US$12 million advance payment follows completion of structure that will house new belt filters to increase the Processing Facility’s filtration capacity
TORONTO, Dec. 23, 2020 (GLOBE NEWSWIRE) -- Noranda Income Fund (TSX:NIF.UN) (the “Fund”) today announced that it has received an additional advance payment of US$12 million per the terms of the senior secured zinc stream agreement (the “Stream Agreement”) between its wholly-owned subsidiary, Noranda Income Limited Partnership, and leading base metals focused streaming and royalty company BaseCore Metals LP (“BaseCore”) following the completion of an expansion project construction milestone. This follows the receipt of an initial US$12 million advance payment upon closing of the agreement on July 30, 2020 (consult the announcement press release for a summary of the terms of the Stream Agreement). BaseCore will pay a total of US$40 million (including payments to date) in advance payments against the purchase price for the sale of zinc by the Fund to BaseCore. Proceeds are primarily being used to complete strategic expansion projects aimed at increasing the zinc production capacity of the Fund’s electrolytic zinc processing facility (the “Processing Facility”) located in Salaberry-de-Valleyfield, Québec.
“We are pleased to continue to safely move forward with our strategic expansion projects to improve our filtration and cooling capacity, and ultimately, lower our production costs and increase our production capacity. Our teams are working diligently in accordance with our strict COVID-19 protocols and the first phase of our project has been completed on time and on budget despite the challenges posed by the current context,” said Liana Centomo, Chief Executive Officer of Canadian Electrolytic Zinc Limited, the Fund’s Manager. “Over the next months, our focus will be on preparing the building that will house our new belt filters now that the structure is ready, and on completing the engineering work for our new cooling towers. We expect to receive the new belt filters and break ground on the new cooling towers by the second quarter of 2021, which will mark another important step in the progression of our expansion projects,” added Ms. Centomo.
Estimated at a cost of US$32 million, the expansion projects are expected to increase the Processing Facility’s zinc production by approximately 20,000 tonnes per year to 280,000-290,000 tonnes annually. Construction work began in the third quarter of 2020 and commissioning is targeted for the first quarter of 2022.
Expansion projects overview
Increasing the Processing Facility’s filtration capacity will increase its flexibility to treat varied feeds. With local concentrate feeds diminishing and the trend of global feed grades decreasing, the Processing Facility will improve its ability to process a higher volume of impurities, namely iron, as existing equipment has reached its saturation point. This will allow the Processing Facility to maintain its current production levels as well as to increase zinc production. Construction work consists of the addition of two belt filters, one for treating residue and the other for treating process water generated for the filtering of the residue, a building to house them, and increasing cement mixing capacity to produce jarofix. The expanded filtration building will also be able to accommodate a third belt filter. The option of the installation of a third belt filter, not included in current cost estimates, will allow the operation further flexibility to react to changes in global feed qualities.
The other key project is aimed at increasing the cooling capacity of electrolyte in the cell house where zinc is plated with the installation of two additional cooling towers. The zinc plating process generates heat and increases the temperature of the electrolyte. The cell house electrolyte must be maintained at a maximum temperature to operate efficiently and for the proper plating process to occur. To maintain the optimal temperature, the electrolyte is continually pumped through cooling towers. During the summer months, the plant’s throughput must be reduced to respect its current cooling capacity.
Potential impact of COVID-19
As a result of the ongoing COVID-19 pandemic, many companies and local and national governments have imposed restrictions, such as closures, quarantines, cancellations and travel restrictions in an effort to manage rising caseloads. The Fund has contingency plans in place to minimize impact to operations which include strategies to adapt to various potential scenarios, including but not limited to securing adequate resources in terms of manpower, supplies, logistics and concentrate; however, the Fund may incur losses or expenses relating to such events outside of its control despite maintaining strict COVID-19 measures within the Processing Facility. Given the evolving and dynamic nature of COVID-19, it is difficult to predict how significant or adverse the impact of the pandemic may be on the Fund’s business, its operations, its ability to complete its expansion projects on time and on budget, and the market for its securities.
Certain information in this press release, including statements regarding the Fund’s production and sales, future business plans and operation of the Processing Facility, future liabilities and obligations of the Fund (including capital expenditures), the ability of the Fund to operate profitably, the dependence upon the continuing supply of zinc concentrates and competition relating thereto, the ability of the Processing Facility to treat a more varied feed quality stream, anticipated trends in zinc concentrate supply and demand, smelting capacity, sulphuric acid market demand and supply, zinc concentrate treatment charges, the anticipated financial and operating results of the Fund, distributions to Unitholders, the scope, timing and completion of the Expansion Projects, the impact of the Expansion Projects on the operations of the Processing Facility, the operating and financial results of the Fund, the achievement of milestones under the Stream Agreement and the additional advance payments, and the agreements relating to purchases of zinc concentrate and sale of zinc metal are forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". Statements containing forward looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events.
Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in greater detail in the "Risk Factors" section of the Fund’s Annual Information Form dated March 30, 2020 for the year ended December 31, 2019 and the Fund’s other periodic filings available at www.sedar.com. These factors are not intended to represent a complete list of the factors that could affect the Fund; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this press release are made as of the date of this press release, and the Fund expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.
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.
For further information, please contact:
Noranda Income Fund:
Chief Financial Officer of Canadian Electrolytic Zinc Limited, Noranda Income Fund’s Manager