Noranda Income Fund (the "Fund") (TSX:NIF.UN)
Q1 2014 and Subsequent Highlights
-- Zinc premiums averaged 10.3 cents US per pound (11.3 cents Cdn) compared
to Q1 2013 - 8.4 cents US per pound (8.5 cents Cdn)
-- Declared monthly cash distributions from January to April 2014 of
$0.04167 per priority unit
-- Two major capital projects have or are about to be completed:
-- The four-year rehabilitation project to replace the liners in the
cell house was completed in the first quarter of 2014 on budget.
-- The project to increase the Processing Facility's silica removal
capacity is expected to be completed this quarter, on time and under
budget.
Financial and Operating Highlights (First quarter 2014 compared to the first
quarter 2013)
Earnings before income taxes in the first quarter of 2014 were $11.1 million
compared to $27.3 million in the same quarter a year ago. The $16.2 million
decrease was mainly due to lower zinc metal sales and by-product revenues and
higher costs resulting from increased volumes of seaborne concentrates,
partially offset by a weaker Canadian dollar and by a higher processing fee,
premiums and recoveries.
Cash used by operating activities in the first quarter of 2014, was $12.4
million, including a negative $24.2 million increase in non-cash working
capital. In the same period of 2013, cash used by operating activities was $5.7
million, which was negatively impacted by a $20.8 million increase in non-cash
working capital. Cash distributions of $4.7 million were paid in both the 2014
and 2013 quarterly periods.
During the first quarter of 2014, non-cash working capital increased by $24.2
million in a large part due to an increase in concentrate inventories partly
offset by an increase in accounts payables and accrued liabilities and by a
reduction in accounts receivables.
In March of 2014, two seaborne deliveries of concentrate were received causing
inventories to rise. Going forward, inventory levels are expected to be less
stable because of the irregularity of the shipments compared to the rail
deliveries. During the first quarter of 2013, non-cash working capital increased
by $20.8 million in a large part due to an increase in accounts receivable and a
reduction in accounts payable and accrued liabilities.
"We had a challenging first quarter as the Processing Facility increased its
consumption of seaborne concentrate, production was constrained by limited
silica treatment capacity and unit costs were negatively impacted by the lower
production," said Eva Carissimi, President and Chief Executive Officer of the
Fund. "The second half of 2014 is expected to be positively impacted by the
completion of our two major investment projects, with production recovering to
normal levels."
Annual General Meeting
May 15th, 2014 at 2 pm ET
Location: Gallery Room at the TSX Broadcast & Conference Centre, The Exchange
Tower, 130 King Street West, Toronto, Ontario
Come and join us at the TSX Broadcast and Conference Centre, or listen to the
AGM and view the slides from the Investor Centre/Presentations section of the
Fund website: http://www.norandaincomefund.com/investor/presentations.html or
click on this link: www.gowebcasting.com/5529
Conference Call and Webcast:
May 15th, 2014 at 4:30 p.m. ET
Dial in number: 416-340-2216
Toll-free North American number: 1-866-223-7781
In addition, you can listen to the teleconference and view the slide
presentation from the Conference Call section of the Noranda Income Fund
website: http://www.norandaincomefund.com/investor/conference.html or click on
this link: www.gowebcasting.com/5528
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 2869 628# and you will be prompted for your name and company.
The recording will be available until midnight on May 29th, 2014.
A full version of the first quarter 2014 Management's Discussion and Analysis
("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, May 15, 2014.
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 first 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 2014 zinc
metal production. 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 Fund's ability
to operate at normal production levels 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.
Further information about Noranda Income Fund can be found at
www.norandaincomefund.com.
SELECTED FINANCIAL AND OPERATING INFORMATION
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First Quarter
($ thousands) 2014 2013
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Statements of Comprehensive Income
Information
Revenues 154,345 150,055
Raw material purchase costs 78,375 69,033
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Revenues less raw material purchase costs 75,970 81,022
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Other expenses:
Production 43,984 39,152
Selling and administration 5,361 5,482
Foreign currency loss 3,687 3,491
Loss (gain) on derivative financial
instruments 826 (3,308)
Depreciation of property, plant and
equipment 8,696 8,102
Rehabilitation expense (recovery) 1,077 (1,029)
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Earnings before finance costs and income
taxes 12,339 29,132
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Finance costs, net 1,252 1,874
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Earnings before income taxes 11,087 27,258
Current and deferred income tax expense 2,580 5,096
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Earnings attributable to Unitholders and
Non-controlling interest 8,507 22,162
Distributions to Unitholders 4,688 4,688
Current income tax recovery on distribution - -
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Increase in net assets attributable to
Unitholders and Non-controlling interest 3,819 17,474
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Other comprehensive income (loss) gain (1,761) 2,918
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Comprehensive income 2,058 20,392
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Statements of Financial Position Information Mar. 31, 2014 Dec. 31, 2013
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Cash 2,539 15,547
Inventories 106,552 77,580
Accounts receivable 87,346 91,898
Income taxes receivable 1,205 4,040
Property, plant and equipment 271,124 272,341
Total assets 474,771 467,075
Accounts payable and accrued liabilities 82,717 87,844
Total bank and other loans 59,622 51,322
Total liabilities excluding net assets
attributable to Unitholders 193,180 187,542
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First Quarter
Statements of Cash Flows Information 2014 2013
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Cash provided by operating activities before
cash distributions and net change in non-
cash working capital items 12,850 20,073
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Cash distributions (4,688) (4,688)
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Net change in non-cash working capital items (20,549) (21,101)
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Cash used in operating activities (12,387) (5,716)
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Cash used in investing activities (8,692) (3,963)
Cash provided by financing activities 8,071 10,138
Net (decrease) increase in cash (13,008) 459
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Cash distributions declared per Priority
Unit 0.12501 0.12501
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First Quarter
2014 2013
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Zinc concentrate processed (tonnes) 121,044 133,382
Zinc grade (%) 51.7 52.9
Zinc recovery (%) 97.0 96.0
Zinc metal production (tonnes) 59,544 68,413
Zinc metal sales (tonnes) 60,509 63,058
Processing fee (cents/pound) 40.0 39.5
Zinc metal premium (US cents/pound) 10.3 8.4
By-product revenues ($ millions) 6.5 11.0
Copper in cake production (tonnes) 567 620
Copper in cake sales (tonnes) 173 703
Sulphuric acid production (tonnes) 91,974 105,791
Sulphuric acid sales (tonnes) 94,361 103,233
Average LME copper price (US$/pound) 3.19 3.60
Sulphuric acid netback (US$/tonne) 55 72
Average LME zinc price (US$/pound) 0.92 0.92
Average US/Cdn. exchange rate 1.10 1.01
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(i) 1 tonne = 2,204.62 pounds
Adjusted Earnings before Distributions to Unitholders, Finance Costs, Income
Taxes, Depreciation and Amortization ("Adjusted EBITDA")
Adjusted EBITDA is used by the Fund as an indication of cash generated from
operations. Adjusted EBITDA is not a recognized measure under IFRS and therefore
the Fund's method of calculating Adjusted EBITDA is unlikely to be comparable to
methods used by other entities.
The Fund's Adjusted EBITDA is calculated by starting from earnings before
finance costs and income taxes and adjusting for all of the non-cash items such
as depreciation, gain or loss on the sale of assets, changes in fair value of
embedded derivatives and non-cash gain on derivative financial instruments. In
addition, an adjustment is made to reflect the net change in the rehabilitation
liability (reclamation (recovery) expense less site restoration expenditures)
and the net change in employee benefits (non-cash employee benefit expenses less
employer contributions).
The Fund's Adjusted EBITDA is currently supported by the stability of the Supply
and Processing Agreement. It is expected that the Fund's Adjusted EBITDA will be
subject to more variability once this agreement expires in May 2017.
A reconciliation of Adjusted EBITDA for the first quarter of 2014 compared to
the same period in 2013 is provided below:
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Adjusted EBITDA Q1/2014 Q1/2013 Change
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($ thousands)
Earnings before finance costs and
income taxes $ 12,339 $ 29,132 $ (16,793)
Depreciation of property, plant and
equipment 8,696 8,102 594
Net change in rehabilitation
liability 1,082 (1,046) 2,128
Non-cash loss (gain) on derivative
financial instruments 516 (4,686) 5,202
Change in fair value of embedded
derivatives (5,377) (3,955) (1,422)
Gain on sale of assets (101) (329) 228
Net change in employee benefits (371) (198) (173)
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$ 16,784 $ 27,020 $ (10,236)
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FOR FURTHER INFORMATION PLEASE CONTACT:
Michael Boone
Vice President and Chief Financial Officer,
Canadian Electrolytic Zinc Limited
Noranda Income Fund's Manager
416-775-1561
info@norandaincomefund.com
Noranda Income (TSX:NIF.UN)
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