Second Quarter 2022 Highlights (compared to same period in 2021)
- Earnings before income taxes of
$111.9 million , including an unrealized derivative financial instrument gain of$130.0 million , compared to loss before income taxes of$13.3 million , including an unrealized derivative financial instrument gain of$0.9 million - Adjusted EBITDA1 of negative
$2.3 million compared to negative$11.4 million - Zinc metal production of 56,988 tonnes compared to 67,579 tonnes
- Zinc metal sales of 57,006 tonnes, compared to 67,348 tonnes
“The second quarter of 2022 has been challenging both from a financial and operational perspective. Our financial results continue to be impacted by lower zinc production and sales, as we also began to see a decrease in zinc prices. While indicative spot treatment charges have remained robust year-to-date, any positive impact will be limited by our lower volumes and related operational challenges, and as we continue to consume inventory acquired last year,” said
“Due to the continued impact of labour availability constraints on operations and an unexpected deterioration in cellhouse conditions during the second quarter, we must lower once again our production and sales guidance for 2022. We continue to actively work on addressing our labour challenges, through increased recruitment, operator training, coaching, and scheduling efforts. Maintenance and housekeeping regimes are being strengthened as well. I would like to recognize the dedication of our employees at the Processing Facility who continue to work towards achieving a return to normal operating conditions in a challenging context,” concluded
Production and Sales Outlook Revision
The Fund has revised its annual production and sales target to between 225,000 and 240,000 tonnes of zinc, from its previously disclosed
The Fund’s ability to achieve the low end of its revised guidance range is dependent on maintaining current production cadence through to the end of the year. The Fund’s ability to achieve the higher end of its revised guidance range is dependent on the Processing Facility successfully mitigating its labour challenges and improving operational efficiency before the end of the year. The Fund’s ability to achieve its revised guidance range is subject to a number of risks and uncertainties, which include but are not limited to, continued labour availability constraints, higher employee turnover, a further deterioration in cellhouse operations and equipment failures, unplanned maintenance events, and increased absenteeism due to a potential new wave of COVID-19, among other factors.
Expansion Projects Completion
The Fund completed the commissioning of its strategic expansion projects, comprised of the installation of additional belt filters and related equipment to increase the Processing Facility’s filtration capacity and two additional cooling towers in the cellhouse to improve cooling capacity in the summer months, as planned, in the second quarter of 2022.
Financial Results for the Second Quarter 2022
Revenues in the three months ended
Net revenues less raw material purchase costs and derivative financial instruments gain in the three months ended
Production costs before change in inventory for the three months ended
Unit production costs2 were
Liquidity Position and Distribution Policy
As at
Cash provided by operating activities for the three months ended
Based on the Fund’s current liquidity position and capital requirements, as well as continued challenging market conditions, the Fund has limited ability to pay regular distributions, which are subject to the approval of its ABL Facility lenders. The Board continues to carefully monitor and review the Fund’s financial performance, capital requirements, business environment and prospects on a periodic basis as well as its required levels of reserves and expected future cash flows, to determine its ability to pay distributions to unitholders in future.
Market Outlook
The prices of zinc, copper and sulphuric acid have been strong through 2022. Most recently, zinc prices fell significantly in June from
CRU reports that zinc premiums may have peaked in the second quarter of 2022. Zinc inventories in
According to
Readers should be advised that the summarized communication presented in this press release is limited in its disclosure. It is not a suitable source of information for readers who are unfamiliar with the Fund, and it is not in any way a substitute for reading the Consolidated Financial Statements and MD&A because a reader relying on this summary alone might overlook decision critical information.
Second Quarter 2022 Results Conference Call
When: | |
Dial-in: | 1-888-886-7786 (toll-free |
To access webcast: | http://www.norandaincomefund.com/investor/conference.php or https://app.webinar.net/m4WR924OXxZ |
The recording will be available until midnight on
1-877-674-7070 (toll-free
Forward-Looking Information
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, and the impact of the amendments to the SPA, the Operating and Management Agreement, the Management Services Agreement, the Administration Agreement 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
About the
For more information: | Paul Einarson Chief Executive Officer of Tel.: 514-745-9380 info@norandaincomefund.com |
Reconciliation of Non-IFRS Financial Measures
1Adjusted EBITDA (“Earnings before income taxes, depreciation and amortization”) is used by the Fund as an indication of cash generated from operations. Adjusted EBITDA is not a recognized measure under IFRS and therefore the Fund’s method of calculating Adjusted EBITDA is unlikely to be comparable to methods used by other entities. The Fund’s Adjusted EBITDA is calculated by starting from earnings before finance costs and income taxes and adjusting for non-cash items such as depreciation, gain or loss on the sale of assets, senior secured metal liability change in estimate, derivative financial instrument loss or gain and changes in fair value of embedded derivatives. In addition, an adjustment is made to reflect the net change in the rehabilitation liabilities (reclamation (recovery) expense less site restoration expenditures), write down of inventories, inventory management program unrealized gain or loss, metal sales management program unrealized gain or loss and the net change in employee benefits (non-cash employee benefit expenses less employer contributions).
Reconciliation of Adjusted EBITDA ($ millions) | Three months ended | |
2022 | 2021 | |
Earnings (loss) before finance costs and income taxes | $116.8 | |
Depreciation of property, plant and equipment | 4.0 | 3.8 |
Write down of inventories | 16.8 | - |
Net change in residue ponds rehabilitation liabilities | (0.9) | 0.6 |
Senior secured metal liability change in estimate | - | - |
Derivative financial instrument loss (gain) | 3.1 | (0.8) |
Change in fair value of embedded derivatives | (12.7) | (3.8) |
Inventory management program - unrealized | (122.3) | (0.9) |
Metal sales management program - unrealized | (7.8) | - |
Loss (gain) on sale of assets | 0.1 | (0.1) |
Net change in employee benefits | 0.6 | 0.8 |
$(2.3) |
2Unit production costs is not a recognized measure under International Financial Reporting Standards and therefore the Fund’s method of calculating unit production costs may not be comparable to methods used by other entities. Unit production costs means production costs divided by total tonnes of zinc produced. The Fund uses unit production costs as it believes it provides the best indication of the costs of production in a period and provides the ability to compare production costs in different periods.
Source:
2022 GlobeNewswire, Inc., source