Noranda Income Fund (NIF.UN-T)

There is no dividend. Sales are up but earnings are less negative rather than positive. Earnings growth forecast for this year is zero.

This has been absolutely taken through the wringer. There is a massive strike going on, with no end to it. There are 3 zinc smelters in all of North America, and this is one of them. Realistically, it is a recovery situation of some sort. Management has been running the operation. Glencore is the all-powerful tool behind this company, and they are going to need to have one of the smelters to stay in place. He is not going to leave this one.

They had to eliminate their dividend, and the stock has come off. Believes there is still a strike going on, so this company is struggling.

They have one client: Gencore. The contract has been renewed, but the challenge is that it is at market pricing. The company may not be able to make a profit at these prices and may not be able to maintain the yield. Stay clear until you get a sense of what the financials look like and what will the yield be.

This is a play on their one-time contract with Glencore which is up in November. Valuation looks great at 2X cash flow, 1.8X EBITDA with an 11% yield, but it is a fictional yield if that contract winds up. This is much more of an events stock than what he would look for.

Had bought this for its extraordinarily high dividend. Is there a zinc situation that is going to run through this company when the time comes? He just continues collecting his money. Dividend yield of 11%.

The units have done pretty well over the last little while. Noranda is tricky, and is hard to wrap your mind around. It is effectively a “pass-through” for zinc processing. Really a toll booth. Not sure he would be jumping into this, especially after its recent movement. The “units” effectively have a priority to receive dividends.

A zinc processing plant, with Glencore (GLEN-LSE) being the primary customer. The yield seems too good to be true. In this case it is not, because the stock can sustain their yield. An extremely cheap stock. Trades at 2X Price to Earnings, 1.6X EBITDA and has a 17% yield. The contract runs out in 2017, and it is unclear what is going to happen at that point. Trading at about .5X BV. The assets are worth something even after the 1 year is up. If you hold it today, you are going to get 17% of your money back in yield between now and 2017, and then you have optionality beyond that. Not a bad place to be.

A zinc processing facility. Zinc used to be sourced from a closer mine, but mines locally have closed down. One facility in Quebec is very efficient and it is just a matter of getting the zinc out of it. 21% yield.

Still likes this. Up about 50% from where he bought it. He maintains the view that because it has very important metals processing facilities, it is going to have life after death, which occurs after the end of their contract. It doesn’t make sense that no one buys it or that the contract is not renewed.

Zinc processing facility in Quebec. Some of their mines are depleting. Getting zinc from further away makes the plant less attractive.

There are 3 zinc smelters in North America and there is a need for more zinc. They have an agreement to supply zinc that runs until 2017, and he would speculate that it will run past that date.

Have a ton of trouble on their hands. A classic case of financial engineering going bad. Noranda sold it into this fund at the highest price they possibly could, to make it look like an attractive investment to unsuspecting retail investors. This is a mess.

On his watch list. He has always been afraid of it to some degree. They may not have a business after 2017. That is a major, major danger signal. The value is questionable, even if it is contrarian.

Looking at this right now. An absolutely tremendous payout. He doesn’t know the company well enough to Buy into it, but he loves dividends. This company is giving money back all the time. 9% dividend yield.