RE: dividend My opinion is that the dividend is relatively safe for the short term; but that being said the real issue is what happens after 2017 and the expiry of the Xstrata processing contract and what will they do as far as setting up reserves to pay for cleanup of the site if they cannot get replacement feedstock.
My personal belief is that Xstrata is playing hardball and wants to get the plant for a pittance in 2017 or earlier.
So far the outside directors are being cagey as well with looking for other material to process and I find it very interesting that the increase in capital spending is intended to improve the ability to process feedstock with higher impurity levels. I quote "In order for the Processing Facility to remain competitive in the future, it is important that it increase its silica removal capabilities".
I certainly hope that they are successful, and I would not be surprised if Xstrata later in the game agrees that they would like to have the plant process material post 2017. I do not have a very high opinion of Xstrata; but that is just an opinion partially based on their, in my opinion, lowball offer a while back.
The real trick is that during the next period NIF will have to set up reserves for clean up and site restoration as well as plant removal and pay for capital expenditure which is necessary to process different feedstock. In addition to all of that NIF will have to pay off debt rather than pay distributions as the banks want to get their money back whatever happens.
If the outside directors are successful in finding other material to process after the 2017 expiry of the contract I believe that Xstrata will reverse course and want to extend the contract.
If that happens then I think we will see Xstrata being willing to extend the contract meaning a large increase in the payout and capital value of the units; but that will be delayed with another 4 years to go in this painful journey.
Certainly my hope that the distribution is relatively safe depends on the short term earnings and is a hope rather than a firm conviction.