Noranda Income Fund Reports First Quarter Earnings Before Income
Taxes of $11.1 Million
SALABERRY-DE-VALLEYFIELD, QUEBEC--(Marketwired - May 15, 2014) -
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, Québec. 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 |
|
|
First Quarter |
|
| ($ thousands) |
2014 |
|
2013 |
|
|
|
|
|
|
| Statements of Comprehensive Income Information |
|
|
|
|
| Revenues |
154,345 |
|
150,055 |
|
| Raw material purchase costs |
78,375 |
|
69,033 |
|
| Revenues less raw material purchase costs |
75,970 |
|
81,022 |
|
| 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 |
) |
| Earnings before finance costs and income taxes |
12,339 |
|
29,132 |
|
| Finance costs, net |
1,252 |
|
1,874 |
|
| Earnings before income taxes |
11,087 |
|
27,258 |
|
| Current and deferred income tax expense |
2,580 |
|
5,096 |
|
| 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 |
- |
|
- |
|
| Increase in net assets attributable to Unitholders and
Non-controlling interest |
3,819 |
|
17,474 |
|
| Other comprehensive income (loss) gain |
(1,761 |
) |
2,918 |
|
| Comprehensive income |
2,058 |
|
20,392 |
|
|
|
|
|
|
| Statements of Financial Position Information |
Mar. 31, 2014 |
|
Dec. 31, 2013 |
|
| 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 |
|
|
First Quarter |
|
| Statements of Cash Flows Information |
2014 |
|
2013 |
|
| Cash provided by operating activities before cash
distributions and net change in non-cash working capital items |
12,850 |
|
20,073 |
|
| Cash distributions |
(4,688 |
) |
(4,688 |
) |
| Net change in non-cash working capital items |
(20,549 |
) |
(21,101 |
) |
| Cash used in operating activities |
(12,387 |
) |
(5,716 |
) |
| 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 |
|
| Cash distributions declared per Priority Unit |
0.12501 |
|
0.12501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
2014 |
2013 |
| 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$/pound) |
0.92 |
0.92 |
| Average US/Cdn. exchange rate |
1.10 |
1.01 |
|
|
|
| * 1 tonne = 2,204.62 pounds |
|
|
Adjusted Earnings before Distributions to Unitholders, Finance
Costs, Income Taxes, Depreciation and Amortization ("Adjusted
EBITDA")
Adjusted EBITDA is used by the Fund as an indication of cash
generated from operations. Adjusted EBITDA is not a recognized
measure under IFRS and therefore the Fund's method of calculating
Adjusted EBITDA is unlikely to be comparable to methods used by
other entities.
The Fund's Adjusted EBITDA is calculated by starting from
earnings before finance costs and income taxes and adjusting for
all of the non-cash items such as depreciation, gain or loss on the
sale of assets, changes in fair value of embedded derivatives and
non-cash gain on derivative financial instruments. In addition, an
adjustment is made to reflect the net change in the rehabilitation
liability (reclamation (recovery) expense less site restoration
expenditures) and the net change in employee benefits (non-cash
employee benefit expenses less employer contributions).
The Fund's Adjusted EBITDA is currently supported by the
stability of the Supply and Processing Agreement. It is expected
that the Fund's Adjusted EBITDA will be subject to more variability
once this agreement expires in May 2017.
A reconciliation of Adjusted EBITDA for the first quarter of
2014 compared to the same period in 2013 is provided below:
|
Adjusted EBITDA |
Q1/2014 |
|
Q1/2013 |
|
Change |
|
|
($ 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 |
) |
|
|
$ 16,784 |
|
$ 27,020 |
|
$ (10,236 |
) |
Michael BooneVice President and Chief Financial Officer,Canadian
Electrolytic Zinc LimitedNoranda Income Fund's
Manager416-775-1561info@norandaincomefund.com
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