Noranda Income Fund (the "Fund") (TSX:NIF.UN) had a solid third quarter. The
Fund's financial results continue to be supported by the stability of the Supply
and Processing Agreement.
Q3 2013 Highlights:
-- Earnings before income taxes were $13.9 million (Q3 2012 - $8.7 million)
-- Zinc metal production was 61,331 tonnes (Q3 2012 - 60,615 tonnes)
-- Zinc metal sales were 66,420 tonnes (Q3 2012 - 60,953 tonnes)
-- Zinc premiums averaged 8.4 cents US per pound (Q3 2012 - 7.6 cents US
per pound)
-- Sulphuric acid netback remained strong at US$73 per tonne (Q3 2012 -
US$79 per tonne)
-- Monthly cash distributions from July to October 2013 were $0.04167 per
priority unit (each a "Priority Unit"); continuing the consistent
monthly distributions since they were resumed in September 2011
-- The Fund's debt was $58.4 million (net of deferred financing fees), down
from $95.5 million at the end of December 2012
Conference Call and Webcast:
November 12th, 2013 at 8:30 a.m.
Dial in number: 416-340-9547
Toll-free North American number: 1-800-772-8997
In addition, you can listen to the teleconference and view the slide
presentation from the Conference Call section of our website:
http://www.norandaincomefund.com/investor/conference.html or click on this link:
http://www.gowebcasting.com/5088
Recording of the Conference Call:
Dial in number: 905-694-9451 or
Toll-free North American number: 1-800-408-3053.
The pass code is 4213 015# and you will be prompted for your name and company.
The recording will be available until midnight on November 26th, 2013.
Long-Term Strategy
Work on the long-term strategy for the Fund continues with the services of an
industry consultant who is assisting the Independent Committee in identifying
possible alternative sources of zinc concentrate after the expiry of the Supply
and Processing Agreement in 2017.
2013 Capital Spending
The main focus of the 2013 capital spending program is the silica removal
project. By the end of September 2013, $6.0 million had been spent.
Commissioning remains scheduled for the summer of 2014.
The 2013 capital expenditure forecast has been reduced to $40.4 million from $46
million as some of the work and expenditures associated with the silica removal
project has shifted to the first quarter of 2014.
Financial and Operating Highlights (Third quarter 2013 compared to the third
quarter 2012)
Earnings before income taxes in the third quarter of 2013 were $13.9 million
compared to $8.7 million in the same quarter a year ago. The $5.2 million
increase was mainly due to stronger premiums and zinc metal sales, higher
processing fee and the impact from derivative financial instrument (gain) loss,
partially offset by negative concentrate payable settlement adjustments (see the
third quarter 2013 Management's Discussion and Analysis ("MD&A") for further
details).
Cash provided by operating activities in the third quarter of 2013, before net
changes in non-cash working capital items, was $15.8 million compared to $15.1
million during the same period of 2012. Cash distributions of $4.7 million were
declared in both the 2013 and 2012 quarterly periods. During the third quarter
of 2013, non-cash working capital decreased by $10.1 million due to a decrease
in accounts receivable and inventories and an increase in accounts payable and
accrued liabilities. During the third quarter of 2012, non-cash working capital
decreased by $14.2 million due to an increase in accounts payable and accrued
liabilities.
Financial and Operating Highlights (Nine months of 2013 compared to nine months
of 2012)
Earnings before income taxes in the first nine months of 2013 were $55.7 million
compared to $36.0 million in the same period a year ago. The $19.7 million
increase was mainly due to stronger premiums and zinc metal sales and higher
processing fee, positive concentrate payable settlement adjustments and the
impact from movement in the exchange rate, partially offset by lower by-product
revenues (see the third quarter 2013 MD&A for further details).
Cash provided by operating activities in the first nine months of 2013, before
net changes in non-cash working capital items, was $48.5 million compared to
$47.2 million during the same period of 2012. Cash distributions of $14.1
million were declared in both the first nine months of both years. During the
first nine months of 2013, non-cash working capital decreased by $21.0 million
due to a decrease in inventories and accounts receivable, partially offset by a
decrease in accrued liabilities. During the first nine months of 2012, non-cash
working capital increased by $2.8 million due to a decrease in income taxes
payable and an increase in inventories, partially offset by an increase in
accounts payable and accrued liabilities and a decrease in accounts receivable.
OTHER DEVELOPMENTS
On November 5, 2013, Manuel Alvarez Davila resigned from the Board of the
Noranda Operating Trust. A replacement candidate is expected to be appointed
soon. On behalf of the Board, John Swidler, Chair, would like to thank Manuel
for his wise counsel during his tenure as a Board member.
A full version of the third quarter 2013 MD&A and the unaudited Interim
Condensed Consolidated Financial Statements will be posted on www.sedar.com and
on the Fund's website at
http://www.norandaincomefund.com/investor/financials.html today, November11,
2013. Readers should be advised that the summarized communication presented in
this press release is limited in its disclosure. It is not a suitable source of
information for readers who are unfamiliar with the Fund, and it is not in any
way a substitute for reading the second quarter unaudited Interim Condensed
Consolidated Financial Statements and MD&A because a reader relying on this
summary alone might overlook decision critical information.
FORWARD-LOOKING INFORMATION
This press release contains forward-looking information and statements within
the meaning of applicable securities laws, including statements on 2013 capital
expenditures and the commissioning of the silica removal project.
Forward-looking information involves known and unknown risks, uncertainties and
other factors, which may cause actual events, results or performance to be
materially different from any future events, results or performance expressed or
implied by the forward-looking information, and as a result, the Fund cannot
guarantee that any forward-looking statements or information will materialize.
Such risks and uncertainties include, but are not limited to, the effect of
general business and economic conditions, the Fund's ability to operate at
normal production levels, the Fund's capital expenditure requirements and other
general risks and uncertainties set out in the Fund's continuous disclosure
documents on available on SEDAR at www.sedar.com.
Forward-looking information contained in this press release is based on, among
other things, management's current estimates, expectations, assumptions, plans
and intentions, which management believes are reasonable as of the current date,
and which are subject to a number of risks and uncertainties. Except as required
by law, the Fund does not undertake to update these forward-looking statements
or information, whether written or oral, that may be made from time to time by
the Fund or on the Fund's behalf.
Noranda Income Fund is an income trust whose units trade on the Toronto Stock
Exchange under the symbol "NIF.UN". Noranda Income Fund owns the electrolytic
zinc processing facility and ancillary assets (the "Processing Facility")
located in Salaberry- de-Valleyfield, Quebec. The Processing Facility is the
second-largest zinc processing facility in North America and the largest zinc
processing facility in eastern North America, where the majority of zinc
customers are located. It produces refined zinc metal and various by-products
from sourced zinc concentrates. The Processing Facility is operated and managed
by Canadian Electrolytic Zinc Limited, a wholly-owned subsidiary of Glencore
Canada Corporation.
Except where otherwise indicated, all amounts in this press release are
expressed in Canadian dollars.
Further information about the Noranda Income Fund can be found at
www.norandaincomefund.com
SELECTED FINANCIAL AND OPERATING INFORMATION
----------------------------------------------------------------------------
Third Quarter Year-to-date
($ thousands) 2013 2012 2013 2012
----------------------------------------------------------------------------
Statements of Comprehensive
Income Information
Revenues 148,460 128,555 461,092 426,897
Raw material purchase costs 72,001 70,810 218,842 222,044
----------------------------------------------------------------------------
Revenues less raw material
purchase costs 76,459 57,745 242,250 204,853
----------------------------------------------------------------------------
Other expenses:
Production 46,596 38,803 136,906 126,735
Selling and administration 4,421 4,715 15,262 15,765
Foreign currency (gain)
loss (2,016) (2,522) 5,086 (2,094)
Loss (gain) on derivative
financial instruments 3,333 (1,896) (87) (2,581)
Depreciation of property,
plant and equipment 9,433 7,905 27,566 24,440
Rehabilitation (recovery)
expense (659) 168 (3,164) 656
----------------------------------------------------------------------------
Earnings before finance
costs and income taxes 15,351 10,572 60,681 41,932
----------------------------------------------------------------------------
Finance costs, net 1,444 1,827 5,003 5,972
----------------------------------------------------------------------------
Earnings before income taxes 13,907 8,745 55,678 35,960
Current and deferred income
tax expense 3,098 2,690 11,737 12,655
----------------------------------------------------------------------------
Earnings attributable to
Unitholders and Non-
controlling interest 10,809 6,055 43,941 23,305
Distributions to Unitholders 4,688 4,688 14,063 14,063
Current income tax recovery
on distribution - (1,367) - (4,101)
----------------------------------------------------------------------------
Increase in net assets
attributable to Unitholders
and Non-controlling
interest 6,121 2,734 29,878 13,343
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other comprehensive income
(loss) 1,154 (1,304) 7,034 (2,834)
----------------------------------------------------------------------------
Comprehensive income 7,275 1,430 36,912 10,509
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Statements of Financial
Position Information September 30, 2013 Dec. 31, 2012
----------------------------------------------------------------------------
Cash and cash equivalents 15,190 1,303
Inventories 64,331 91,697
Accounts receivable 86,087 98,347
Income taxes receivable 5,025 4,801
Property, plant and
equipment 265,446 270,867
Total assets 443,058 477,629
Accounts payable and accrued
liabilities 56,496 72,448
Total bank and other loans 58,355 95,509
Total liabilities excluding
net assets attributable to
unitholders 171,138 242,621
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Third Quarter Year-to-date
Statements of Cash Flows
Information 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash provided by operating
activities before cash
distributions and net
change in non-cash working
capital items 20,525 19,772 62,599 61,261
----------------------------------------------------------------------------
Cash distributions (4,688) (4,688) (14,063) (14,063)
----------------------------------------------------------------------------
Net change in non-cash
working capital items 10,133 14,194 20,988 (2,847)
----------------------------------------------------------------------------
Cash provided by operating
activities 25,970 29,278 69,524 44,351
----------------------------------------------------------------------------
Cash used in investing
activities (7,738) (5,730) (17,655) (16,133)
Cash used by financing
activities (4,179) (19,853) (37,982) (23,630)
Net increase in cash 14,053 3,695 13,887 4,588
----------------------------------------------------------------------------
Cash distributions declared
per Priority Unit 0.12501 0.12501 0.37503 0.37503
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Third Quarter Year-to-date
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Zinc concentrate processed
(tonnes) 122,216 120,899 379,907 372,887
Zinc grade (%) 53.2 54.5 53.2 54.2
Zinc recovery (%) 97.3 97.1 97.3 96.6
Zinc metal production
(tonnes) 61,331 60,615 198,030 188,949
Zinc metal sales (tonnes) 66,420 60,953 204,559 192,890
Processing fee (cents/pound) 39.5 39.2 39.5 39.2
Zinc metal premium
(US$/pound) 0.084 0.076 0.084 0.075
By-product revenues ($
millions) 9.2 9.2 29.8 31.0
Copper in cake production
(tonnes) 330 584 1,330 1,736
Copper in cake sales
(tonnes) 373 307 1,599 1,541
Sulphuric acid production
(tonnes) 97,700 100,259 306,761 308,965
Sulphuric acid sales
(tonnes) 97,964 95,344 305,269 312,939
Average LME copper price
(US$/pound) 3.21 3.50 3.35 3.61
Sulphuric acid netback
(US$/tonne) 73 79 72 74
Average LME zinc price
(US$/pound) 0.84 0.86 0.87 0.88
Average Cdn/US exchange rate 1.038 0.995 1.024 1.002
----------------------------------------------------------------------------
(i) 1 tonne = 2,204.62 pounds
Adjusted Earnings before Distributions to Unitholders, Finance Costs, Income
Taxes, Depreciation and Amortization ("Adjusted EBITDA")
Adjusted EBITDA is used by the Fund as an indication of cash generated from
operations. Adjusted EBITDA is not a recognized measure under International
Financial Reporting Standards ("IFRS") and therefore the Fund's method of
calculating Adjusted EBITDA is unlikely to be comparable to methods used by
other entities.
The Fund's Adjusted EBITDA is calculated by starting from earnings before
finance costs and income taxes and adjusting for all of the non-cash items such
as depreciation, (gain) loss on the sale of assets, changes in fair value of
embedded derivatives and non- cash gain on derivative financial instruments. In
addition, an adjustment is made to reflect the net change in the rehabilitation
liability (reclamation (recovery) expense less site restoration expenditures)
and the net change in employee benefits (non-cash employee benefit expenses less
employer contributions).
A reconciliation of Adjusted EBITDA that compares the third quarter and first
nine months of 2013 to the same periods in 2012 can be found in the table below:
----------------------------------------------------------------------------
Adjusted EBITDA Q3/2013 Q3/2012 Change
----------------------------------------------------------------------------
($ thousands)
Earnings before finance costs and income
taxes $ 15,351 $ 10,572 $ 4,779
Depreciation of property, plant and
equipment 9,433 7,905 1,528
Net change in rehabilitation liability (791) 164 (955)
Loss (gain) on derivative financial
instruments 484 (1,073) 1,557
Change in fair value of embedded
derivatives 223 5,402 (5,179)
Loss (gain) on sale of assets 41 (420) 461
Net change in employee benefits (253) (485) 232
----------------------------------------------------------------------------
$ 24,488 $ 22,065 $ 2,423
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA YTD/2013 YTD/2012 Change
----------------------------------------------------------------------------
($ thousands)
Earnings before finance costs and income
taxes $ 60,681 $ 41,932 $ 18,749
Depreciation of property, plant and
equipment 27,566 24,440 3,126
Net change in rehabilitation liability (3,530) 466 (3,996)
Gain on derivative financial instruments (4,926) (2,200) (2,726)
Change in fair value of embedded
derivatives (1,006) 10,263 (11,269)
Gain on sale of assets (521) (112) (409)
Net change in employee benefits (585) (1,164) 579
----------------------------------------------------------------------------
$ 77,679 $ 73,625 $ 4,054
----------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
Financial information:
Michael Boone, Vice President & Chief Financial Officer
Canadian Electrolytic Zinc Limited,
Noranda Income Fund's Manager
416-775-1561
info@norandaincomefund.com
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