Noranda Income Fund Unit T.NIF.UN

RE:RE:RE:RE:RE:RE:RE:Why woudl I ever invest in Noranda? Help please

[Bigbird9999]

NIF is on track to produce Adjusted Net Revenues (EBITA)  of $60 million for 2020.  Like clockwork it reports $15 million per quarter. This is pretty stable as it is baked into the complex and secret agreements that are in place.  The average annual CAPEX is $30 million and allowing another $10 million for reserves/contingencies leaves approx $20 million in free cash which  could be distributed.  Over 2020 this $20 million has been entirely consumed by the increase in Raw material  inventory ($45 million).  Glencore has total control of NIF and they rely on the huge swings in metal prices, TCs, unexpected events like covid , etc. to obscure and hide the free cash and report break even earnings.  

Every quarter, the financial position of NIF gets about $15 million stronger.  So far all they do is pay down debt (the LOC) or increase inventory or pay it to Glencore as interest or fees calculated and justified by some opaque  "secret" formula that cannot be revealed because it is business confidential.  

The independent board can rightly say that using the free cash to pay down debt and/or increase RM inventory enhances shareholder value and they would not be wrong.  But they could also decide to pay us a portion as a monthly distribution.  The biggest hurdle is that the ABLOC lender must agree. Consider that they could use $5 million per year of the $20 million of excess cash generated to pay  a monthly distibution of 1.5 cent CAD per share.  This would cost $560000 CAD = $420000 USD per month giving us about 15% dividend at todays SP (18 cents per year on $1.20).  I isuspect his would generate an immediate bump in the SP.

Of course Glencore and its puppet management will do everything they can to make it seem that it is beter to retain the cash on the balance sheet as reserves and inventory than it is to give it to a bunch of pesky, whinning share holders.  Glencore owns 25% of NIF.  If they pay a distribution, Glenore gets 25% of the cash.  If they retain the cash it stays on the balance sheet and Glencore gets to keep and control 100% of the cash until some day in the distant future when the fund is liquidated or more likely Glencore will produce a lowball offer and take NIF private.

The problem is that we have no leverage, and no activist shareholder who wants to take on Glencore.  Call me deluded, but I believe that the day they resume distributions is closer than you may think.

GLTA
BB