PROSPECTUS SUMMARY

This summary highlights certain information contained elsewhere in this prospectus. Please read the entire prospectus, including the consolidated financial statements and the related notes and the section entitled “Risk Factors,” before you decide to invest. In addition, this prospectus includes forward-looking information that involves risks and uncertainties. See “Cautionary Statement Concerning Forward-Looking Statements.”

Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to (a) “Noranda HoldCo” refer only to Noranda Aluminum Holding Corporation, excluding its subsidiaries, (b) “Noranda AcquisitionCo” refer only to Noranda Aluminum Acquisition Corporation, a direct wholly owned subsidiary of Noranda HoldCo, excluding its subsidiaries, and (c) “Noranda,” the “company,” “we,” “our,” and “us” refer collectively to (1) Noranda Aluminum, Inc. and its subsidiaries on a consolidated basis prior to the Apollo Acquisition and (2) Noranda HoldCo and its subsidiaries on a consolidated basis (including Noranda Aluminum, Inc.) after the completion of the Apollo Acquisition.

The Company

Overview

We are a leading North American integrated producer of value-added primary aluminum products and high quality rolled aluminum coils. We have two businesses: our upstream business and downstream business. Our upstream business consists of three reportable segments: primary aluminum products, alumina refining, and bauxite. These three segments are closely integrated and consist of a smelter near New Madrid, Missouri, which we refer to as “New Madrid,” and supporting operations at our bauxite mine and alumina refinery. New Madrid has annual production capacity of approximately 580 million pounds (263,000 metric tonnes), which represented more than 15% of total 2009 U.S. primary aluminum production, based on statistics from the Aluminum Association. Our flat rolled products segment comprises our downstream business, which is one of the largest aluminum foil producers in North America and consists of four rolling mill facilities with a combined maximum annual production capacity of 410 to 495 million pounds, depending on production mix.

Upstream Overview

Our upstream business is one of the largest U.S. producers of primary aluminum products. We believe our combination of captive alumina and bauxite, secure electric power and strategically located assets gives us meaningful operating flexibility. Our bauxite mining operation in Jamaica, which we refer to as “St. Ann,” provides a secure source of bauxite to our wholly owned alumina refinery in Gramercy, Louisiana, which we refer to as “Gramercy.” Our alumina refinery provides a strategic supply of alumina to our New Madrid smelter at costs below recent spot market prices for alumina. Because our captive alumina and bauxite production capacity exceeds our internal requirements, we also sell these raw materials to third parties. The margin from these sales effectively lowers the cost of our alumina supply. In addition, we have a long-term, secure power contract at New Madrid that extends through 2020. We believe this contract gives Noranda an advantage over aluminum smelters facing frequent power shortages or disruptions. In addition, our power costs are not linked to London Metals Exchange aluminum prices, unlike the power costs of some of our competitors, particularly in North America.

Primary aluminum is a global commodity and its price is set on the London Metals Exchange, or the “LME.” Due to a long-term domestic supply deficit in the U.S. and transportation costs, our primary aluminum products typically earn a Midwest premium on top of the LME price, the sum of which is known as the Midwest Transaction Price, or the “MWTP.” In addition, we typically sell a majority of our primary aluminum products in the form of value-added products, such as billet, rod and foundry, which include a fabrication premium over the MWTP. We also have the flexibility to direct primary aluminum volumes to our downstream rolling mills, on an arm’s-length basis, when demand is weak for our value-added end-products. This helps to ensure a steady demand for our upstream production.

 

The global recession and credit crisis which began in late 2007 and continued through 2009 severely impacted the aluminum industry, causing the monthly average LME price to drop from a peak of $1.49 in July 2008 to a low of $0.57 in February 2009. The average LME price for 2009 was $0.76 per pound, which had a significant negative impact on our upstream business and our 2009 operating results.

The upstream business is vertically integrated with operations in bauxite mining, alumina refining and aluminum smelting.

Downstream Overview

Our downstream business is a low-cost domestic producer of aluminum flat rolled products. We own and operate four rolling mills, including the West plant in Huntingdon, Tennessee, which is recognized as one of the most advanced rolled aluminum production facilities in North America.

 

Plant		Location		Maximum Capacity (in pounds)			Products
Huntingdon — West		Huntingdon, TN		235 million			Finstock, container stock, intercompany reroll and miscellaneous heavy gauge products
Huntingdon — East		Huntingdon, TN		130 million			Finstock, transformer windings, household foil and miscellaneous heavy gauge products
Salisbury		Salisbury, NC		95 million			Light gauge products including flexible packaging, finstock, lithographic sheet, intercompany reroll and miscellaneous leveled products
Newport		Newport, AR		35 million			Light gauge products including flexible packaging
Total				495  million	(1)

 

(1)	Capacity includes intra-company reroll. Based on production mix at December 31, 2009, effective annual capacity of our rolling mills is 410 million pounds.

 

Versatile manufacturing capabilities and advantageous geographic locations provide our rolling mills with the flexibility to serve a diverse range of end-users. We believe that this flexibility, when combined with our strong customer service, product quality and strategic sales support, has allowed our downstream business to gain share of demand during a period of weakness in end-market demand. The downstream business prices its products at the MWTP plus a fabrication premium. Therefore, notwithstanding periodic metal margin gains or losses during times of volatility in aluminum prices, our downstream earnings are substantially insulated from fluctuations in primary aluminum prices. As a result, the downstream business’s performance is predominantly driven by fluctuations in volumes and the fabrication premiums we are able to achieve. During periods of difficult market conditions in our downstream business, we have the ability to scale back meaningfully on capital expenditures, such as in 2009, when we spent $3.7 million on capital improvements, a reduction of 58% versus 2008. We believe that the nominal maintenance capital requirements combined with operating performance that is substantially insulated from aluminum price fluctuations make the downstream business a relatively strong vehicle for free cash flow generation. The geographic proximity of the facilities in our upstream and downstream businesses creates a further degree of vertical integration, providing for additional operational flexibility.

The downstream business has been impacted by weak end markets during the recent economic downturn. Weak market conditions have had a direct negative impact on our downstream business volume and subsequently our financial results. Over the course of 2009, we saw a slowing in the overall rate of year-over-year volume decline as a result of targeted growth programs in less cyclical market segments.

Recent Developments

New Madrid Power Outage

In January 2009, an ice storm disrupted the power grid throughout Southeastern Missouri. The resulting power outage disabled two of New Madrid’s three production lines, initially reducing our daily production to 25% of pre-outage levels. This event had a substantial negative impact on our 2009 operating results, resulting in an average operating rate of 58% of capacity for the year. This is significantly below our operating rate for the past 20 years of 99%. We reached a settlement with our insurance providers pursuant to which we collected approximately $67.5 million in the second and third quarters of 2009.

New Madrid returned to full operating capacity prior to March 31, 2010, up from 70% during the last three months of 2009.

 

The following chart presents our New Madrid smelter’s historical operating rates, as a percentage of capacity:

Source: Noranda Company data as of April 20, 2010

Hedging

From time to time, we have historically entered into fixed-price aluminum swap agreements for specified time periods to reduce the risk profile of our business or enhance the value of our equity. When we deemed that prices were high relative to our cost of production, we entered into aluminum sale swaps that allowed us to substantially lock in the prices at which we sell our primary aluminum even though the LME price might vary considerably. Conversely, when our estimate of the fair-value LME price was significantly higher than the market LME price, we entered into fixed-price aluminum purchase swaps to effectively close the economic position of, but not settle, a portion of our aluminum sales swaps. Specifically, in March and April 2009, as the LME price hovered at a level where, according to CRU, an independent consultancy group focused in part on the mining and metals sectors, over 50% of the world’s aluminum suppliers were producing negative cash margins, we entered into fixed-price aluminum purchase swaps to lock in the majority of the value in our existing aluminum sale swaps. Our sale swaps, which at the time covered approximately 50% of our expected primary aluminum shipments through 2012, currently have a net open hedge position covering approximately 8% and 7% of forecasted shipments in 2010 and 2011, respectively. Soon after we closed the economic position of the majority of our aluminum sale swaps, we executed a hedge settlement agreement with our primary hedging counterparty that allowed us to settle a portion of the closed positions, provided that the settlement proceeds were used to fund debt repurchases. See “Description of Certain Indebtedness — Aluminum Swaps.” At the closing of this offering, we intend to settle all of our remaining fixed-price aluminum hedges and use the proceeds to repay indebtedness.

Debt Repurchases

During 2009, we purchased a total of $404 million aggregate principal amount of indebtedness, of which $25 million was purchased using cash-on-hand and the remaining $379 million was purchased subject to the hedge settlement agreement. In accordance with the hedge settlement agreement regarding these repurchases, we realized cash proceeds from our primary hedging counterparty totaling $120.8 million during the year ended December 31, 2009 and $68.7 million through April 15, 2010.

 

Ratings

On January 25, 2010, Moody’s Investors Service upgraded Noranda’s Corporate Family Rating and Probability of Default Rating to B3 from Caa1. Moody’s also revised Noranda’s rating outlook to “Positive” from “Stable” and raised its speculative grade liquidity rating to SGL-2 from SGL-3. Moody’s issue level ratings for Noranda were revised as follows: Noranda HoldCo senior unsecured notes rating was moved to Caa2 from Caa3. Noranda AcquisitionCo senior secured revolver and senior secured term loan ratings were moved to B1 from B2 and its senior unsecured notes rating was moved to Caa1 from Caa2. On March 17, 2010, Standard & Poor’s resolved its CreditWatch status for Noranda by upgrading Noranda’s Corporate rating to B- and revising Noranda’s rating outlook to “Positive” from “Stable”. S&P’s issue level ratings for Noranda were revised as follows: Noranda AcquisitionCo senior secured revolver and senior secured term loan ratings were upgraded to B from D based on a recovery rating of ‘2’ and its senior unsecured notes rating was upgraded to CCC from D based on a recovery rating of ‘6’. Noranda HoldCo senior unsecured notes rating was also upgraded to CCC from D based on a recovery rating of ‘6’.

Joint Venture Transaction

On August 31, 2009, we completed a transaction, which we refer to as the “Joint Venture Transaction,” whereby we became the sole owner of the alumina and bauxite production joint ventures, Gramercy and St. Ann, respectively, that we had operated since 2004 as a 50/50 joint venture with Century Aluminum Company (together with its subsidiaries, “Century”). In consideration for its ownership share, Century was forgiven certain liabilities to the alumina joint venture and was released from all agreements and obligations of the joint ventures. In addition, as part of the Joint Venture Transaction, we contracted to supply Century approximately 190,500 metric tonnes of alumina through 2010. The first 125,000 metric tonnes was sold at a fixed price and the remainder is being sold at prices indexed to the LME price.

Workforce Reduction

On February 26, 2010, we announced a workforce and business process restructuring in our U.S. operations that is expected to generate savings of approximately $8.0 million to $10.0 million annually through reduced operating costs and improved operating efficiencies. The U.S. workforce restructuring plan reduced headcount by 89 employees through a combination of voluntary retirement packages and involuntary terminations. Substantially all activities associated with this workforce reduction have been completed as of the time of the announcement. We estimate these actions will result in approximately $6.4 million of pre-tax charges to be recorded in the first quarter of 2010, primarily due to one-time termination benefits and pension benefits. We estimate that additional pre-tax charges of $0.5 million will be recorded in the second and third quarters of 2010 related to one-time termination benefits and pension benefits conditioned upon certain employees providing continued service to the Company through various dates in the second and third quarters of 2010. Substantially all of these charges will result in cash expenditures.

In connection with a decision to contract the substantial portion of our bauxite mining to third party contractors, on April 21, 2010, we announced a workforce reduction in our Jamaican bauxite mining operations. The change to contract mining is expected to generate savings of approximately $4 million to $5 million annually through reduced operating costs and improved operating efficiencies in addition to approximately $7 to $8 million of capital expenditure savings. The workforce restructuring plan reduced headcount by approximately 160 employees through a combination of voluntary retirement packages and involuntary terminations. Substantially all activities associated with this workforce reduction were complete as of the date of the announcement. We estimate these actions will result in approximately $3 million to $4 million of pre-tax charges to be recorded in second quarter 2010, primarily due to one-time termination benefits and pension benefits. This charge does not reflect the amount, if any, of non-cash charges, for the disposal of certain long-lived assets.

 

Our CORE productivity savings in 2009 totaled approximately $43.5 million. If we are able to achieve the expected level of savings from the 2010 restructuring activities, our targeted CORE productivity savings for 2010 will be larger than our 2009 savings.

Stock Split

On April 16, 2010, our Board of Directors approved a two-for-one split of our outstanding shares of common stock to be effected in the form of a stock dividend. Stockholders of record at the close of business on April 19, 2010 were issued one additional share of common stock for each share owned by such stockholder as of that date. The additional shares were issued on April 20, 2010. The stock split increased the number of shares of our common stock outstanding from approximately 21.9 million to approximately 43.8 million. Share and per-share amounts shown in this prospectus reflect the split as though it occurred on May 17, 2007 (the date of the Apollo Acquisition). The total number of authorized common shares and the par value thereof was not changed by the split. In connection with the stock split, the Board of Directors also approved an increase to the number of shares of common stock issuable under the 2007 Long-Term Incentive Plan from 1.9 million to 3.8 million.

Competitive Strengths

Vertically Integrated Assets and Long-term Electricity Supply. Our vertical integration and long-term electricity supply contracts that are not indexed to the LME price result in a high correlation between changes in the LME price and our operating earnings. Our upstream business is integrated from bauxite to alumina to primary aluminum metal. In strengthening LME environments, the net cost of our alumina generally becomes increasingly attractive relative to contracted and spot market alumina prices. We believe that this cost advantage in rising markets and the security of our bauxite and alumina supply provide us with a competitive advantage versus aluminum producers that are dependent on purchasing LME price indexed alumina in the market. While we seek to maximize value-added product sales to third parties at New Madrid, in weak markets, our downstream business provides a reliable source of commodity grade ingot demand. Power is the most significant component of our upstream cash cost to produce primary aluminum. Our New Madrid smelter has entered into a long-term power supply contract through May 2020, ensuring the secure supply of power. We believe this contract gives Noranda an advantage over aluminum smelters facing frequent power shortages or disruptions. In addition, our power costs are not linked to LME aluminum prices, unlike the power costs of some of our competitors, particularly in North America.

Strong Liquidity Position. As of December 31, 2009, we had cash and revolving credit facility borrowings available totaling $167.9 million. In 2010, through the date of this prospectus, we have used available cash balances, which included $68.7 million of proceeds from 2010 hedge terminations, to repay $215.9 million of our revolving credit facility and $17.5 million of term B loan borrowings. As of April 15, 2010, we had approximately $35.2 million of cash and cash equivalents and $216.2 million of available borrowing capacity under our revolving credit facility.

As of April 15, 2010, the settlement of all our fixed-price aluminum hedges would have generated proceeds totaling $90.1 million that we plan to use to repurchase debt. In the year ended December 31, 2009, our cash interest payments totaled $17.3 million, following our elections to pay interest in-kind on our notes beginning in the third quarter of 2008. We also have no debt maturities prior to 2013 and no maintenance covenants in our debt facilities. The combination of significant sources of liquidity, a low cash interest burden relative to our debt and no near-term maturities provides for our favorable liquidity position and the ability to invest in and grow our business.

Strategic Operating Locations. The ease of access and proximity of Gramercy to St. Ann and New Madrid to Gramercy provide us with an attractive freight cost advantage. New Madrid is the closest Midwest smelter to the

 

Gulf Coast, the location of our alumina refinery and a major port for alumina shipped to the U.S. We believe this proximity allows our New Madrid smelter to source its alumina from Gramercy at an advantageous freight cost compared to other U.S. based smelters. In addition, our New Madrid smelter is located in close proximity to its customers, with the majority of customers located within a one-day truck delivery distance. According to CRU, our St. Ann bauxite mining operation has benefitted on a relative cost basis in 2009 from its favorable location, as compared to bauxite operations in other large production basins such as Australia where the local currency has strengthened. Similarly, we believe that Gramercy benefits from its location near the mouth of the Mississippi River given its relative proximity to St. Ann and ease of access for bauxite shipments.

Integrated, Cost Effective Assets. According to CRU, New Madrid fell to the high third quartile on CRU’s global business operating cost curve by late 2009. CRU expects that New Madrid will have the opportunity to get into the second quartile of the cost curve in 2010. The expected improvement from 2009 is based upon CRU’s assumptions of a recovery in the LME from 2009 levels, a rising cost curve and New Madrid’s improved cost profile. This expectation also includes an assumption that Noranda’s cost cutting measures will be supported by a stable or declining power tariff at New Madrid in 2010. CRU estimates that Gramercy was the lowest cost refinery in the US and was in the third quartile globally for 2009, while St. Ann was in the second quartile on the global bauxite site operating cost curve in 2009. Our downstream business’s largest rolling mill, the Huntingdon — West facility, is recognized as one of the most advanced rolled aluminum production facilities in North America. This mill began production in 2000 at a capital cost of $238 million and has the lowest conversion cost (excluding metal) for foil stock production in North America, according to CRU. Including Gramercy and St. Ann at 100%, since 2004, our businesses have reported almost $400 million of capital expenditures. CRU estimates the replacement value of our facilities to be approximately $3.8 billion as of February 2010.

Experienced Management Team. We have a seasoned management team, whose members average more than 21 years of experience in cyclical and commodity industries. Our senior management team, led by CEO and President Layle K. “Kip” Smith, has achieved substantial cost-cutting and commercial goals since the onset of the global economic slowdown, allowing us to operate in the midst of a severe downturn in aluminum pricing and demand, while positioning us for better performance as markets return. Financial discipline has been a priority, including the strict control of operating expenses and cash flow.

Business Strategy

Expand Our Production and Sales. Over the five years ended in 2008, we increased our primary aluminum production by 37 million pounds and we believe we will have opportunities of similar magnitude to increase production through major capital investments and debottlenecking projects in the future. We are also undertaking a capital project to expand capacity at our rod mill at New Madrid, given strong trends in the market for rod used in conductor applications. In addition to the significant sales opportunities for smelter grade alumina and bauxite, which we now have by virtue of our sole ownership of our alumina refinery and bauxite mining operation, we believe there is an opportunity to increase our sales of hydrate, or chemical grade alumina, an attractive specialty product as Gramercy is one of only three chemical grade alumina producers in the U.S.

Pursue Opportunistic External Growth. We regularly review potential opportunities to acquire additional upstream and downstream businesses. We recently completed the Joint Venture Transaction, which offers us the opportunity to increase our sales and subsidize our smelter operating costs. We believe our focused commercial activities since the closing of the Joint Venture Transaction have yielded sufficient contracted demand to support full production levels at our alumina refinery through 2012. Operating at full production volumes will allow us to better leverage the fixed costs at our refinery. In addition, we believe that there are meaningful cost-cutting opportunities at Gramercy and St. Ann. The Joint Venture Transaction and subsequent increase in our alumina sales to third parties serve to increase the impact of changes in the LME price on our operating cash flow.

 

Focus on Productivity Improvements. Our management team is committed to reducing costs at our production facilities by investing in high-return capital improvements, optimizing labor productivity and implementing projects that improve the operating and energy efficiencies of our production processes. In late 2008, we initiated a productivity program called Cost-Out Reliability and Effectiveness, or “CORE.” We believe that opportunities exist to drive additional cost savings and efficiencies, particularly at Gramercy and St. Ann. Our upstream cash cost of primary aluminum has declined from $0.81 per pound for the full year ended 2008 to $0.77 per pound for the year ended December 31, 2009 to $0.72 per pound for the three months ended March 31, 2010. This significant improvement, which occurred notwithstanding the inefficiencies from low capacity utilization rates at New Madrid in 2009, has been driven by CORE as well as favorable price trends in some of our major cost inputs, including natural gas and caustic soda. In the downstream business, we have identified and implemented the early stages of various capital projects that will increase our ability to use scrap metal to reduce costs. In addition, we maintain lean manufacturing and Six Sigma programs to rationalize our cost base in the upstream and downstream businesses. In 2009, we achieved $43.5 million of cost savings through our CORE program, which involved one-time costs totaling $13.9 million. Of total CORE savings in 2009, we estimate $34.1 million or 78% are permanent or recurring in nature. For 2010, we have set a CORE target that is larger than that achieved in 2009, as a result of our expectation of further productivity improvement driven by CORE as well as new cost saving opportunities we anticipate in our upstream business as a result of the Joint Venture Transaction.

 

Source: Noranda Company data and estimates as of April 21, 2010

Maximize Cash Flow. Senior management has implemented a focused strategy to maximize profitability and cash flow. Our ability to maintain positive cash flows from operations during the recent economic downturn and concurrent smelter production outage is a testament to our strong focus on cash conservation and productivity. In addition, we have been able to generate significant cash flow through the prudent management of working capital, capital expenditures and operating expenses. We intend to continue this keen focus on cash flow, even as market conditions improve. From the date of the Apollo Acquisition through March 31, 2010, working capital reductions contributed $138 million to cash flow from operating activities, and we will continue to target working capital efficiencies throughout our businesses without sacrificing our product availability or lead times.

Improve Capital Structure and Financial Profile. From the Apollo Acquisition through March 31, 2010, we have retired or repurchased $542 million principal amount of our indebtedness. These debt reductions, which were funded with cash flow generated from our operations and gains realized from aluminum hedges, have led to significant equity value creation while allowing us to maintain a strong liquidity position. In addition to reducing leverage, we seek to improve our financial profile by mitigating our exposure to rising input costs and falling product prices. We believe that prudent and opportunistic hedging of the commodities that impact our business, including aluminum, natural gas and crude oil, allows us to protect the value of our enterprise from large and sometimes rapid commodity price fluctuations. In October and November of 2009, we entered into natural gas purchase swaps that raised our hedge profile to cover approximately 50% of our forecasted natural gas needs in each of 2010, 2011 and 2012. In addition, approximately 8% and 7%, respectively, of our forecasted 2010 and 2011 aluminum sales are hedged at fixed prices. At the closing of this offering, we intend to settle all of our

 

remaining fixed-price aluminum hedges and use the proceeds to repay indebtedness. In the future, we will continue to evaluate our hedging strategy based on our financial leverage and our view of actual and forecasted commodity prices.

Enhance Safety Performance and Continue Stable Employee Relations. We believe that maintaining employee safety and a positive working relationship with our employees are key drivers of a well performing business. We have consistently improved our company-wide safety performance through focused procedures and training programs. In 2009, our company-wide annual number of recordable safety incidents per man hour had decreased by over 45% from 2005 levels. There have been no significant labor disruptions at any facility under our management since 1996 and we have recently successfully renegotiated agreements with our labor unions, including at St. Ann in 2008 and at our downstream rolling mill in Salisbury, North Carolina in 2009.

Industry Overview

The aluminum industry consists broadly of upstream primary aluminum production and downstream rolled product manufacturing. Upstream production involves the power intensive process of producing primary aluminum from alumina, which is derived from the raw material bauxite. Downstream manufacturing involves the value-added process of converting primary aluminum into aluminum products, such as finstock, light gauge sheet, foil and other products.

Upstream

Primary aluminum is a highly functional metal because of its metallurgical properties and environmentally friendly attributes, such as its light weight and recyclability. Significant amounts of aluminum are required for basic infrastructure and transportation needs, and as growth trends in developing economies such as China, India and Russia continue, aluminum usage is expected to enjoy significant growth. Global trends by consumers and governments suggest a rising preference to use environmentally responsible materials, which may drive increased intensity of use for aluminum versus other heavier materials that are not as frequently recycled. For example, in the automotive industry, the amount of aluminum per vehicle has increased in recent years, helping to drive increased fuel efficiency and higher post-consumer recycling of automotive parts. In the field of electricity conductors, new power cable designs employ significantly more aluminum per cable foot in an effort to increase efficiency and conductivity. As energy and resource conservation and post-consumer recycling efforts continue to intensify, aluminum demand is expected to benefit.

Following significant weakness related to the global recession and credit crisis which began in late 2007 and continued through 2009, aluminum prices have begun to recover, rising 93% through April 15, 2010 from their record lows reached in February 2009. Prices would need to rise by almost an additional 40% to equal peak prices reached in July 2008. Pressure remains on global producers to cut operating costs.

According to CRU, the global business operating production cost curve for aluminum has fallen significantly from year-end 2008 to December 31, 2009 by approximately 30%. This is related to the following:

 

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lower costs for alumina, which is indexed to the LME price of aluminum for many global producers;

 

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decreased power costs, due to changes in power tariffs by regulatory authorities around the world and, in some cases, indexing of power prices to the LME price of aluminum;

 

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productivity and cost reduction programs implemented throughout the industry;

 

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emergence of approximately one million metric tonnes per year of new low-cost capacity outside of China;

 

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shut-down of approximately three and a half million metric tonnes per year of high-cost global capacity (after accounting for recent restarts), including nearly one-third of U.S. smelter capacity; and

 

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large regional LME hub premiums (such as the Midwest premium Noranda earns), which analysts measure as a credit against producers’ cash costs.

While primary aluminum demand has improved since the trough in prices in early 2009, global inventories remain high, and end-market demand, particularly in North America, has been slow to recover.

Weakness in the supply and demand balance has been offset, in part, by curtailment of global production capacity as well as strong recent growth and stimulus measures in emerging economies, particularly China. Metal premiums in Southeast Asia, Europe and the U.S. have risen in relation to the LME price, aided by improving demand, metal financing contracts and net imports into China tightening the spot market. Higher premiums in Asia and a recovery from the trough in the U.S. economy has aided U.S. producers and increased MWTP. In 2010, global demand is expected to grow by approximately 13% over 2009 levels according to CRU. In addition, there is a shortage of domestically produced primary aluminum in the U.S. United States aluminum production is equal to approximately 43% of total of U.S. aluminum demand per 2010 CRU production and demand forecasts.

As illustrated below, aluminum consumption is more highly correlated to Gross Domestic Product (“GDP”) growth than other metals, according to CRU, suggesting that consumption growth will accelerate if and when recovery in GDP takes hold and is sustained:

 

 

Source:

CRU as of October 2009

 

Given that China is the primary driver of growth in aluminum demand globally, it is important to examine some of the urbanization and intensity of consumption per capita trends in China, as shown below, along with the consumption per capita trends in other emerging markets such as India and Russia, in data provided by CRU:

 

Source: CRU as of December 31, 2009		Source: CRU as of March 12, 2010

The following chart illustrates the expected growth in aluminum global consumption, according to CRU. Demand is expected to increase by 22% from 2008 to 2012, and by nearly 81% between 2008 and 2020. CRU also expects that China will become a net importer of aluminum over the next few years.

 

Source: CRU as of March 12, 2010

 

Notwithstanding weakness in the current and recent supply and demand trends for aluminum, we believe the medium and long-term supply and demand outlook for aluminum supports sustainable, higher LME prices due to the following trends:

 

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global demand driven by long-term and sustained economic growth, higher standards of living and increased demand from emerging markets, especially China and India;

 

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long-term world-wide increases in the cost of power, which is a significant input cost in the production of primary aluminum;

 

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barriers to entry for greenfield smelters due to high capital costs, long lead time to market, required regulatory approvals and increasing scarcity of power;

 

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substitution away from other metals (e.g., steel and copper) to aluminum due to aluminum’s strength-to-weight and value-to-weight ratios and relative price compared to other metals; and

 

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a weaker U.S. dollar relative to historical periods.

China, which according to CRU currently represents approximately one-third of global production and has relatively high cash costs compared to the rest of the world (as shown below in the expected cost curve for 2010 from CRU), is expected to have an impact on LME prices. CRU expects that over the next few years Chinese producers will add additional relatively high-cost capacity, which may further support sustainable, higher LME prices. As demonstrated below, the third and fourth quartiles are highly concentrated with Chinese producers.

 

 

Source: CRU as of February 19, 2010

We are a North American producer with a majority of our primary aluminum sales in the form of value-added products delivered within a one-day delivery radius of New Madrid. Therefore, while global market trends determine the LME price and impact our margins, domestic supply and demand for our value-added products also directly impact our margins.

According to CRU, similar to the trend in the cost to produce primary aluminum, the global business operating production cost curve for alumina fell significantly from an average of $266 per tonne in calendar year 2008 to around $216 per tonne during 2009. The decrease in alumina refining costs was driven by lower input costs and high cost capacity rationalization.

The bulk of smelter grade alumina is generally sold on a contract basis, with prices typically ranging from 12-15% of the LME price depending on the contract term and alumina market dynamics. The spot alumina market has improved following rationalization of high-cost alumina refinery capacity and postponement of large

 

greenfield projects in response to record low alumina prices in the early part of 2009. CRU estimates that around a fifth of global alumina capacity was idle in the early part of 2009. With demand increasing in the second half of 2009, alumina prices started to rise, which led to restarts in idled refining capacity. The bulk of the restarts have taken place in China, supporting the strong growth in aluminum production. Outside of China, there have been restarts in refining capacity in the USA, Canada and Europe.

Downstream

Our downstream business is a leading producer of foil and certain light gauge sheet products. Industry-wide, these two product groups accounted for approximately 1.5 billion pounds of demand in North America in 2008, falling to approximately 1.25 billion pounds of demand in 2009.

Profit margins in the downstream business are generally unaffected by short-term volatility in the underlying LME price. The price of any given end-product is equal to the MWTP plus a negotiated fabrication premium. These fabrication premiums are determined in large part by industry capacity utilization, which in turn is driven by supply-demand fundamentals for our product. Since 2007, the downturn in the U.S. economy generally and the housing market in particular have resulted in lower industry volumes and, in addition, reduced fabrication premiums in certain key product areas.

Risk Factors

Participating in this offering involves substantial risk. Our ability to execute our strategy also is subject to certain risks. The risks described under the heading “Risk Factors” immediately following this summary may cause us not to realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant challenges and risks include the following:

 

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our susceptibility to cyclical fluctuations in the primary aluminum industry and changes in general economic conditions;

 

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the cost of energy and raw materials;

 

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the risk of natural disaster that could damage our facilities;

 

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our ability to pass through increases in our costs to our customers;

 

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our substantial indebtedness; and

 

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the highly competitive nature of the industry in which we operate.

Before you participate in this offering, you should carefully consider all the information in this prospectus, including matters set forth under the heading “Risk Factors.”

Principal Stockholders

Our principal stockholders are investment funds affiliated with or managed by Apollo Management VI, L.P., including Apollo Investment Fund VI, L.P. and its parallel co-investment funds. Apollo Investment Fund VI, L.P. is an investment vehicle with committed capital, along with its parallel investment funds, of over $10 billion. Apollo Management VI, L.P., Apollo Investment Fund VI, L.P. and its parallel investment funds are affiliates of Apollo Global Management, LLC, a leading global alternative asset manager with offices in New York, Los Angeles, London, Frankfurt, Luxembourg, Singapore, Hong Kong and Mumbai. Apollo Global Management, LLC had assets under management of $53.6 billion as of December 31, 2009, in private equity, credit-oriented capital markets funds and real estate invested across a core group of industries where Apollo

 

Global Management, LLC has considerable knowledge and resources. Companies in which affiliates of Apollo Global Management, LLC have a significant equity investment include, among others, Berry Plastics Corporation, CEVA Logistics, Momentive Performance Materials Inc., Metals USA Holdings Corp., and Parallel Petroleum Corporation. Except as otherwise indicated herein or as the context otherwise requires, “Apollo” refers to investment funds affiliated with, or co-investment vehicles managed indirectly by, Apollo Management L.P., including Apollo Investment Fund VI, L.P., along with its parallel investment funds.

We will use available cash to pay $13.0 million to Apollo related to the termination of Apollo’s management agreement, as discussed in “Certain Relationships and Related Party Transactions.”

Additional Information

Noranda Aluminum Holding Corporation was incorporated in Delaware on March 27, 2007. The principal executive offices of Noranda Aluminum Holding Corporation are at 801 Crescent Centre Drive, Suite 600, Franklin, TN 37067, and the telephone number there is (615) 771-5700.

We also maintain an internet site at www.norandaaluminum.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration statement of which this prospectus forms a part, and you should not rely on any such information in making your decision whether to purchase our securities.

 

The Offering

 

Common stock offered by us

10,000,000 shares

 

Common stock to be outstanding after this offering

53,788,232 shares (55,288,232 shares if the underwriters exercise their over-allotment option in full).

 

Listing

Our common stock has been approved for listing on the New York Stock Exchange under the symbol “NOR.”

 

Over-Allotment Option

We have granted the underwriters an option to purchase up to an additional 1,500,000 shares within 30 days from the date of this prospectus in order to cover over-allotments, if any.

 

Use of proceeds

We will receive net proceeds from this offering of approximately $70.3 million, after deducting the underwriting discounts and commissions and estimated expenses.

As described in “Use of Proceeds,” we intend to use the $70.3 million net proceeds from this offering, together with $90.1 million of proceeds from settling all our outstanding fixed-price aluminum hedges, and $22.0 million of cash on hand, to repurchase the Holdco Notes, of which $64.1 million was outstanding as of April 15, 2010, to repay $110.0 million principal amount outstanding under the term B loan and to pay $13.0 million to Apollo related to the termination of Apollo’s management agreement. At April 15, 2010, settling all our fixed-price aluminum hedges would have generated settlement proceeds totaling $90.1 million.

 

Dividends

We do not currently anticipate paying dividends on our common stock following this offering. Any declaration and payment of future dividends to holders of our common stock may be limited by restrictive covenants of our debt agreements, and will be at the sole discretion of our Board of Directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our Board of Directors deems relevant. See “Dividend Policy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations and Contingencies,” “Description of Certain Indebtedness” and “Description of Capital Stock — Common Stock.”

 

Except as otherwise indicated, all information in this prospectus:

 

•

assumes no exercise of the underwriters’ over-allotment option to buy up to 1,500,000 additional shares from us;

 

•

does not give effect to 2,162,432 shares of our common stock issuable upon the exercise of outstanding options as of April 23, 2010, 593,012 shares of which we expect will likely vest upon consummation of this offering, at a weighted-average exercise price of $2.00 per share; and

 

•

does not give effect to 5.7 million shares of common stock reserved for future issuance under our Amended and Restated Noranda Aluminum Holding Corporation 2007 Long-Term Incentive Plan and under the Noranda 2010 Incentive Award Plan.

 

SUMMARY CONDENSED HISTORICAL AND UNAUDITED SUPPLEMENTAL PRO FORMA FINANCIAL AND OTHER DATA

The following tables present summary condensed historical and unaudited supplemental pro forma consolidated financial and other data of Noranda Aluminum, Inc. and summary condensed historical and unaudited supplemental pro forma consolidated financial and other data of Noranda Aluminum Holding Corporation. This information is only a summary and should be read in conjunction with the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Supplemental Pro Forma Condensed Consolidated Statement of Operations” and with the audited and unaudited consolidated financial statements of Noranda Aluminum, Inc. and Noranda Aluminum Holding Corporation and their notes included elsewhere in this prospectus, as well as the other financial information included in this prospectus.

Noranda HoldCo, Noranda AcquisitionCo and Noranda Intermediate Holding Corporation did not engage in any business or other activities prior to the Apollo Acquisition except in connection with their formation and the Apollo Transactions, as described in “Business — The Transactions.” Accordingly, for the purposes of this prospectus, all financial and other information herein relating to periods prior to the completion of the Apollo Transactions is that of Noranda Aluminum, Inc.

The financial information for the periods from January 1, 2007 to May 17, 2007 includes the results of operations, cash flows and financial condition for Noranda Aluminum, Inc. on a basis reflecting the stepped-up values of Noranda Aluminum, Inc. prior to the Apollo Acquisition, but subsequent to the Xstrata Acquisition, and is referred to as “Predecessor.” The financial information for the period from May 18, 2007 to December 31, 2007 and as of December 31, 2007, and as of and for the years ended December 31, 2008 and 2009 and as of March 31, 2010 and for the three months ended March 31, 2009 and 2010 includes the results of operations, cash flows and financial condition for Noranda Aluminum Holding Corporation on a basis reflecting the impact of the purchase allocation of the Apollo Acquisition, and is referred to as “Successor.”

The consolidated statements of operations and cash flow data for the periods from January 1, 2007 to May 17, 2007, from May 18, 2007 to December 31, 2007 and for the years ended December 31, 2008 and 2009 and the consolidated balance sheet data as of December 31, 2008 and 2009 have been derived from the audited consolidated financial statements included elsewhere in this prospectus. The financial information as of March 31, 2010 and for the three months ended March 31, 2009 and 2010 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus.

The unaudited supplemental pro forma condensed consolidated statement of operations for the year ended December 31, 2007 is based on the historical consolidated statement of operations for the Predecessor period from January 1, 2007 to May 17, 2007 and the Successor period from May 18, 2007 to December 31, 2007 and gives effect to the Apollo Transactions and the Special Dividend as if they had occurred on January 1, 2007.

The unaudited supplemental pro forma condensed consolidated statement of operations data is for informational purposes only and does not purport to present what our results of operations would have been if the Apollo Transactions and the Special Dividend had occurred as of the date indicated, nor does it project our results of operations for any future period. Furthermore, this data does not reflect any additional costs necessary to operate as a stand-alone company. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

 

		Pro  Forma(1) Predecessor and Successor						Successor
(in millions, except per share data and where noted)		As of and for the Year Ended December 31, 2007						As of and for the Year Ended December 31, 2008				As of and for the Year Ended December 31, 2009				Three Months Ended March 31, 2009				As of and for the Three Months Ended March  31, 2010
Statement of Operations Data(2):
Sales		$	1,395.1					$	1,266.4			$	769.9			$	164.3			$	301.5
Operating costs and expenses
Cost of sales			1,205.3						1,122.7				779.9				184.3				264.9
Selling, general and administrative expenses			56.5						73.8				75.6				22.2				29.0
Goodwill and other intangible asset impairment			—						25.5				108.0				43.0				—
Excess insurance proceeds			—						—				(43.5	)			—				—
Other (recoveries) charges, net			(0.5	)					—				—				—				—
			1,261.3						1,222.0				920.0				249.5				293.9
Operating income (loss)			133.8						44.4				(150.1	)			(85.2	)			7.6
Other expenses (income)
Interest expense, net			106.8						88.0				53.6				15.9				9.2
(Gain) loss on hedging activities, net			44.1						69.9				(111.8	)			(45.1	)			(1.8	)
Equity in net (income) loss of investments in affiliates			(11.5	)					(7.7	)			79.7				44.0				—
(Gain) loss on debt repurchase			2.2						1.2				(211.2	)			(152.2	)			0.1
Gain on business combination			—						—				(120.3	)			—				—
Income (loss) before income taxes			(7.8	)					(107.0	)			160.0				52.2				—
Income tax expense (benefit)			1.7						(32.9	)			58.6				7.9				—
Net income (loss) for the period		$	(9.5	)				$	(74.1	)		$	101.4			$	44.3			$	(0.1	)
Net income (loss) per share
Basic		$	(0.22	)				$	(1.70	)		$	2.33			$	1.02			$	(0.00	)
Diluted		$	(0.22	)				$	(1.70	)		$	2.33			$	1.02			$	(0.00	)
Weighted-average shares outstanding
Basic			43.07						43.44				43.53				43.48				43.77
Diluted			43.07						43.44				43.53				43.48				43.77
Cash dividends declared per common share		$	5.00					$	2.35			$	—			$	—			$	—
Balance Sheet Data(4):
Cash and cash equivalents		$	75.6					$	184.7			$	167.2							$	31.5
Property, plant and equipment, net			657.8						599.6				745.5								732.5
Total assets			1,650.5						1,936.2				1,697.6								1,448.3
Long-term debt (including current portion)(5)			1,151.7						1,346.6				951.7								728.3
Common stock subject to redemption			—						2.0				2.0								2.0
Shareholders’ equity			(0.1	)					36.6				92.2								72.4
Working capital(6)			211.5						336.0				388.0								262.6
Cash Flow Data:
Operating activities									65.5				220.4				75.2				100.6
Investing activities									(51.1	)			(24.0	)			(8.9	)			(13.0	)
Financing activities									94.7				(214.0	)			(50.6	)			(223.4	)
Financial and Other Data:
EBITDA(7)								$	79.2			$	307.0			$	93.5			$	35.3
Average realized Midwest Transaction Price(8)		$	1.23					$	1.21			$	0.81			$	0.70			$	1.04
Net cash cost for primary aluminum (per pound shipped)(11)								$	0.81			$	0.77			$	0.85			$	0.72
Shipments:
Third party shipments:
Bauxite (kMts)(9)			—						—				482.9				—				488.5
Alumina (kMts)(9)			—						—				245.0				—				172.2
Primary aluminum products (pounds, in millions)			523.4						509.5				291.4				76.7				95.1
Flat rolled products (pounds, in millions)			371.6	(10)					346.1				309.3				71.7				83.8
Intersegment shipments:
Bauxite (kMts)(9)			—						—				835.1				—				528.2
Alumina (kMts)(9)			—						—				116.5				—				101.3
Primary aluminum products (pounds, in millions)			31.2						80.4				60.2				12.2				25.7

See accompanying notes

 

		Predecessor						Successor
(in millions, except per share data and where noted)		Period from January 1, 2007 to May 17, 2007						Period from May 18, 2007 to December 31, 2007 and as of December 31, 2007
Statement of Operations Data:
Sales		$	527.7					$	867.4
Operating costs and expenses
Cost of sales			424.5						768.0
Selling, general and administrative expenses			16.8						39.2
Other (recoveries) charges, net			—						(0.5	)
			441.3						806.7
Operating income			86.4						60.7
Other expenses (income)
Interest expense, net			6.2						65.0
(Gain) loss on hedging activities, net			56.6						(12.5	)
Equity in net income of investments in affiliates			(4.3	)					(7.3	)
(Gain) loss on debt repurchase			—						2.2
Income before income taxes			27.9						13.3
Income tax expense			13.6						5.1
Net income for the period		$	14.3					$	8.2
Net income per share(3)
Basic								$	0.19
Diluted								$	0.19
Weighted-average shares outstanding
Basic									43.21
Diluted									43.33
Cash dividends declared per common share								$	5.00
Balance sheet data:
Cash and cash equivalents								$	75.6
Property, plant and equipment, net									657.8
Total assets									1,650.5
Long-term debt (including current portion)(5)									1,151.7
Shareholders’ equity (deficiency)									(0.1	)
Working capital(6)									211.5
Cash flow data:
Operating activities		$	41.2					$	160.8
Investing activities			5.1						(1,197.7	)
Financing activities			(83.7	)					1,112.5
Financial and other data:
EBITDA(7)		$	63.8					$	148.0
Average realized Midwest Transaction Price(8)		$	1.31					$	1.21
Net cash cost for primary aluminum (per pound shipped)(11)		$	0.74					$	0.76
Shipments (pounds in millions):
Primary aluminum products:
External aluminum			202.3						321.1
Intersegment aluminum			12.1						19.1
Total aluminum shipments			214.4						340.2
Flat rolled products			135.6	(10)					236.0	(10)

See accompanying notes

 

 

(1)	Pro forma financial data is presented. See table on following page for historical financial data. For a reconciliation of the pro forma financial data to the historical financial data, see “Unaudited Supplemental Pro Forma Condensed Consolidated Statement of Operations.”

 

(2)	Figures may not add due to rounding.

 

(3)	Net income (loss) per share is not presented for the Predecessor period because Noranda was a wholly owned subsidiary during that period.

 

(4)	Historical balance sheet data is presented.

 

(5)	Long-term debt includes long-term debt due to related parties and to third parties, including current installments of long-term debt. For the Successor period long-term debt does not include issued and undrawn letters of credit under the existing $242.7 million revolving credit facility.

 

(6)	Working capital is defined as current assets net of current liabilities.

 

(7)

EBITDA represents net income (loss) before income taxes, net interest expense and depreciation and amortization. We have provided EBITDA herein because we believe it provides investors with additional information to measure our performance. We use EBITDA as one criterion for evaluating our performance relative to our peers. We believe that EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies.

EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States (“U.S. GAAP”), and may not be comparable to similarly titled measures used by other companies in our industry. EBITDA should not be considered in isolation from or as an alternative to net income, operating income (loss) or any other performance measures derived in accordance with U.S. GAAP.

For example, EBITDA excludes certain tax payments that may represent a reduction in cash available to us; does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; does not reflect capital cash expenditures, future requirements for capital expenditures or contractual commitments; does not reflect changes in, or cash requirements for, our working capital needs; and does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness.

The following table reconciles net income (loss) to EBITDA for the periods presented:

 

		Predecessor					Successor
(in millions)		Period from January 1, 2007 to May 17, 2007					Period from May 18, 2007 to December 31, 2007			Year Ended December 31, 2008				Year Ended December 31, 2009			Three Months Ended March 31, 2009			Three Months Ended March 31, 2010(2)
Net income (loss)		$	14.3				$	8.2		$	(74.1	)		$	101.4		$	44.3		$	(0.1	)
Income tax expense (benefit)			13.6					5.1			(32.9	)			58.6			7.9			—
Interest expense, net			6.2					65.0			88.0				53.6			15.9			9.2
Depreciation and amortization			29.7					69.7			98.2				93.4			25.4			26.1
EBITDA		$	63.8				$	148.0		$	79.2			$	307.0		$	93.5		$	35.3

 

(8)

The price for primary aluminum consists of two components: the price quoted for primary aluminum ingot on the LME and the Midwest transaction premium, a premium to LME price reflecting domestic market dynamics as well as the cost of shipping and warehousing, the sum of which is known as the Midwest Transaction Price. As a majority of our value-added products are sold at the prior month’s MWTP, we calculate a “realized” MWTP which reflects the specific pricing of sale transactions in each period.

 

(9)

External alumina and bauxite shipments (in kilometric tonnes, or “kMts”) are recorded subsequent to the August 31, 2009 Joint Venture Transaction. Additionally, from time-to-time, the New Madrid smelter sells excess alumina. During 2009, the smelter sold 52.3 kMts of excess alumina to third parties and the refinery sold 192.7 kMts of alumina to external customers. One metric tonne represents 2,204.6 pounds. For the year ended December 31, 2009, our sales included 540.1 million pounds of alumina sold to third parties, and 1.1 billion pounds of bauxite sold to third parties.

 

(10)

For purposes of comparability to other periods, brokered metal sales are excluded because the related metal was sold without fabrication premiums. Brokered metal sales excluded were $8.1 million for the period from January 1, 2007 to May 17, 2007, and $43.2 million for the period from May 18, 2007 to December 31, 2007.

 

(11)

Unit net cash cost for primary aluminum per pound represents our costs of producing commodity grade aluminum net of value-added and Midwest premiums on primary aluminum sales, and alumina and bauxite sales to external customers. We have provided unit net cash cost per pound of aluminum shipped because we believe it provides investors with additional information to measure our operating performance. Using this metric, investors are able to assess the prevailing LME price plus Midwest premium per pound versus our unit net costs per pound shipped. Unit net cash cost per pound is positively or negatively impacted by changes in primary aluminum, alumina and bauxite production and sales volumes, natural gas and oil related costs, seasonality in our electrical contract rates, and increases or decreases in other production related costs.

Unit net cash costs is not a measure of financial performance under U.S. GAAP and may not be comparable to similarly titled measures used by other companies in our industry. Unit net cash costs per pound shipped should not be considered in isolation from or as an alternative to any performance measures derived in accordance with U.S. GAAP. Unit net cash costs per pound shipped has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results under U.S. GAAP.

The following table summarizes our unit net cash costs for primary aluminum for the periods presented:

 

		Predecessor				Successor
		Period from January 1, 2007 to May 17, 2007				Period from May 18, 2007 to December 31, 2007		Year Ended December 31, 2008		Year Ended December 31, 2009		Three Months Ended March 31, 2009		Three Months Ended March 31, 2010
		$				$		$		$		$		$
Total cash cost (in millions)		158.8				259.3		478.2		269.6		75.9		87.5
Total primary aluminum products shipments (pounds in millions)		214.4				340.2		589.9		351.6		88.9		120.8
Net cash cost per pound for primary aluminum(a)		0.74				0.76		0.81		0.77		0.85		0.72

 

The following table reconciles cost of sales to cash cost for primary aluminum for the periods presented:

 

		Predecessor					Successor
(in millions)		Period from January 1, 2007 to May 17, 2007					Period from May 18, 2007 to December 31, 2007			Year Ended December 31, 2008			Year Ended December 31, 2009			Three Months Ended March 31, 2009			Three Months Ended March 31, 2010
		$					$			$			$			$			$
Bauxite cost of sales		—					—			—			32.9			—			19.7
Alumina refining cost of sales		—					—			—			91.1			—			87.6
Primary aluminum products cost of sales		203.5					356.8			623.0			384.6			101.0			115.5
Flat rolled products cost of sales		237.9					432.7			597.5			369.0			91.5			119.1
Intersegment cost of sales		(16.9	)				(21.5	)		(97.8	)		(97.7	)		(8.2	)		(77.0	)
Total cost of sales		424.5					768.0			1,122.7			779.9			184.3			264.9
Upstream cost of sales		203.5					356.8			623.0			384.6			101.0			115.5
LIFO and lower of cost or market adjustments(b)		(0.7	)				2.5			(30.5	)		6.5			—			0.3
Fabrication premium(c)		(18.1	)				(27.3	)		(40.5	)		(31.6	)		(7.8	)		(7.9	)
Depreciation and amortization expense		(21.4	)				(52.5	)		(72.0	)		(52.4	)		(18.7	)		(12.2	)
Alumina and bauxite impact(d)		(8.6	)				(13.6	)		(13.1	)		(20.3	)		(3.3	)		(11.2	)
Selling, general and administrative expenses(e)		4.4					7.7			12.4			9.0			6.9			3.5
External alumina(f)		—					—			—			(14.2	)		—			—
Other(g)		(0.3	)				(14.3	)		(1.1	)		(12.0	)		(2.2	)		(0.5	)
Total upstream cash cost of primary aluminum		158.8					259.3			478.2			269.6			75.9			87.5

 

(a)

During 2009, we refined our cash cost calculation methodologies to reflect an adjusted EBITDA based calculation (see the “Covenant Compliance” section for a full description and reconciliation of adjusted EBITDA). As a result, 2008 figures may not tie to cash costs as presented in 2008 filings. We did not revise the calculation of cash cost for periods prior to 2008 as the effect is immaterial.

(b)	Reflects the conversion from last-in, first-out (“LIFO”) to first-in, first-out (“FIFO”) method of inventory costing, including removing the effects of adjustments to reflect the lower of cost or market value.

(c)	Our value-added products, such as billet, rod and foundry, earn a fabrication premium over the MWTP. To allow comparison of our upstream per unit costs to the MWTP, we net the fabrication premium in determining upstream cash costs for primary aluminum.

(d)

Our upstream business is fully integrated from bauxite mined by St. Ann to alumina produced by Gramercy to primary aluminum metal manufactured by our aluminum smelter in New Madrid, Missouri. To reflect the underlying economics of the vertically integrated upstream business, this adjustment reflects the favorable impact that third-party joint venture sales have on our upstream cash cost for primary aluminum as well as post-integration intercompany alumina cost of sales eliminations.

(e)	Represents certain selling, general and administrative expenses which management believes are a component of upstream cash costs for primary aluminum, but which are not included in cost of goods.

(f)	Represents the impact of sales of excess alumina from New Madrid, as the cash costs presented are for primary aluminum only.

(g)	Reflects various other cost adjustments, such as the elimination of the effects of any intercompany profit in inventory, derivative cash settlements and non-cash pension and accretion.

 

Covenant Compliance

Upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness. In addition, certain covenants contained in our debt agreements restrict our ability to take certain actions (including incurring additional secured or unsecured debt, expanding borrowings under existing term loan facilities, paying dividends and engaging in mergers, acquisitions and certain other investments) unless we meet certain standards in respect of the ratio of our Adjusted EBITDA, calculated on a trailing four-quarter basis, to our fixed charges (the “fixed-charge coverage ratio”) or the ratio of our senior secured net debt to our Adjusted EBITDA, calculated on a trailing four-quarter basis (the “net senior secured leverage ratio”). Furthermore, our ability to take certain actions, including paying dividends and making acquisitions and certain other investments, depends on the amounts available for such actions under the applicable covenants, which amounts accumulate with reference to our Adjusted EBITDA on a quarterly basis.

The minimum or maximum ratio levels set forth in our covenants as conditions to our undertaking certain actions and our actual performance are summarized below:

 

		Financial Ratio Relevant to Covenants		Covenant Threshold		Actual
						December 31, 2008		December 31, 2009		March 31, 2010
Noranda HoldCo:
Senior Floating Rate Notes due 2014(1)		Fixed Charge Coverage Ratio		Minimum 1.75 to 1.0		2.5 to 1		1.6 to 1		2.2 to 1
Noranda AcquisitionCo:
Senior Floating Rate Notes due 2015(1)		Fixed Charge Coverage Ratio		Minimum 2.0 to 1.0		3.2 to 1		2.1 to 1		3.2 to 1
Senior Secured Credit Facilities(1)(2)		Net Senior Secured Leverage Ratio		Maximum 3.0 to 1.0(3)		1.9 to 1		3.5 to 1		1.8 to 1

 

(1)

For purposes of measuring Adjusted EBITDA in order to compute the ratios, pro forma effect is given to the Joint Venture Transaction as if it had occurred at the beginning of the trailing four-quarter period. Fixed charges are the sum of consolidated interest expenses and all cash dividend payments in respect of preferred stock. In measuring interest expense for the ratio, pro forma effect is given to any repayment or issuance of debt as if such transaction occurred at the beginning of the trailing four-quarter period.

For Noranda HoldCo and Noranda AcquisitionCo, the pro forma impact of the Joint Venture Transaction on Adjusted EBITDA for the four quarters ended December 31, 2009 and March 31, 2010 was $15.6 million and $9.0 million, respectively. For Noranda HoldCo, fixed charges on a pro forma basis (giving effect to debt repayments) for the four quarters ended December 31, 2008, December 31, 2009 and March 31, 2010 were $94.7 million, $72.0 million and $71.0 million, respectively. For Noranda AcquisitionCo, fixed charges on a pro forma basis (giving effect to debt repayments) for the four quarters ended December 31, 2008, December 31, 2009 and March 31, 2010 were $73.4 million, $53.9 million and $49.0 million, respectively.

 

(2)

As used in calculating this ratio, “senior secured net debt” means the amount outstanding under our term B loan and the revolving credit facility, plus other first-lien secured debt (of which we have none as of December 31, 2009), less “unrestricted cash” and “permitted investments” (as defined under our senior secured credit facilities). At December 31, 2008, senior secured debt was $618.5 million and unrestricted cash and permitted investments amounted to $160.6 million, resulting in senior secured net debt of $457.9 million. At December 31, 2009, senior secured debt was $544.0 million and unrestricted cash and permitted investments aggregated $145.8 million, resulting in senior secured net debt of $398.2 million. At March 31, 2010, senior secured debt was $320.6 million and unrestricted cash and permitted investments were $31.1 million, resulting in senior secured net debt of $289.5 million.

 

 

(3)	The maximum ratio was 2.75 to 1 until December 31, 2008 and changed to 3.0 to 1 on January 1, 2009.