Noranda Income Fund Unit T.NIF.UN

RE:Reserves

[Bigbird9999]

Don't think they moved cash but they did take a $60 million cad writedown on the PPE.  There were so many moving parts that it requires a deep dive to see what happened.  T

1. They started reporting in USD in 2018 and restated 2017 from CAD to US so you can't compare the numbers prior to 2017 without converting to USD
2. Under the old agreement NIF carried the finished goods inventory until it was delivered. This caused huge swings in the inventory. Remember the 30000 tonnes of cathode that hey had to sell to Glencore because they had no space on the ABL credit line.  Inventory value peaked at  $232 million at the end of 2017.  For 2018 $150 million 2019  $172 million.  In the future inventory should be pretty stable at $150 -$200 million which equates to a concentrate inventory of 3 - 4 months.  
3. Under the new agreement Glencore purchases all of the FG inventory at the end of each month.  So the huge swings in sales vs production are eliminated.  
4. Cash generated by operations In USD were 2016 +$44 million, 2017 - ($44 million) 2018 -(7 million) Q319 +36 million on track for full year 19 to be +$56 million
5. Debt went from $48 million in 2016 to $109 million in 2017 to $134 million in 2018  Almost all of this was caused by the cash consumed in operations of $50 million.  Q3 2019 debt is $111 million and be $90 million at year end.

From what I can see with my engineer's eyes they stopped distributions as the operation ate $51 million cash for 2017 and 2018.  This was financed by debt and now that we have a reasonable TC and stable sales the operation will generate ~$20 million per quarter going forward.  If they apply half  of the cash to the debt it will be reduced to $50 million  by the end of 2020 and they will have $50 million in cash that they must distribute or invest in PPE or ???

BB