Noranda Income Fund Unit NNDIF

The Boliden Odda "Green Zinc Project" conundrum

[galvanized]

Boliden is busy working on a project to add about 150k tonnes of capacity to their zinc smelter at a cost of about 700 euros = 1B cad. You can see a short summary of the project here:

https://afry.com/en/newsroom/press-releases/afry-main-engineering-partner-boliden-in-zinc-production-expansion-in

So the conundrum is, Why would Boliden spend 1B cad,, to add 150K of capacity when they could have just purchased the NIF smelter which has a capacity of about 275K, and a market cap of  just 70M?  

To my mind, these two facilities are quite similar.  They both have access to cheap hydro power and on site access on the atlantic for seaborne material.

If we were to use the project cost of the Boliden expansion to calculate a replacement cost for the NIF smelter
1B / 150K tonnes = 6666 per tonne
so at that rate NIF should be worth 6666 X 257000 = 1,833150,00 cad / 50M shares =36.66 per NIF share.

That is what I would cal one heck of a spread between the Bid and the Ask!

[Scotch12]

Presumably, the reason the smelter trades so far below fair value is that anyone who purchased it would be stuck with the terrible contract that Noranda has with Glencore.   Their only option would be to challenge the legality of the contract in that it violates fiar competition or anti-trust law. https://smallbusiness.chron.com/companies-honor-previous-contracts-37710.html

[galvanized]

I'n not aware of Glencore being in possession of some sort of poison pill that prevents an outside bid for the company.  Sure Glencore has a contract, but the terms only go forward for a relatively short period, as far as I know.

[Scotch12]

"As far as know", that is reassuring - lol. From the FAQ on the company's website page 10. The term of the SPA automatically renews for successive five-year periods unless Glencore provides the Fund with a notice of non-renewal prior to the expiry of the then-current term. The Fund does not have the right to terminate the SPA except in certain limited circumstances such as breach

[Bigbird9999]

Its very complicated but in the zillions of very complex ageements and  documents on SEDAR, I am pretty sure there is some kind of poson pill/deterent buried deep and carried over from Noranda to Xstrata to Glencore.  I recall some kind of language that gives Glencore the right to convert and vote their shares in a takeover.scenario.  I also recall seeing some terms about

[ZincDink]

I think we all know the replacement cost on the mill is over 1 B$ and in most sane worlds would be valued at least half the replacement cost unless investors truly believed this would be orphaned. Who might go against GC?...Trafigura might. They stole Nyrstar, which isn't looking like it was the steal of the centruy now. If you were a concentrate supplier who doesn't like paying excess

[Scotch12]

That is a very good point ZincDink.  Energy prices are rising, by more than 10 percent, in Europe as a result of the idiot Putin's invasion of Eastern Ukraine. https://time.com/6149989/energy-prices-ukraine-oil/ What do people think about the feasibility of Teck Resources of Korea Zinc, one day making a move on the Quebec smelter? I know little about either.

[Eric1212]

Personally, i would love if Teck Resources would contact our management for supply & buying Zinc concentrate & rafined products.