Noranda to set US$5.5M charge due to loss in arbitration case
Noranda Aluminum Holding Corporation, which mines bauxite in Jamaica through a subsidiary, will record a US$5.5 million (J$660 million) non-cash charge as a result of losing its arbitration case against the Government of Jamaica.
Noranda Bauxite Limited, a wholly owned subsidiary, and the Government were at odds over the rate at which to apply a production levy.
Earlier this month, an arbitration panel in London issued its decision in favour of the Government.
"As a result of the arbitration panel's decision ... the company expects to record an approximately US$5.5 million non-cash charge in fourth-quarter 2015," Noranda said in a notice issued this week.
"This charge represents additional production levy obligations in excess of amounts recorded in the nine-months ended September 30, 2015," the notice said.
Noranda anticipates that the arbitration panel will issue an explanation of the reasons for its decision in the first quarter of 2016.
The company explained that the additional sum reflects the difference between the weighted average US$5.67 per dry metric tonne (DMT) production levy due for the nine month period as a result of the arbitration panel's decision, and the $5.00 per DMT - $3.75 in cash and $1.25 in letters of credit - previously provided to the Government.
Noranda mines bauxite from its plant in St Ann, Jamaica, and then processes it at its Gramercy Aluminum plant in the United States. The arbitration tribunal issued its decision on December 18.
The bauxite company had challenged the Government's decision not to extend a concession granted in 2009 under the Bauxite Levy Act.
Under the agreement, Noranda did not have to pay the full levy, but in December 2014 it expired.
In its decision, the arbitration tribunal agreed with the Government that it did not surrender its rights to apply the full bauxite levy to Noranda after the concession expired.
The Government argued that Noranda should pay the full levy as of January 2015 as required under the Bauxite Levy Act.