Noranda Income Fund Unit T.NIF.UN

RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Getting realistic about NIF

[Bigbird999]

Armcorp...I think you are either misunderstanding or mistating the debt. 

Have a loook at note 15 of the 2015  Finacial statement.  There it explains that the "Debt owed to Glencore and affiliates" is a Current Liability.   NIF pays Glencore  about $250 million a year in fees and payments for goods and services that Glencore has purchased in their role as agents and operator of the fund and plant.  This debt is non interest bearing and is due in the normal course of business (i.e. a current liability).  In a "normal" company this would appear as an account payable.  NIF also pays Glencore about $450 million per year for the concentrate feed.  So the total purchases from Glencore total about $700 million (~$175 million per Q).  The $79 million that you consider to be debt is just what NIF happened to owe Glencore  on June 30.  It is simply a snapshot in time that amounts to about 45 days of payments owed to Glencore.  If you go back through the quarterly reports you will see this number jumps around a lot.  This is mostly due to the timing of deliveries of feed and other materials and when NIF writes a cheque for the goods and services they have receceived from Glencore over the quarter.

Because of its unique ownership structure they are reporting money due from and owed to Glencore as separate line items in the FS instead of lumping it into receivables and payables. For instance NIF consumes about $48 million per year of power, so at any point in time NIF owes Hydro Quebec about $4 million.  This is not reported separately but is lumped into AP and trade.  At June 30 Glencore owed NIF $7 million (receivables) down from $21 million on Dec 31 and NIF owed Glencore $79 million (payables) up from $24 million on Dec 31.  All things being equal, in most companies a reduction in receivables and an increase in payables would be considered a GOOD thing. 

As westcoast has said what you consider to be debt is simply the working capital requirement.  IF NIF chad drawn another $79 million on their credit line and paid the total owed to Glencore it would not have changed a thing except they would not owe Glencore anything.  The working capital would be the same except NIF would be financing another $79 millionon the LOC  rather than Glencore financing it as a payable (I am sure GC woould be very happy if NIF did this.

Relax, at the end of Dec 2016 there will be ZERO debt except for the credit line used to finance the working capital requirement. 

BB