Noranda awaits arbitrators’explanation regarding bauxite levy

In a December 18 Form 8-k filing to the US Securities Exchange Commission, Noranda Aluminium Holdings Company (NAHC) Limited said it is looking forward to an explanation by the United Kingdom- based arbitration panel which granted the government of Jamaica an increase in the levy paid on locally mined bauxite.

Noranda noted in its filing that the “arbitration panel rendered the decision without including an explanation of the reasons for its decision. The company anticipates that the arbitration panel will issue an explanation of the reasons for its decision in the first quarter of 2016.”

The arbitration proceeding addressed a dispute between Noranda Bauxite Limited - an NAHC associated company - and the Government of Jamaica regarding the extent to which NBL must make production levy payments in connection with shipments of bauxite derived from NBL’s mining operations in Jamaica.

The December 18 SEC filing states that as a result of the arbitration panel’s decision the company expects to record a non-cash charge of approximately US$5.5 million in the fourth quarter of 2015.

“This charge represents additional production levy obligations in excess of amounts recorded in the nine months ended September 30, 2015. This additional amount 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 (including $3.75 in cash and $1.25 in letters of credit) previously provided to the GOJ,” the filing outlined.

NAHC said the arbitration panel’s decision also indicates that NBL may offset certain income taxes paid against production levy obligations.

“NBL will be entitled to a credit against the entire additional amount for the nine months ended September 30, 2015,” it was noted.

Noranda noted among its comments in the filing that the arbitration panel decided that “NBL’s rights in respect of most favoured treatment are governed by the establishment agreement and not by a December 30, 2009 letter to NBL signed by the chairman of Jamaica Bauxite Mining Limited and countersigned by the President and Chief Executive Officer of the company in his capacity as a member of the Board of Directors of NBL.

“In so deciding, the arbitration panel, in effect, rejected NBL’s claim that the letter amended the establishment agreement and, in violation of a provision in the letter, the GOJ failed to afford NBL treatment at least as favourable as that provided to other bauxite and alumina producers in Jamaica with respect to the production levy,” it was stated.