Noranda Income Fund Unit T.NIF.UN

RE:RE:RE:RE:RE:Still waiting to enter this one

[Bigbird999]

Zn price doesn't really make much difference now or in 2017.  The earnings available to pay the monthly distributions are dependent on

1. Treatment charges
2. by product revenues
3. metal price premiums
4. the cost of converting Zn concentrate to salable Zn metal (largely electricity)

Nobody knows for sure what the treatment charges will be post SPA, but we do nknow what the effect would be today....  On page 24 of the presentation they calculate the EBITDA that would be achieved if they had purchased concentrate at market terms rather than the SPA.  The difference is about $20 million ($80 million actual vs $60 million if they had to purchase under market terms). 

Management keeps saying that there is a risk that the future treatment charges may be much lower than today or that they will not be able buy enough zinc concentrate to run the plant.  They empasise that there is a risk that the plant will have to shut down.  The likelyhood of this happening is close to zero.  They keep over emphasising the risks while under emphasising the positive factors such as

1. The debt will be paid off at the end of 2016  Currently they are paying it down by $15 million per year final payment Dec 2016.  So they will have $15 million more available for distribution or to offset the lower treatment charges
2. NIF energy costs are in the bottom quartile of competing Zn plants
3. They are carrying >$100 million worth of land on the balance sheet at $5 million
4. The guidance they issued for 2015 will generate ~$80 million of free cash flow
5.  

Tomorrow or Wednesday they will announce the March dividend payable at the end of April.  In a couple of weeks we will receive the Feb dividend.  The cyle will repeat monthly.  Enjoy....

BB