Noranda Income Fund Unit T.NIF.UN

RE:Zinc price looking frothy now

[Bigbird999]

Zinc price has virtually no effect under the current SPA Net revenue is very stable (unless they decide to impair the assets like in the past).  Under market terms it is a difffernt story.  Net revenues will be very volatile.  Under market terms,NIF benefits from a higher zinc price and lower CAD$.  $100 change in LME makes ~$8million change in net revenues.  1 cent change in $CAD makes ~$2 million change in net revenue.  Play around with that calculator I posted a while back to see each the effect. 

I am hopeful that NIF and Glencore will reach an agreement that is a similar form to the current agreement because it removes the volatility.  Current TC is 40.5 cents CAD per lb.  NIF can be profitable down to the low 30s cents/lb.  The question is can they find a number that both parties can live with for 5 years.    If not, they will be have to agree on market terms that change annually making future profits, distributions and SP very volatile. 

BB