Noranda Income Fund provided an update regarding its previously disclosed challenges with cellhouse operating conditions and equipment fragility, which have been adversely affecting zinc production volumes and output quality. Due to an accelerated deterioration in cellhouse operating conditions, the Fund is proceeding with the proactive repair of numerous cells, to be completed during a shutdown of the cellhouse. In addition to completing targeted cell repairs, which is expected to take four to six weeks, the team will undertake a cell-by-cell integrity assessment and proceed with additional repairs as necessary, which could extend the timeline further.

The shutdown, which is expected to start by the end of October, will continue until all cell repairs deemed necessary are completed and will negatively impact production volumes for 2022. While the Fund believes that the above-described extensive cell repair program will contribute to stabilizing near-term cellhouse operating conditions, the repairs will not fully address the underlying issues impacting operating conditions. Evaluations undertaken thus far have led to the conclusion that a replacement of all cells in the cellhouse will be necessary to stabilize and improve operating conditions.

Therefore, a careful review by Management is ongoing to assess potential replacement options and related capital investment requirements and therefore, no decision has yet been made by the Fund on next steps. As part of this review process, Management has engaged third-party engineering firms to perform studies of the required cell replacements, as well as the previously planned crane replacements. The Fund is also exploring financing options and evaluating the impact on the business.

It is likely that a full cell and crane replacement would not be completed before the end of 2024 due to the procurement of long lead items, and would require a shutdown of all operations for a period of approximately seven weeks. The cost of a full cell and crane replacement is currently estimated to be approximately US$100 million. More updates will follow once a decision on the plan for long-term cellhouse replacement has been finalized and the financing has been secured.

As a result of the cellhouse maintenance shutdown commencing by the end of this October 2022 and uncertainty regarding its duration, the Fund does not expect to meet its previously disclosed annual production and sales guidance for 2022, last updated on July 25, 2022, of between 225,000 and 240,000 tonnes of zinc. Furthermore, the Fund does not intend to provide annual production and sales guidance for the foreseeable future, as the Processing Facility's production capacity will remain constrained until the underlying issues impacting cellhouse operating conditions are fully addressed.