Canada-based Noranda Income Fund (the Fund), which owns the CEZinc processing facility and ancillary assets in Salaberry-de-Valleyfield, Quebec, and Switzerland-based miner Xstrata Zinc's subsidiary Xstrata Canada Corporation have announced that on July 28, 2010 they entered into a non-binding letter of intent with respect to a potential acquisition of the Fund by Xstrata.
The potential transaction contemplates the acquisition of all of the outstanding priority units of the Fund for cash consideration of $3.40 per priority unit, which represented a premium of 33 percent over the July 15 closing price of the priority units on the Toronto Stock Exchange. Xstrata beneficially owns an effective 25 percent voting and economic interest in the Fund and manages the Fund's sole operating asset, the CEZinc refinery and processing facility in Québec.
If a definitive agreement were to be reached, the parties would expect to proceed by way of a takeover bid by Xstrata, or one of its affiliates, of all of the outstanding priority units of the Fund. Any actual offer by Xstrata would be subject to a number of customary conditions, including the completion of satisfactory due diligence and regulatory approvals.
The CEZinc processing facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America. It produces refined zinc metal and various by-products from zinc concentrates purchased from mining operations.