NEW YORK Noranda Income Fund reported a boost in zinc
production in the first quarter, but output rates may be
reduced going forward as the closure of Xstrata Zinc
Canadas Brunswick Mine forces Norandas refinery to
process feed mix with a higher impurity content, the company
Salaberry-de-Valleyfield, Quebec-based Noranda processes zinc
for Baar, Switzerland-based Glencore Xstrata Plc at the
Canadian Electrolytic Zinc Ltd. (CEZinc) facility under a deal
that expires in 2017. In the first quarter, Norandas zinc
production totaled 68,413 tonnes, up nearly 9 percent from
62,813 tonnes in the same quarter last year due to slightly
higher volumes of zinc concentrate and a build-up of
work-in-progress inventory last year, it said.
But with CEZincs major supplierGlencore
Xstratas Brunswick Minepermanently closing last
month, Noranda said it could start facing lower output levels
and higher costs due to an increased level of impurities found
in other mines concentrate sent to CEZinc for refining.
While future feeds are expected to still be within the
specifications set out in the supply and processing agreement,
the processing facility may experience an increase in its
operating costs, working capital requirements and/or capital
expenditures as a result of being required to treat a more
varied feed quality stream, Noranda said. Higher
amounts of impurities may also negatively impact the volume of
zinc concentrate that can be processed, resulting in a lower
In addition, the company expects its inventory levels to
fluctuate more following the Brunswick Mine shutdown as
larger and more irregular seaborne deliveries of concentrate
will replace some of the regular rail deliveries from Ontario,
Québec and New Brunswick, it said.
But while the shutdown of the aging Brunswick operation may
impact Norandas future output, the company said it had
enough advanced warning to prepare for the change. For example,
in the fourth quarter CEZinc received increased deliveries of
zinc concentrate containing higher silica content, which it
said it is blending with the historical concentrate mix to
ensure a gradual transition to the new material.
The fact that the processing facility successfully
treated higher levels of silica in concentrate feeds in the
first quarter of 2013 was very encouraging, Noranda said,
citing a Canadian $20-million investment announced in December
to increase the refinerys ability to remove silica (
amm.com, Dec. 17
The bulk of the investment is expected to occur in 2013
and the project is scheduled to be completed by June
2014, the company said this week.
In the first quarter, Noranda reported earnings before income
taxes (Ebit) of C$27.3 million ($26.9 million) on revenues of
C$150.1 million ($147.5 million) vs. Ebit of C$15.4 million on
sales of C$145.8 million in the year-ago quarter.
Partially contributing to the stronger financial quarter was
the rise in production as well as firmer premiums, which
averaged 8.4 cents per pound in the first quarter vs. 7.5 cents
per pound in the same quarter last year as both contract and
spot premiums rose, the company said.
Looking forward, zinc demand is likely to improvealbeit
from low levelsas the quarter progresses, Noranda
Zinc demand emerged from the seasonally slow December and
January period showing only modest growth in March, the
company said. Customers are maintaining a cautious
outlook and are continuing to maintain low purchase
inventories. A gradual improvement in customer demand is
expected during the second quarter.