Glencore Canada to Acquire Noranda Income Fund Priority Units in an All-Cash Transaction

TORONTO, Jan. 09, 2023 (GLOBE NEWSWIRE) — Noranda Income Fund (TSX: NIF.UN) (the “Fund”) announced today that it has entered into an arrangement agreement (the “Arrangement Agreement”) with Glencore Canada Corporation (“Glencore”) by which Glencore will acquire all of the issued and outstanding priority units of the Fund for C$1.42 per unit, by way of a court approved plan of arrangement, for total consideration of approximately C$53.2 million (the â€śTransaction”). The purchase price of C$1.42 per unit represents a 45% premium on the closing price on the Toronto Stock Exchange (“TSX”) on January 6, 2023, the last trading day prior to announcement, and a 62% premium on the 20-day volume weighted average price per priority unit on the TSX for the period ending on January 6, 2023. Glencore currently holds 100% of the Fund’s special fund units, representing 25% of all issued and outstanding units of the Fund.

The Arrangement Agreement was unanimously approved by the Board of Trustees of Noranda Operating Trust (the “Board”), with those members of the Board who are related to Glencore abstaining from voting, upon recommendation from the Independent Committee of the Board, after arm’s-length negotiations yielded an attractive offer for the Fund’s priority unitholders.

This transaction has several benefits for the Fund’s priority unitholders including:

  • Immediate and attractive premium for the Fund’s priority unitholders;
  • All-cash transaction not subject to a financing condition; and
  • Removal of future dilution, commodity and execution risk.

“Noranda Income Fund was established in 2002 as an income trust to distribute cash flow from the zinc processing facility in Salaberry-de-Valleyfield, Quebec, to unitholders. While the Fund distributed significant cash flow to unitholders through to 2017, today the Fund faces various challenges operating as a single-asset zinc processing facility in an environment of rising costs and fluctuating commodity prices and facing material near-term capital expenditure requirements, which inhibits the Fund’s ability to recommence cash flow distributions in the foreseeable future,” said Mr. Anthony Lloyd, Chair of the Board and member of the Independent Committee. “The Transaction provides unitholders an opportunity to realize an immediate and attractive premium for their units and is unanimously recommended by the Independent Committee of the Fund’s Board.”

Independent Committee Review and Board Recommendations

The Independent Committee took into consideration several factors when approving the Arrangement Agreement including:

  • Compelling Value to Priority Unitholders: The C$1.42 per unit purchase price represents a 45% premium on the closing price on the TSX on January 6, 2023, the last trading day prior to announcement, and a 62% premium on the 20-day volume weighted average price per priority unit on the TSX for the period ending on January 6, 2023. Considering associated risks and with challenges still on the horizon for the Fund, the Independent Committee concluded that the consideration represents a compelling value for priority unitholders compared to the status quo.
  • Certainty of Value and Immediate Liquidity: The Transaction allows unitholders to realize an attractive price for their units through an all-cash offer, thereby providing certainty of value and immediate liquidity.
  • Inability to Generate Distributable Cash: The Fund has not been able to generate distributable cash to proceed with monthly distributions for unitholders since 2017 and with long-term capital expenditures needed in the cellhouse it is unlikely the Fund would be able to recommence such distributions in the foreseeable future.
  • Business Subject to Significant Volatility: The Fund is, by its nature as a single-asset zinc smelter, subject to significant volatility. Following the initial 15-year favourable supply and processing agreement put in place at the Fund’s inception in 2002, the ability to generate revenue and cash flow is subject to market volatility in treatment charges and zinc prices. The Fund also faces significant working capital requirements and fluctuations thereof. These challenges are exacerbated by the rising cost environment.
  • Capex Requirements: The operations of the Fund necessitate meaningful capital expenditure (“capex”) requirements to maintain zinc smelting operations, which is reflective of the heavy industrial nature of the Fund’s business. These capex requirements are necessary to ensure the maintenance, stability, safety and efficiency of its operations. This past year, production was negatively impacted primarily by instability in cellhouse operating conditions and the related six-week shutdown of the cellhouse to conduct maintenance and repairs: in 2022, zinc metal production decreased by 33% to 198,182 tonnes, compared to 264,046 tonnes in 2021, and zinc metal sales decreased by 33% to 198,666 tonnes, compared to 263,612 tonnes in 2021. While the Fund believes the cellhouse repairs will contribute to stabilizing near-term cellhouse operating conditions, the cost of a full cell and crane replacement in the cellhouse, required to fully address underlying operational issues, is estimated to be approximately US$100 million. Obtaining financing for this will present a challenge for the Fund.
  • Negotiations Led by Independent Committee: The Arrangement Agreement is the result of extensive arm’s-length negotiations between the Independent Committee and Glencore, with the oversight and participation of the Independent Committee’s external financial and legal advisors, as well as the Fund’s external legal advisor.
  • Independent Valuation and Fairness Opinion: Accuracy Canada provided an independent valuation to the Independent Committee, which determined that, as at December 31, 2022, based upon and subject to the assumptions, limitations and qualifications contained therein, the fair market value of the priority units ranged from C$1.24 to C$1.94 per unit. Accuracy Canada also provided the Independent Committee a fairness opinion to the effect that, as at January 8, 2023, the consideration to be received by the priority unitholders under the Transaction is fair, from a financial point of view, to such holders, subject to the limitations, qualifications, assumptions and other matters set forth therein.
  • Additional Fairness Opinion: Paradigm Capital, acting as financial advisor to the Independent Committee and the Fund, provided an opinion to the effect that, as at January 8, 2023, the consideration to be received by the priority unitholders under the Transaction is fair, from a financial point of view, to such holders, subject to the respective limitations, qualifications, assumptions, and other matters set forth in such opinion.
  • Minimal Conditionality: The Transaction is not subject to any due diligence condition or financing condition and the Independent Committee and the Board believe that there are limited closing conditions that are outside of the control of the Fund and, as such, there is a reasonable likelihood of completion.
  • Transaction Structure: The Transaction is structured as a court approved plan of arrangement, which provides procedural benefits to unitholders such as dissent rights and which also allows for structural flexibility which may be desirable given the Fund’s complex corporate structure.
  • Required Unitholder and Court Approvals: The Transaction will become effective only if, at a special meeting of unitholders called to consider the Transaction, it is approved by (i) 66 2/3% of the votes cast by the holders of the Fund’s priority units and special fund units voting as a single class, and (ii) a simple majority of the votes cast by holders of the Fund’s priority units and special fund units after excluding votes from certain unitholders, including Glencore, and, after considering the procedural and substantive fairness of the Transaction, by the Ontario Superior Court of Justice (Commercial List).
  • Benefits to Other Stakeholders: The Independent Committee believes that the Transaction – and integrating the zinc smelter operations into Glencore – is in the best interest of the processing facility, its employees and the local community, given that the Fund already has so many important relationships with Glencore, including Glencore being the owner of the zinc smelter’s manager, which is also the employer of the facility’s employees.

The past few years have been difficult for the resource industry, with supply chain disruptions and labour shortages presenting challenges to the sector globally. Following recently announced production issues, the Fund made necessary investments and proceeded to a temporary shutdown of the zinc smelter to make immediate repairs in the cellhouse. While that proved to be the right decision with the cellhouse now reopened, challenges are still on the horizon. The Fund does not intend to provide annual production and sales guidance for the foreseeable future, as the zinc smelter’s production capacity will remain constrained until the underlying issues impacting cellhouse operating conditions are fully addressed.

It is the view of the Independent Committee that the Transaction offers the best value realizable for unitholders and comes at a strategic time. The Fund is grateful to the zinc smelter’s employees for their hard work and dedication to the Fund, including during the recent shutdown.

Background to the Transaction

The Transaction is the result of a concerted review by the Independent Committee of the alternatives available to the Fund, begun informally in February 2021 and formally launched in September 2021, to address the financial, liquidity and leverage challenges facing the Fund.

Given the suspension of monthly distributions in January 2017 and the Fund’s financial results during the period from 2017 through to early 2021, in early 2021 the Independent Committee questioned the sustainability of the Fund model and began an informal strategic review. As part of this strategic review, in 2021, a third-party global engineering firm assessed the current state of the Fund’s performance and strategic alternatives and, in the same year, Paradigm Capital, then acting as financial advisor to the Board, performed an independent review of the strategic and financial alternatives for the Fund.

In January 2022, the Independent Committee began to discuss with Glencore more concretely Glencore’s interest in pursuing a privatization of the Fund. In February 2022, the strategic review was formalized by the Board by way of a supplemental mandate of the Independent Committee. During the months that followed, discussions with Glencore continued, while the Independent Committee continued to explore and evaluate alternatives for the future of the Fund, in the event that a proposal might not result from the discussions with Glencore.

In March 2022, the Independent Committee engaged Paradigm Capital as financial advisor to the Independent Committee and the Fund in connection with the potential privatization transaction.

During the course of the strategic review, the zinc smelter’s cellhouse was experiencing accelerated deterioration, resulting in pressing capex needs. By October 2022, management’s conclusion was that a replacement of all cells in the cellhouse would be necessary. As mentioned above, the cost of a full cell and crane replacement is estimated to be approximately US$100 million.

In October 2022, Glencore International AG (“Glencore AG”) delivered a proposal letter in which it proposed the privatization of the Fund. As the Independent Committee through its long-running strategic review was of the opinion that the privatization of the Fund was the only viable option, it negotiated with Glencore AG in the following months, during which time it obtained the independent valuation and fairness opinions, which negotiations concluded with the execution of the Arrangement Agreement.

Through the strategic review, the Independent Committee completed an in-depth analysis of the Fund’s status quo, long-term prospects and lack of viable alternatives. The Independent Committee believes that the Transaction presents the best opportunity to deliver value to unitholders and that it is fair to unitholders and in the best interests of Fund and the unitholders.

Transaction Summary

The Transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) and will require the approval of: (i) 66 2/3% of the votes cast by the holders of the Fund’s priority units and special fund units voting as a single class; and (ii) a simple majority of the votes cast by holders of the Fund’s priority units and special fund units after excluding votes from certain unitholders, including Glencore, as required under Multilateral Instrument 61 101 – Protection of Minority Security Holders in Special Transactions, at a special meeting of the Fund’s unitholders to be held to consider the Transaction (the “Meeting”). In addition to unitholder approvals, the Transaction is also subject to the receipt of court approval, regulatory approval and other customary closing conditions for transactions of this nature. The Transaction is expected to be completed in the first quarter of 2023. The Arrangement Agreement provides for customary deal-protection provisions, including a non-solicitation covenant on the part of the Fund and a right for Glencore to match any Superior Proposal (as defined in the Arrangement Agreement). The Arrangement Agreement includes a termination amount of C$2.1 million, payable by the Fund to Glencore in certain circumstances, including if Glencore fails to exercise its right to match in the context of a Superior Proposal supported by the Fund.

Further details regarding the terms of the Transaction are set out in the Arrangement Agreement, a copy of which will be made available on SEDAR at

The Meeting

The Meeting is expected to be held on or about February 28, 2023. Unitholders as at the close of business on January 9, 2023, will be entitled to vote at the Meeting. The Meeting will take place in advance of the special meeting of unitholders which has been called for March 28, 2023 in response to the meeting requisition notice received from certain unitholders. Voting in favour of the Transaction provides unitholders with an opportunity to select a certain cash payment at an attractive premium rather than proceed to a special meeting to consider replacing trustees of the Fund. Additional information regarding the terms of the Arrangement Agreement and the background of the Transaction will be provided in advance of the Meeting in the information circular for the Meeting, a copy of which will be made available on SEDAR at Unitholders should read the information carefully before deciding how to vote. At this time, there is no need for unitholders to take any voting action.

Attention Unitholders: If you have questions or want to ensure you receive the latest updates directly to your mobile device please call or text Kingsdale Advisors at 1-888-213-0093.   Kingsdale Advisors can also help you by email at [email protected]

Forward-Looking Information
Certain information in this press release, including statements regarding the Arrangement Agreement, the proposed Transaction, the Meeting, receipt of Fund unitholder, court and required regulatory approvals for the Transaction and the cost of and financing of a full cell and crane replacement, 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, 2022 for the year ended December 31, 2021 and the Fund’s other periodic filings available at 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.

About the Noranda Income Fund
Noranda Income Fund is an income trust whose priority 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, Quebec. 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:

Advisors and Counsel
Accuracy Canada Inc. provided an independent valuation and a fairness opinion to the Independent Committee. Fasken Martineau DuMoulin LLP is acting as legal counsel to the Independent Committee. Paradigm Capital Inc. is acting as financial advisor to the Independent Committee and the Fund.

Torys LLP is acting as legal counsel to the Fund’s manager. Kingsdale Advisors is acting as strategic unitholder advisor and communications advisor to the Fund.

BMO Capital Markets and McCarthy TĂ©trault LLP are acting as financial advisor and legal counsel respectively to Glencore.

For more information: Andrew Sidnell
Vice President, Special Situations
Kingsdale Advisors
[email protected]

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