NIF news -Noranda settles terms with Glencore NIF Noranda settles terms with Glencore re Zn concentrates
Fri Mar 08 08:16:04 2019 EDT
Noranda Income Fund (TSX:NIF)
Shares Issued 37,489,975
Last Close NIF.UN 3/7/2019 $1.73
Friday March 08 2019 - News Release
Mr. Paul Einarson reports
NORANDA INCOME FUND ANNOUNCES TERMS AGREEMENT
Noranda Income Fund has successfully reached an agreement with Glencore Canada, on the terms under which zinc concentrate will be purchased and zinc metal will be sold for the period of May 1, 2019, to April 30, 2020.
Last year, on March 8, 2018, the Fund announced it reached agreements pursuant to which Glencore Canada will supply the Fund with all of its zinc concentrate requirements and purchase all of the Fund's zinc metal for the four year period ending April 30, 2022. The terms are to be agreed annually in-line with prevailing market conditions and in consultation with the Independent Trustees' industry consultants.
Over the last several months, treatment charges have rebounded in favour of smelters but the pricing environment threatens to continue to be volatile. The Fund, in that context, has favoured and successfully negotiated a combination of 50% of the concentrate feed at a fixed treatment charge and the remaining 50% at a variable treatment charge that will reflect market movement during that period, in addition to other provisions of the four-year agreement.
Eva Carissimi, President and Chief Executive Officer of Canadian Electrolytic Zinc Limited, the Fund's manager, commented, "At the end of the initial term of the SPA, in May 2017, after 15 years during which the Fund had enjoyed favourable contractual conditions, the Fund started operating under market conditions. This transition occurred during a period of shortage of supply due to the closure of several large mines in 2016 and 2017, resulting in very low treatment charges. According to industry analysts such as Wood Mackenzie and CRU, the market has recently rebounded, and the terms under which zinc concentrate will be supplied to the Fund, from May 1, 2019 to April 30, 2020, will reflect this more favourable market environment."
The Fund does not expect to realize the full impact of these terms until all inventory purchased prior to May 1, 2019 has been fully processed. This is expected to occur in the third quarter of 2019.
The market terms have not been disclosed, as the terms are commercially sensitive as reflected in the contractual requirement and market practice that the pricing information be kept confidential.
Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". Noranda Income Fund owns the electrolytic zinc processing facility and ancillary assets (the "Processing Facility") located in Salaberry de-Valleyfield, Quebec. The Processing Facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of zinc customers are located. It produces refined zinc metal and various by-products from sourced zinc concentrates. The Processing Facility is operated and managed by Canadian Electrolytic Zinc Limited, a wholly-owned subsidiary of Glencore Canada Corporation.