NORANDA INCOME FUND ANNOUNCES TERMS FOR 2020/2021 CONTRACTUAL PERIOD

TORONTO, March 12, 2020 (GLOBE NEWSWIRE) -- Noranda Income Fund (TSX:NIF.UN) (the “Fund”) today reported the terms under which zinc concentrate will be purchased and zinc metal will be sold for the period of May 1, 2020, to April 30, 2021. Except where otherwise indicated, all amounts in this press release are expressed in US dollars.  

On March 8, 2018, the Fund announced that it had reached an agreement pursuant to which Glencore Canada, as principal, supplies the Fund with all of its zinc concentrate requirements, and purchases all of the Fund’s zinc metal for the four-year period ending April 30, 2022. The terms are to be agreed upon annually in-line with prevailing market conditions and in consultation with the Independent Trustees’ independent industry consultants. For the period between May 1, 2020, and April 30, 2021, the purchases of primary zinc concentrates will be made at variable treatment charges that fluctuate in-line with market movements, as well as at with other provisions in the four-year agreement. The Fund and Glencore Canada agreed upon a fixed premium price on zinc metal sales for the same May 1 to April 30 contractual period.

The terms have not been disclosed as the terms are considered commercially sensitive and subject to the contractual requirement and the market practice of keeping pricing information confidential.

Illustrative Adjusted EBITDA¹
Adjusted EBITDA, applying these contract terms to twelve months of production and using the assumptions below, would be between $57 million and $88 million.

Illustrative Adjusted EBITDA assumptions
Zinc price (US$ per pound)	$0.91 to $1.22
CAD$/US$ exchange rate	$0.75
Zinc metal production and sales (tonnes)	260,000 to 270,000
Zinc concentrate and secondary feed processed (tonnes)	515,000 to 535,000

Assuming capital expenditures between $30 million and $35 million, cash flow from operations after capital expenditures would be between $22 million and $58 million.

Note that the illustrative Adjusted EBITDA are estimates that may not be indicative of future results, which will be impacted by future prices of zinc metal, variations in treatment charges as well as other factors such as levels of production, foreign exchange, zinc premiums, by-product prices and production costs. Nor is the illustration to be construed as guidance for the 2020 calendar year results as the contractual period and calendar year are not coterminous. Further, the actual achieved cash flow within reporting periods may differ significantly due to changes in working capital including changes in financial derivative instruments among other balances and capital expenditures.