NORANDA INCOME FUND ANNOUNCES TERMS FOR 2020/2021 CONTRACTUAL PERIOD - Seite 2

The Fund’s ability to meet the assumptions identified above is subject to various risks, uncertainties and assumptions, some of which can be found in “Forward-Looking Information”.

Outlook for the Fund
According to industry analysts such as Wood Mackenzie and CRU, the zinc concentrate market tightness that began in 2016 continued throughout 2017 and 2018. A turnaround has occurred due to higher mine production in 2019 and cuts to smelter production resulting from a widespread crackdown from China’s environmental agencies combined with production issues at various smelters around the world. Chinese refined metal production has increased but was partially offset by declines outside of China. The slight increase in global production, however, was insufficient to meet global metal demand. The refined market deficit maintained historically low metal stocks. The refined market is expected to move into a small surplus in 2020 without much impact on global metal stocks. Commodity prices, including zinc, may be subdued by the ongoing US-China trade war regardless of the favourable underlying fundamentals. The impact of the Covid-19 epidemic on the Chinese zinc industry is starting to be seen in both supply and demand. The long-term impact will depend on the length and extent of the epidemic.

Wood Mackenzie further reported that over the next few years, an increasing concentrate surplus will increase treatment charges. Consequences of excessive concentrate stocks may lead to unsold concentrate and higher treatment charges which may also result in mine production cuts or closures. Wood Mackenzie is predicting improvements in Chinese smelter utilization rate to curtail rising excess concentrate levels.

Quality and Availability of Zinc Concentrates
The global quality of zinc concentrates has been declining in terms of zinc grade and the level of impurities contained within.  The impact on a smelter is an increase in the level of residues to be treated per tonne of zinc produced. The Fund is continually focused on optimizing its existing facilities and is assessing the impact of this global trend on its operating capacities to determine what capital investments could be made to improve production capacity and overall profitability.