Particularly infuriated with todays price actionFinally vented in a note...which I am sure will spure managment into action (lol).
Management and directors should consider shutting down and selling the plant
It appears clear from the continued drop in market value (even with more than 70 M$ in capital investments since 2014) that no one believes that Noranda will continue as an ongoing concern. Rather than continued squandering of investment dollars, the management team and board should consider implementing a shut down and sale of remaining assets. I currently believe there is more value to shareholders (or at least 70 percent of shareholders) proceeding with this than continually throwing good money away.
If we look at the current plant valuation of 128 M$, this is about half the historical value and probably 1/5 the replacement value. If we look at valuations of plants around the world, selling the process equipment should allow shareholders to obtain some value. Using a replacement cost of 500 M$ for the plant, I would suggest selling process equipment whole should allow revenue of 50 M$. Selling the plant for scrap is difficult to determine, but possibly 25 M$. The land value probably has another 25 M$, though the board and management will need to determine this.
It's interesting to compare current valuations of zinc refiners to determine plant valuations. Below is a table of data recently taken from Investing.com comparing plant valuations.
| | Rev | MV | rev/MV | equity | MV/equity | Percent |
| Noranda | 854.2 | 42.4 | 0.05 | 153.5 | 0.3 | -24 |
| Zhuzhou | 18.9 | 3.81 | 0.20 | 0.2 | 19.1 | 11 |
| Korea Zinc | 7055000 | 7614000 | 1.08 | 6887443 | 1.1 | 8 |
| Shenzen | 27.4 | 16.96 | 0.62 | 11.9 | 1.4 | 23 |
| Henan | 17.9 | 6.72 | 0.38 | 3.6 | 1.9 | 47 |
| Huludao | 7.1 | 4.95 | 0.70 | 2.8 | 1.8 | 20 |
| Yunnan | 16.7 | 26.83 | 1.61 | 15 | 1.8 | 43 |
| Baiyin | 67 | 21.25 | 0.32 | 14.1 | 1.5 | -5 |
| Yunnan luoping | 1.6 | 2.22 | 1.39 | 1.46 | 1.5 | -2 |
| Hindustand | 201 | 1270 | 6.32 | 366.4 | 3.5 | 114 |
Clearly, it is difficult to compare plants exactly, as Korea Zinc refines other metals as do many of the others. Some like Hindustan are integrated with their mines. To simplify comparison, I made no adjustment in currency as well. As you can see by MV/equity, zinc refiners are much more valuable overseas than in Canada (probably since most wouldn't accept processing all supplied concentrate today's spot market).
As indicated before, I believe the current equity valuation is to low to begin with, and Noranda probably has a 0.1 to 0.15 MV/equity (the 120 M$ in impairment charges over concerns over concentrate availability no longer appear an issue, thank goodness since it would have been a huge embarrassment to Basecore).
Note that the Percent is the percent value shares have recovered since the start of the year, with Noranda having the single honor of double digit decrease in valuation.
The point is that selling the plant is a feasible option. Ideally, we would have presented this to Zhuzhou before they closed the old plant and rebuilt a new plant (they have the 19.1 MV/equity since they have a tremendous amount of debt, new plants are expensive!). Zhuzhou probably is the best plant to compare with Noranda based on size of plant though.
It was indicated that consideration has been made for share buybacks, as this often increases shareholder value. I don't think this will for NIF, as many dissatisfied shareholders (often referred to as "bag holders") jump at the opportunity to sell a losing investment.
At best, I believe you can purchase no more than 10 percent per calendar year. At today's price, that is 5 M$. It may be better to offer a steady income similar to past years. Resuming a quarterly distribution, if allowed, would probably do more for share holder value than a buyback. Just announcing a regular quarterly dividend of a penny would provide more shareholder value in my opinion at half the price.
If management and the board wanted to hold more share, or any for that matter, then this would also be considered a good indication of the companies health.
I am not sure about the rules, but possibly, the company could start a small buyback program without having to do an announcement. I suggest looking between chairs in the staff lounges for investment capital, as loonies and toonies often fall out in chairs. Maybe raise capital by asking all monthly users charging their electric cars at the plant to chip in $ 1 per month in the investment club.
So in conclusion, I still feel closing down and selling the plant is the best plan for the majority of shareholders. This would avoid the unpleasant situation Nyrstar shareholders found themselves in when Trafigura bankrupted the company and took over the assets for pennies on the dollar.
Please consider looking into this for the AGM this year.
Yours truly,
Mike D