Noranda Income Fund Unit T.NIF.UN

RE:NORANDA AND TREVALI SHAREHOLDERS BEING SCREWED BY GLENCORE

[Finalsay]

So Trevali pays "benchmark" TCs to Glencore which are $300 per tonne. First off I would be super appreciative if you could point me to where you are getting this number, and also any information you have how the benchmark is calculated. I find it quite difficult to find public details regarding TCs on the internet. I find it interesting that benchmark TCs are so far from current spot prices as I thought benchmarks were designed to at least somewhat follow what they are benchmarking.

Also why is Noranda being screwed by receiving spot TCs? Is this uncommon for refiners with supply and purchase agreements and seen as a raw deal for Noranda?

I also feel like this Trevali --> Glencore --> Noranda linkage requires too many assumptions and simplifications. However even if this is exactly the arrangement, I still dont understand the economics of it. Normally middlemen just extract a fee from the deals and limit exposures to them (eliminate altogether if possible). If they are "screwing" someone in a deal then it is usually from exorbitant fees, not from taking the winning side of a deal (as that would make them a counterparty not a middleman). In this case where you describe Trevali --> Glencore --> Noranda they would have exposure to the difference between benchmark and spot treatment charge. While this exposure is currently extremely profitable ($200/tonne) it does not make sense at all to me for Glencore to hold this exposure if they are acting as middlemen. I think my main questions for you would be why are you assuming that having this exposure will always be profitable why Glencore would want to take oneside bets in arranging the contracts when they are supposed to be acting a middleman? It's possible this exposure to differences between benchmark and spot prices is actually a hedge for the opposite exposure in another deal, but if that's the case than this arrangement you are describining is certainly over simplified, and the winning party of these arrangements is actually the 4th party that is holding the other side of the Glencore deal that Glencore is hedging with this one. This scenario makes the most sense to me as at least Glencore's actions would actually fit with that of a middleman. But if that's the case it is much more difficult to suggest that Glencore is screwing Trevali and Noranda with these pricing arrangements.