Noranda to continue mining in Jamaica amid bankruptcy
Noranda Aluminum Holding Corporation will continue its bauxite mining operations in Jamaica amid filing for bankruptcy protection in the United States.
The Chapter 11 filing in St Louis announced on Monday also involved a plan to secure up to US$165 million in financing for liquidity purposes, said the company. Noranda mines bauxite in Jamaica through subsidiary Noranda Bauxite Limited (NBL).
"Noranda is continuing production and its partnership with the Government of Jamaica at its Noranda Jamaica Bauxite Partners mine in St Ann, Jamaica," Noranda said in a notice about the restructuring on Monday.
The local subsidiary expects to record a US$5.5 million (J$660 million) non-cash charge as a result of losing an arbitration case against the Government of Jamaica last December. Noranda and the Government were at odds over the rate at which to apply a production levy for bauxite mined in St Ann. The ruling required Noranda to pay the levy at a rate of US$7.56 per tonne, which took effect January 2015. Noranda had argued that the concessionary US$2.50 rate set in 2010 should continue to apply, but the Government said that rate, which was adjusted to keep the sector afloat during the global economic crisis, had been withdrawn.
Noranda on Monday said that part of the continuation of local operations involves NBL improving its efficiency. The St Ann mine is owned 51 per cent by the Jamaican Government, while Noranda, the managing partner, holds the other 49 per cent.
"The company continues to focus its efforts on improving productivity and reducing its costs, as well as maintaining bauxite sales volumes and achieving improved pricing with respect to its largest third-party customer, Sherwin Alumina LLC. Sherwin filed for Chapter 11 relief in January 2016," said Noranda.
Last February, Noranda finished expanding its port with expectations to save more than US$5 million ($600m) annually in shipping costs with its newly deepened and expanded port in St Ann, Jamaica.
The port which cost US$11 million to expand will allow ships laden with bauxite to depart with 10 per cent heavier loads without fear of hitting the sea floor.
Kip Smith, Noranda's president and chief executive officer said in the release: "In light of the challenging market conditions for the aluminium industry and the recent disruptions in our primary business operations, the board and management team, with the support of our principal lenders, determined that undertaking this court-supervised process is in the best interests of Noranda and its stakeholders. We believe this court-supervised process will provide us with time and financial flexibility to evaluate options to enhance the sustainability of our major business operations".
In conjunction with the filing, Noranda has entered into an agreement in principle with existing lenders for up to $130 million in debtor-in-possession - DIP - financing and has received a commitment for up to US$35 million in incremental DIP financing provided by certain existing term loan lenders.