RE:RE:RE:RE:ZINC TC and ZINC PriceThis gives us a good insight into how much NIF is getting screwed by the current TC. Glencore owns 25% of Trevali and has an offtake agreement to purchase 100% of the metal produced Have a look at the calculations below:
Trevalia's report shows: All figures are $CDN
- 203 million pounds of payable Zn
- $61 million in smelting/refining charges (this is the TC they were charged by the smelters - revenue for the smelter - cost for the miner)
- $14 million distribution cost (the miner pays for transport from the mine to the smelter)
From the above, we can calculate the amount of concentrate Trevali produced in order to contain 203,000,000 lbs Zn as follows:
- Concentrate treatment terms are 85% contained Zn is payable thus 203 million lbs payable Zn means 203,000,000/85% = 239,000,000 million lbs Zn in con divideded by 2204 lbs per MT = 108,000 MT Zn in con
- Zn con is ~50% Zn so total concentrate = 108,000/50% = 216,000 DMT con. This is about 40% of the total cons treated by NIF (~550,000)
- Trevali's costs for freight = $14 million CAD = USD$11,000,000/216,000 DMT = $49 per DMT. Remember they pay the freight to the smelter
- Trevali's costs for TC = $61 million CAD = USD$46,000,000/216,000 DMT = $210 per DMT. Note that his is approximately $40 over the benchmark TC of $170 seen in the global market
Glencore acts as the middle man for Trevali. Glencore sold all of its mines to Trevali but the offtake agreement means that Trevali must sell all of the cons to Glencore at the agreed to TC. Glencore charges Trevali a TC of $210 per DMT and pays NIF a TC of $80 The difference of $130 per DMT x 217,000 DMT = US$28 million goes directly into Glencore's pocket.
We do not know the TC that the miner is paying to Glencore on the other 60% of NIF's concentrate requirements. Glencore is the owner of Kidd and Braemac but you can be assured that it is a similar story. Glencore controls 100% of the feed and choses how much of the TC that the miner pays is passed onto NIF. Glencore owns 25% of NIF so they only receive 25% of every TC dollar that is passed onto NIF. The other 75% of TC revenue goes to me and you. Obviously they prefer to keep 100% of $28 million rather than 25%
Bottom line is that Glencore only passes through enough of the TC to allow NIF to break even. As previously posted, a "reasonable" TC of something approaching the global benchmark would generate >$1 per share for distribution. Nothing is going to change unless the independent board grows a pair, gets ousted or sued.
BB