RE:Smelter chargeThe offtake agreement between Glencore and Trevali has Glencore taking 100% of Trevali production at International Benchmark Terms (2016 - $188 TC, base $1600 LME + escalators). 2017 terms have not been finalized but are widely rumoured to be in the $120 - $150 range with no escalation (price participation). The only indication we have of the new terms for NIF is the agreement with the REDACTED TC posted on Sedar. The agreement HAS NO ESCALATION (price participation) so that would agree with the rumoured terms emerging from mating season last week. All we have from NIF is a proforma calculation of what the EBITDA would have been for 2016 using the REDACTED TC and the adusted sales revenue including a $44 million inventory management hedging loss caused by a $100 per month increase over the enire year. Countless times they have mentioned the China market spot TC of $40 or less and issued the dire warnings for the future post May. Many assume that $40 is the REDACTED TC but I believe it will be much higher, in line with the rumoured >$120 TC
The shareholders, the union and the market are all left to guess/speculate as to what the TC is in the signed deal which they refuse to release. It is impossible to replicate the profroma calculation because they do not provide enough information but, it is possible to calculate the future EBITA for the 12 months of the new contract by using an average LME and FX over the 12 month term of the new contract.
Below is a table of calculated EBITDA for12 months( May 2017 - April 2018) at various average TCs and LME prices assuming FX = 1.33 with the same premium (8 cents US) and byproduct revenue ($24 million CAD) as obtained in 2016.
| Table of EBITDA vs. LME & TC | | TC | TC | TC | TC | TC | TC | TC |
| $ 46.6 | 40 | 50 | 60 | 70 | 80 | 90 | 100 |
| LME | $2,600 | $12.4 | $19.5 | $26.5 | $33.5 | $40.6 | $47.6 | $54.7 |
| LME | $2,700 | $17.2 | $24.2 | $31.3 | $38.3 | $45.4 | $52.4 | $59.5 |
| LME | $2,800 | $22.0 | $29.0 | $36.1 | $43.1 | $50.2 | $57.2 | $64.2 |
| LME | $2,900 | $26.8 | $33.8 | $40.9 | $47.9 | $54.9 | $62.0 | $69.0 |
| LME | $3,000 | $31.6 | $38.6 | $45.6 | $52.7 | $59.7 | $66.8 | $73.8 |
| LME | $3,100 | $36.4 | $43.4 | $50.4 | $57.5 | $64.5 | $71.6 | $78.6 |
| LME | $3,200 | $41.1 | $48.2 | $55.2 | $62.3 | $69.3 | $76.3 | $83.4 |
At today's LME of ~$2800. The EBITDA varies from $22 million with a $40 TC to $64 million with a $100 TC. CAPEX and Reserves will consume about $31 million of the EBITDA. So if the shorters are correct and the redacted TC is $40, there will be a cash burn of ~$9 million but if the TC is >$60 there will be no cash burn. If the TC is $100 There will be a free cash flow of ~$31 million available for distribution.
I can see no possibility where the board has signed a contract with a $40 TC. It will be closer to the International Benchmark Terms that are being discussed in the >$120 range.
BB
.