DBRS Releases Report on Noranda Operating Trust

DBRS has today released a report on Noranda Operating Trust (the Trust) that provides further detail on the recent confirmation of the Trust’s Senior Secured Notes rating at BB (high) with a Stable trend.

The Trust remains a well-established and profitable processor of zinc concentrates strategically located to serve North American zinc metal markets, but is highly dependent on a zinc concentrate supply and processing agreement (Supply and Processing Agreement) with Glencore Canada Corporation (Glencore Canada) that ends its initial term in May 2017. Post-May 2017, the economic viability of the Trust’s zinc processing facility (CEZinc) is uncertain as it will need to replace (or continue) the Glencore Canada concentrate supply in a market that is currently in oversupply with low zinc processing charges. The Trust’s debt has been reduced sharply and its credit metrics are now very strong for its rating. Nonetheless, the Trust’s earnings and cash flow are fully dependent on the terms of its Supply and Processing Agreement with Glencore Canada and continuing near-capacity operation.

In the first half of 2013, the Trust has continued to restrict distributions to provide funds to maintain the operational capability of CEZinc and build resources to accommodate any transition / remediation / closure costs that may be incurred post-May 2017. DBRS views this as prudent action given the profitability of the CEZinc facility post-May 2017 remains in doubt.

Today’s report and the September 18, 2013, press release are available at www.dbrs.com.