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Noranda signs 4-year zinc concentrate supply deal with Glencore

Noranda Income Fund signed agreements with Glencore Plc unit Glencore Canada Corp. for the supply of all of the former's zinc concentrate needs and purchase of all of Noranda's zinc metal for a four-year period ending April 30, 2022.

Noranda will buy the zinc concentrate and sell the zinc metal for the 12-month period ending April 30, 2019, based on fixed market terms. Thereafter, the terms will be agreed annually in line with market conditions.

The agreement will enable Noranda to execute its investment plan to increase capacity and reduce unit operating costs, said President and CEO Eva Carissimi in a March 8 statement. Noranda owns the CEZ zinc refinery in Quebec, which is operated by the Glencore unit.

"Through our most recent negotiations, the fund has the option to diversify its supplier base beginning in 2020. The fund can decide to exercise this option depending on market conditions," said Jean Pierre Ouellet, chair of the board of trustees.

Noranda expects its adjusted EBITDA this year to be between US$16 million and US$20 million. The forecast is based on zinc production and sales assumption of between 250,000 and 260,000 tonnes. The estimate uses a zinc price of US$1.50 per pound and copper price of US$2.72 per pound.

The parties did not disclose the terms of the transaction.