Noranda Income Fund Unit NNDIF

Share Price

[Bwrbhk]

Since the company announced a temporary shutdown to fix some problems in the cell house and will likely have to replace the whole cell house for a longer term fix at a cost of US$100 million, the share price collapsed from $1.10 to the current level of $0.40.  Why?  In my opinion, fear of bankruptcy, where are they going to get the $100 million and Glencore.  All legitamete concerns.  I had them myself until after seeing the financial results for the 3rd Q and listening to the conference call today.
Could they go bankrupt?  Not a chance, in my opinion.  They just reported an operating cash flow before working capital changes of $41 million for the 3rd Q under difficult operating circumstances.  Once the short term fixes are in place, which could be in a matter of 4 weeks, the plant will be extremely profitable at current TC's and zinc prices.  They will probably have a loss in the 4thQ as they will have been operating for a month or so.  The experts on TC's, CRU and Wood Mackenzie, are estimating that TC's in 2023 will average around $300/t.  Current benchmark and spot TC's are $230/t and $255/t respectively.  In a normal operational year, the company treats about 550,000 of concentrate per year and in 2021 when spot TC's averaged about $85/t, Noranda they reported an operating cash flow of about $10 million.
How are they going to get the $100 million to replace the cell house by the end of 2024, which would probably be the earliest that it could happen.  At current and forecast TC's, they could probably finance most of it from internally generated funds, plus, once the banks see how much money they are making for a few quarters, they will be all over them to loan them money.  Banks love lending money to companies that may not need it.  The fall back position would be the Quebec government or the Caisse,who love lending money to Quebec based companies if it helps employment.
what about Glencore?  Anyone following Noranda over the past several years is well aware of how they have blatantly screwed Noranda's shareholders other than Glencore.  This too may change if enough of us get together and nominate and elect a truly independent board of trustees.
What about valuation!  At a current price of $0.40 the shares are trading at a 72% discount to net-net working capital per share and less than one tenth of book value per share.  Discounts like this are usually accorded to companies that are losing gobs of money and are on the verge of going bankrupt.  Noranda just reported an operating cash flow of $41 million, which is 2X's their market capitalization.
Given the outlook for TC's by the experts, I do not think that even Glencore can screw this one up.  If it is all a ploy to steal the company for a fraction of what it is worth, they will have their asses sued off.

[happyInvestor1]

Hey buddy. thank you for your post. So Glencore own 25 % of the facility according to the conference call. I imagine they might do an hostile take over. Would make sense.

[Bwrbhk]

It is a possibility but unlikely because they would be accused of deliberately knocking down the share price to pick up the shares at a depressed level.  Their corporate governance level is viewed as being so bad that it would be unlikely that they would attempt such a thing like that for a very small prize.

[ljp0101]

They couldn't get a takeover across the line at an attractive price. Too many large dissenters that would go for appraisal and I'm sure they don't want discovery given transfer pricing shenanigans here. If one of the two large shareholders needed out, they might buy the block if it doesn't cause an issue with the listing rules, not familiar enough with Canadian law to know what

[Scotch12]

  LJP, I don’t buy your thesis that there would be too many dissenters to a Glencore takeover.   As I understand it, they would need two thirds of shareholders to agree to it.  It would of course depend partially on the two big shareholders agreeing.   Neither of them has added to their positions since the October announcement that there would be extensive repairs

[Scotch12]

I want to start a poll here.  1. What is the minimum amount you would accept for a buyout? 2. Would you hypothetically contribute 200 dollars to hire a lawyer to file a lawsuit against Glencore/CEZ ? my answers 1.  2.25 2. Yes.

[ZincDink]

You do realize Xstrata offered close to 4 a share before they were bought out by GC. We have invested over 100 M$ in plant to date to allow processing more grades. Presumably, we will be upgrading the cells for another 100 M$ before GC will try and takeover. If we generate 40 M$ per q, and right now, there is nothing that would indicate significant deviation, but lets say 100 M$ per year in

[schocor]

Would I be happy with a 2.25 offer and vote for it; yea, yes I would.  would glencore be stealing the company, and a valuable North American asset in the process; yes, yes they would.  $40m in quarterly cash flow is a little deceiving here I believe; the purchases of concentrate have declined given the cell room shutdown, so cash purchases of concentrate have also decreased. They

[JCW]

I would take $2.25 cash now .....or pay $200 towards a lawyer  for a lot more later.   

[Deev86911]

1.  4$ 2.  Yes I believe Glenn core has manipulated the board and given bonuses to get their way. They've been investigated worldwide and charged. What makes you think they wouldn't do that here?

[ZincDink]

Because this is GC Canada, they will do whats legal. They will be completely unethical though

[rjb1954]

1. $5 2. Yes, but... I think the primary strategy of our group should be to gain a seat on the BOD. If we pool our shares, as has been proposed, I think we should be able to petition NIF for Board representation. I believe that Eric's Group may have critical mass for doing this. Board representation will help to temper GC's behaviour. Hiring a lawyer could help us in gaining a seat at

[ZincDink]

I believe GC gave serious thought to a takeover. They discovered though how the plant had been run down and would take significant investment. Decided to keep it operating just in case China started realizing they were giving away free electricity. Management team goal was to keep plant operating and get plant modernized. With the increase in TC and premiums, problems with the band aids peeling

[ljp0101]

I think at least one of the two large shareholders would take dissent if they offered 2/share today. Heck, I have enough shares for this to probably be worth my while and fair value is 4/share on NIF's own numbers after the writedown (that I suspect use some conservative assumptions). Glencore might succeed in privatizing but need to factor all their costs. And it's not worthwhile for them