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Noranda Income Fund Reports Third Quarter Earnings Before Income Taxes of $8.9 Million

SALABERRY-DE-VALLEYFIELD, QUEBEC -- (Marketwire) -- 11/12/12 -- Noranda Income Fund (the "Fund") (TSX:NIF.UN) reported third quarter earnings before income taxes which were supported by the continued high premiums.

Q3 2012 and Subsequent Highlights:

--  Earnings before income taxes of $8.9 million (Q3 2011 - $16.6 million) 
--  Cash provided by operations of $29.3 million (Q3 2011 - $22.1 million) 
--  Zinc premiums at 7.6 cents US per pound (Q3 2011 - 5.8 cents US per
    pound) 
--  Sulphuric acid netback at US$79 per tonne (Q3 2011 - US$78 per tonne) 
--  Declared monthly cash distributions consistently from July to October
    2012 of $0.04167 per priority unit (each a "Priority Unit") 
--  Debt as at September 30, 2012 totalled $71.6 million (net of deferred
    financing fees), down from $94.2 million at the end of December 2011 
--  The Fund will complete an internal reorganization that is expected to be
    finalized prior to year end and it will eliminate the requirement for an
    in-kind distribution, starting in fiscal 2012. The Fund will not at this
    time convert to a corporation. 

                                                                            
Conference Call and Webcast:                                                
November 13th at 9:30 a.m. EST                                              
    Dial in number: 416-641-6145                                            
    Toll-free North American number: 1-866-303-6430                         

In addition, you can listen to the teleconference and view the slide presentation from the Noranda Income Fund website: http://www.norandaincomefund.com/investor/conference.html or click on this link: http://events.digitalmedia.telus.com/noranda/111312/index.php.

Recording of the Conference Call:                                           
    Dial in number: 905-694-9451 or                                         
    Toll-free North American number: 1-800-408-3053.                        

The pass code is 4051 902# and you will be prompted for your name and company.

The recording will be available until midnight on November 27th, 2012.

Structure

The Independent Committee of the board of trustees of the Operating Trust (the "Board"), together with the Board, has reviewed the tax impact and other consequences to the Fund and its Unitholders for the Fund to convert to a corporation, while also considering the impact of remaining as a trust. The Independent Committee engaged Canaccord Genuity to act as an independent advisor to assist them in this regard.

The Independent Trustees have decided at this time, not to pursue a conversion of the Fund to a corporation. The conversion could only have been completed on terms that were acceptable to both unitholders of the Fund and Xstrata Canada Corporation ("Xstrata Canada"), the holder of the ordinary units of the Noranda Income Limited Partnership ("Partnership"). The Independent Trustees and Xstrata Canada discussed the terms on which such a conversion could occur, but they were unable to reach an agreement.

As an alternative to a conversion to a corporation, the Trustees and Xstrata Canada have approved, in principle, a reorganization that is low cost to implement, and it will eliminate the requirement for the Fund to declare an annual in-kind distribution to reduce its effective tax rate. The reorganization is expected to be completed prior to year end and it will eliminate the requirement for an in-kind distribution, starting in fiscal 2012. It is expected that unitholders will be taxed only on the income they effectively receive as cash distributions. The reorganization will not affect any of the arrangements between Xstrata Canada and the Fund or the Partnership, including the subordination of distributions on Xstrata Canada's units of the Partnership.

Financial and Operating Highlights (Third quarter 2012 compared to the third quarter 2011)

Earnings before income taxes were $8.9 million in the third quarter of 2012, compared to $16.6 million in the same quarter a year ago. The $7.7 million decrease was mainly due to lower zinc sales and by-product revenues, partially offset by higher zinc premiums and processing fee, and lower finance costs.

Cash provided by operating activities in the third quarter of 2012, before net changes in non-cash working capital items, was $15.1 million compared to $18.9 million during the same period of 2011. Cash distributions of $4.7 million were declared in 2012 compared to $1.6 million in 2011. During the third quarter of 2012, non-cash working capital decreased by $14.2 million in large part due to an increase in accounts payable and accrued liabilities. During the third quarter of 2011, non-cash working capital decreased by $3.3 million due to a decrease in accounts receivable and inventories, partially offset by a decrease in accounts payable and accrued liabilities.

Financial and Operating Highlights (First nine months 2012 compared to the first nine months 2011)

Earnings before income taxes were $36.4 million in the first nine months of 2012, compared to $43.6 million in the same period a year ago. The $7.2 million decrease was mainly due to lower zinc sales and by-product revenues, partially offset by higher zinc premiums and processing fee, and lower finance costs.

Cash provided by operating activities in the first nine months of 2012, before net changes in non-cash working capital items, was $47.2 million compared to $53.5 million during the same period of 2011. Cash distributions of $14.1 million were declared in 2012 compared to $1.6 million in 2011. During the first nine months of 2012, non-cash working capital increased by $2.8 million due to a decrease in income taxes payable and accrued liabilities and an increase in inventories, partially offset by a decrease in accounts receivable and an increase in accounts payable and accrued liabilities. During the first nine months of 2011, non-cash working capital decreased by $27.0 million due to a decrease in accounts receivable, an increase in income taxes payable and the impact of the change in the fair value of the embedded derivative related to the zinc concentrate payable, partially offset by lower inventories and accounts receivable.

A full version of the third quarter 2012 Management's Discussion and Analysis ("MD&A") and the Unaudited Interim Financial Statements will be posted on the Fund's website, http://www.norandaincomefund.com/investor/financials.html today, November 12, 2012 and they will be available on www.sedar.com on November 13, 2012. Readers should be advised that the summarized communication presented in this press release is limited in its disclosure. It is not a suitable source of information for readers who are unfamiliar with the Fund, and it is not in any way a substitute for reading the Unaudited Interim Financial Statements and MD&A because a reader relying on this summary alone might overlook decision critical information.

Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". The Noranda Income Fund owns the electrolytic zinc processing facility and ancillary assets (the "CEZinc processing facility") located in Salaberry-de-Valleyfield, Quebec. The CEZinc processing facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of zinc customers are located. It produces refined zinc metal and various by-products from zinc concentrates purchased from mining operations. The CEZinc processing facility is operated and managed by Canadian Electrolytic Zinc Limited.

Except where otherwise indicated, all amounts in this press release are expressed in Canadian dollars.

Further information about the Noranda Income Fund can be found at www.norandaincomefund.com.

SELECTED FINANCIAL AND OPERATING INFORMATION                                
----------------------------------------------------------------------------
                                            Third Quarter      Year-to-date 
($ thousands)                               2012     2011     2012     2011 
----------------------------------------------------------------------------
                                                                            
Statements of Comprehensive Income                                          
 Information                                                                
Revenues                                 128,555  160,866  426,897  506,468 
Raw material purchase costs               70,810   72,851  222,044  266,832 
----------------------------------------------------------------------------
Revenues less raw material purchase                                         
 costs                                    57,745   88,015  204,853  239,636 
----------------------------------------------------------------------------
Other expenses:                                                             
  Production                              38,662   42,737  126,316  132,084 
  Selling and administration               4,699    3,774   15,718   14,585 
  Foreign currency loss (gain)            (2,522)   6,470   (2,094)   2,763 
  Loss (gain) on derivative financial                                       
   instruments                            (1,896)   2,907   (2,581)   3,588 
  Depreciation of property, plant and                                       
   equipment                               7,905    8,654   24,440   26,003 
  Rehabilitation expense                     168    2,954      656    3,163 
----------------------------------------------------------------------------
Earnings before finance costs and income                                    
 taxes                                    10,729   20,519   42,398   57,450 
----------------------------------------------------------------------------
Finance costs, net                         1,827    3,968    5,972   13,829 
----------------------------------------------------------------------------
Earnings before income taxes               8,902   16,551   36,426   43,621 
Current and deferred income tax expense    2,733    5,718   12,781   15,522 
----------------------------------------------------------------------------
Earnings attributable to Unitholders and                                    
 Non-controlling interest                  6,169   10,833   23,645   28,099 
Distributions to Unitholders               4,688    1,562   14,063    1,562 
Current income tax recovery on                                              
 distribution                             (1,367)    (310)  (4,101)    (310)
----------------------------------------------------------------------------
Increase in net assets attributable to                                      
 Unitholders and Non-controlling                                            
 interest                                  2,848    9,581   13,683   26,847 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other comprehensive income (loss)         (1,418)  (2,025)  (3,174)  (2,209)
----------------------------------------------------------------------------
Comprehensive income                       1,430    7,556   10,509   24,638 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Statements of Financial Position                                            
Information                                 Sept 30, 2012     Dec. 31, 2011 
----------------------------------------------------------------------------
Cash and cash equivalents                           6,085             1,497 
Inventories                                        68,751            61,017 
Accounts receivable                                80,804            92,803 
Property, plant and equipment                     268,881           277,135 
Total assets                                      436,386           447,389 
Accounts payable and accrued liabilities           74,650            60,795 
Total bank and other loans                         71,550            94,216 
Total liabilities excluding net assets                                      
 attributable to unitholders                      221,733           243,245 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                            Third Quarter      Year-to-date 
Statements of Cash Flows Information        2012     2011     2012     2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash provided by operating activities                                       
 before cash distributions and net                                          
 change in non-cash working capital                                         
 items                                    19,772   20,430   61,261   55,056 
----------------------------------------------------------------------------
Cash distributions                        (4,688)  (1,562) (14,063)  (1,562)
----------------------------------------------------------------------------
Net change in non-cash working capital                                      
 items                                    14,194    3,265   (2,847)  27,022 
----------------------------------------------------------------------------
Cash provided by operating activities     29,278   22,133   44,351   80,516 
----------------------------------------------------------------------------
Cash used in investing activities         (5,730)  (5,763) (16,133) (17,277)
Cash used in financing activities        (19,853) (17,463) (23,630) (65,836)
Net increase in cash and cash                                               
 equivalents                               3,695   (1,093)   4,588   (2,597)
----------------------------------------------------------------------------
Cash distributions declared per Priority                                    
 Unit                                    0.12504  0.04167  0.37504  0.04167 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                                           Third Quarter        Year-To-Date
                                          2012      2011      2012      2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Zinc concentrate processed (tonnes)    120,899   119,117   372,887   377,500
Zinc grade (%)                            54.5      54.4      54.2      54.1
Zinc recovery (%)                         97.1      96.7      96.6      96.7
Zinc metal production (tonnes)          60,615    63,923   188,949   195,782
Zinc metal sales (tonnes)               60,953    66,219   192,890   203,159
Processing fee (cents/pound)              39.2      38.9      39.2      38.9
Zinc metal premium (US$/pound)           0.076     0.058     0.075     0.060
By-product revenues ($ millions)           9.2      11.7      31.3      39.2
  Copper in cake production (tonnes)       584       577     1,736     2,010
  Copper in cake sales (tonnes)            307       908     1,541     2,811
  Sulphuric acid production (tonnes)   100,259    99,982   308,965   314,205
  Sulphuric acid sales (tonnes)         95,344   100,502   312,939   313,469
Average LME copper price (US$/pound)      3.50      4.08      3.61      4.20
Sulphuric acid netback (US$/tonne)          79        78        74        72
Average LME zinc price (US$/pound)        0.86      1.01      0.88      1.04
Average US/Cdn. exchange rate            0.995      0.98     1.002      0.98
----------------------------------------------------------------------------

Adjusted Earnings before Distributions to Unitholders, Finance Costs, Income Taxes, Depreciation and Amortization ("Adjusted EBITDA")

Adjusted EBITDA is used by the Fund as an indication of cash generated from operations. Adjusted EBITDA is not a recognized measure under IFRS and therefore the Fund's method of calculating Adjusted EBITDA is unlikely to be comparable to methods used by other entities.

The Fund's Adjusted EBITDA is calculated by starting with earnings before finance costs and income taxes and adjusting for all of the non-cash items such as depreciation, rehabilitation expense, net change in employee benefits, changes in fair value of embedded derivatives and non-cash gains/(losses) on derivative financial instruments. A reconciliation of earnings before finance costs and income taxes to Adjusted EBITDA for the third quarter and first nine months of 2012 compared to the same periods of 2011 is provided below:

----------------------------------------------------------------------------
Adjusted EBITDA                             Q3/2012     Q3/2011      Change 
----------------------------------------------------------------------------
($ thousands)                                                               
Earnings before finance costs and income                                    
 taxes                                   $   10,729  $   20,519  $   (9,790)
                                                                            
Depreciation of property, plant and                                         
 equipment                                    7,905       8,654        (749)
Net change in rehabilitation liability          164       3,039      (2,875)
Loss on derivative financial instruments     (1,073)      3,953      (5,026)
Change in fair value of embedded                                            
 derivatives                                  5,402      (8,169)     13,571 
Loss on sale of assets                         (420)         80        (500)
Net change in employee benefits                (641)       (321)       (320)
----------------------------------------------------------------------------
                                         $   22,066  $   27,755  $   (5,689)
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
Adjusted EBITDA                            YTD/2012    YTD/2011      Change 
----------------------------------------------------------------------------
($ thousands)                                                               
Earnings before finance costs and income                                    
 taxes                                   $   42,398  $   57,450  $  (15,052)
                                                                            
Depreciation of property, plant and                                         
 equipment                                   24,440      26,003      (1,563)
Net change in rehabilitation liability          466       3,132      (2,666)
Loss on derivative financial instruments     (2,200)      3,590      (5,790)
Change in fair value of embedded                                            
 derivatives                                 10,263     (12,108)     22,371 
Loss on sale of assets                         (112)        478        (590)
Net change in employee benefits              (1,629)       (959)       (670)
----------------------------------------------------------------------------
                                         $   73,626  $   77,586  $   (3,960)
----------------------------------------------------------------------------

Contacts:
Michael Boone
Vice President & Chief Financial Officer of
Canadian Electrolytic Zinc Limited, Noranda Income
Fund's Manager
416 775-1561
[email protected]

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