the units down and to cause bankers to want rapid pay down of any long term debt by the end of the existing contract in 2017. At the same time they will want to cause a large provision to be made for any “Rehabilitation” Liability which will instil doubt about the future of the plant.
I believe that the current, and near term, cheap processing charge by processors in Asia will be there for the next few years; but that, as the Asian processors fill their plants, the prices they charge will rise and we will face a new economic situation where their processing charge plus the freight to get concentrates there will make the operation of the NIF plant competitive in the post 2017 time period. I certainly do not expect Xstrata to admit any such possibility.
Xstrata may well be willing in 2017 to extend the contract so that NIF continues to operate post 2017 with a then debt free plant. There is also the possibility that the “independent” trustees will make sure that enough concentrate supply is received from non Xstrata sources that the negotiation with Xstrata can be done without having to go hat in hand to Xstrata begging them to supply concentrate for very low processing charges simply to keep the plant operating.
I also do not think that the Canadian and Quebec governments would look kindly on action by Xstrata to ship concentrate to Asia from Canada and shut down good environmentally sound Canadian plants. Employees in Quebec, even though they are Xstrata employees. would also not look favourably at such action.
The operation can certainly pay back bank long and short term debt rapidly and also pay a distribution during the meantime which should only be limited by what is available less what is demanded by the bankers to be paid off on their loans. I also expect that having a significant institutional investor in Clearwater Capital prodding the “Independent” trustees will also result in the bankers becoming more and more reasonable as the long term debt is paid off and the short term becomes less and less as a percentage of the assets securing it.