Noranda ekes out profit despite higher bauxite levy
Noranda Bauxite Limited was able to eke out US$500,000 (J$60 million) of operating profit during the three months to September.
The mining company generated US$33.5 million in sales during the quarter, or US$2.7 million higher revenue than year-earlier levels.
This was primarily as a result of an 18 per cent increase in external sales prices and a five per cent rise in external shipment volume.
Also, savings from the expansion of its port in Discovery Bay, St Ann, helped reduced cost, albeit not by as much as the reduction it saw in fuel expenses.
"Bauxite results reflect US$3.5 million lower fuel costs, a US$1-million currency benefit and lower demurrage fees," said the latest financial statements filed by Noranda to the US Securities and Exchange Commission.
This was offset by an additional US$3 million in production levy charges due to changes in the tax which was enforced by the Government, pending an arbitration hearing next month.
Noranda contends that the Government failed to afford the miner treatment at least as favourable as that afforded to other bauxite and alumina producers in Jamaica with respect to the production levy. It also says that it is entitled to offset certain income taxes paid against the production level, and it is seeking reimbursement of a portion of the US$9 million it paid in additional taxes under the new levy terms.
The Government denies Noranda's claims. It asserts that the miner's claims rely on documents which do not constitute binding agreements. Moreover, the Government is seeking payment of US$17.8 million production levy from January 1 to June 30, 2015, which it alleges remains unpaid by Noranda.
The arbitration hearing has been scheduled for December 12-14, 2015.
Elsewhere, Noranda took a huge beating in its primary aluminium segment, which incurred an operating loss of US$39 million during the review quarter, compared with $20 million operating profit in the corresponding three-month period last year.
The negative performance was largely due to a 27 per cent decline in Midwest Transaction Price to 70 US cents per pound, which signals the possibility of bauxite prices falling in the fourth quarter of 2015.