Valleyfield, Quebec-The Noranda Income Fund reports that it has received notice from its sales agent, Xstrata Canada Corp., that current market conditions now permit Xstrata Canada to arrange for all the sales of sulfuric acid in quantities equal to the processing facility’s normal rate of production. As a result, it has now returned to full production. In the past few months, the Fund has seen stronger market conditions as a result of the strike of the Vale Inco operations in Sudbury and improved sales to both spot and contract customers. Since March 2009, production of sulfuric acid and zinc was reduced by approximately 20 percent due to the weakness in sulfuric acid demand and the lack of sulfuric acid storage capacity. On July 20, 2009, the Fund suspended monthly cash distributions to priority unitholders as a result of the reduced profitability and cash flow from operating the processing facility at less than full capacity, and because of weak market conditions. There have been no monthly distributions paid to ordinary unitholders since February 2009. The board of trustees decided that it was prudent to stop paying the monthly cash distribution until there is an overall improvement in the economic outlook of the Fund. The Fund said that while the return of full capacity is positive, it still faces some challenges, such as low zinc premiums and acid netbacks and a stronger Canadian dollar. In addition, the Fund is in discussions with the revolving facility syndicate about the expected current ratio and possible leverage ratio covenant breaches. At this point in time, the monthly cash distribution remains suspended. In other news, the Fund said a motion for authorization to institute a class action related to an August 2004 accidental discharge of sulfur trioxide was dismissed by the Quebec Court of Appeal. The Fund is satisfied with the judgment and hopes this will end the matter.
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