Noranda Income Fund Unit NNDIF

NORANDA AND TREVALI SHAREHOLDERS BEING SCREWED BY GLENCORE

[Paykel2]

Glencore owns 25% of both the Noranda Income Fund and Trevali Mining and controls both companies.  Glencore has an offtake agreement with Trevali whereby they purchase all of Trevalie's zinc concentrate at a price that is based on benchmark treatment charges which are currently near $300 per tonne.  Glencore also has a supply agreement with Noranda that is based on spot treatment charges which are currently around $100 per tonne.

Some of Trevali's zinc concentrate production goes to Noranda via Glencore as middleman.  Thus, at current treatment charges, Glencore  pockets $200/tonne and both Noranda and Trevali shareholders get screwed.  This has been going since Noranda's original supply agreement with Glencore expired 4 years ago. 

[rjb1954]

Where do you think Glencore is declaring this $200/tonne windfall? Glencore Canada? ... or Glencore Switzerland? Would this be visible from Glencore's financial statements?  

[Paykel2]

Probably their Canadian subsidiary, you will find nothing in their financial statements.  The only way to figure it out is to know what Trevali is paying for TC's and what Noranda is receiving. Trevali’s concentrate off-take agreements reference the annual benchmark treatment charges as stated in their quarterly financial releases. In their financial statements they breakout the

[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

[Finalsay]

Would really enjoy a general discussion regarding Glencore and its influence on Noranda. I'm thinking that discussion would have to start with the supply and processing agreement (SPA) that Noranda has with Glencore in which Glencore, as principal, supplies the fund with all of its zinc conentrate requirements and purchasing all of the Fund's zinc metal. The SPA was set to expire April 30,

[ZincDink1]

but having guranteed supply and purchasing agreements are incredibly important for refiners to operate as going concerns. True dat. The market is expected to swing to excess concentrate, though frankly, it sounds like China has been upgrading smelter capacity. We do need supply, but if we have to accept that GC can flip supply to China so we must meet spot, this is a ppor deal for us and a great

[Finalsay]

Can you elaborate a bit on your comment regarding the delta between local Chinese TC and the sport market and how this provides China with a competitive advantage? Is local Chinese TC essentially the spot price for TCs in China specifically? and if that is the case, why is this different from spot TCs of the entire market? Is it because the concentrate has higher level of impurities? I get the

[ZincDink1]

Being the expert (I read some reports on the internet!), there is a China market Zinc TC and a China Import Market for zinc TC. If you look at some of the smelters, some are near inland mines and therefore don't rely on import material while I believe there are a few near the coast that obtain material from Australia and South America. The South America, for whatever reason, tends to fill the

[Finalsay]

I missed a previous post that quoted a TD research report mentioning the $300 benchmark prices. It sounds like this benchmark is set at the beginning of the year and I now understand the huge discrpenacy in benchmark and spot prices.

[ZincDink1]

KoreaZinc and Teck set a bench mark, however, in China, the bench mark can move around a bit. It dosen't move as aggressively as the spot TC. Off the top of my head, in March, they were all about 300, now China TC is about 200 and spot is 100.

[Paykel2]

In Trevali's press release reporting 3rdQ financial results, they state that the benchmark treatment charges are $300/t and that Trevali's concentrate-of-take agreements reference the annual benchmark treatment charges. On page 14 of Trevali's MD&A for the 3rdQ, they breakout the smelting and refining expenses.  

[Finalsay]

Thanks Paykel - I looked more into it last night and found out that Korea Zinc Co. Ltd and Teck Resources Ltd. set benchmark TCs each year. 

[ZincDink1]

While we don't like it and distrust is rampant, Glencore is doing the only sensible thing - becoming a verticaly integrated supplier of metals. It controls this by having 30 percent invested in producers and the refiner. Frankly, starting to seem very sensible. You should look at GLEN - they were paying 15 % dividend just like the old NIF. Stock price has shot up, so probably going to drop to