Caribou production hedged Like I have been saying, the ONLY way that Caribou should be opened is with its production hedged. Caribou is a high cost mine with too much risk.
The problem with a hedge at $1.25 is that Caribou will not be profitable. Management claims they can run Caribou with a max AISC of $0.97 per pound in 2021. I find that to be unrealistic. Caribou always has problems, and costs are always higher than expected. Restart costs are expected to be $0.11 per pound and sustaining capital is expected to be $0.12 per pound. I am adding another $.05 for unexpected costs and overhead, and that is very generous. The breakeven for 2021 is $.97 + $.11 + $.12 + $.05 = $1.25.
With the total cost at $1.25 and the hedge at $1.25, Caribou will add ZERO profits in 2021. This is why I said they should wait for the price of zinc to be closer to $1.50. Bone headed management strikes again.
Even without my added $.05, Caribou would only earn $.05 on 62M pounds = $3.1M. That is almost nothing.
From the PR:
Trevali has reduced its exposure to commodity price fluctuations by entering into 21-month fixed pricing arrangements for a significant portion of the forecasted zinc production from the mine. Pursuant to existing offtake agreements, an affiliate of Glencore plc has agreed to purchase 115 million pounds of payable zinc, which represents approximately 80% of the forecasted zinc production from Caribou, at an average price of $1.25 per pound. These agreements are for the period from March 2021 to December 2022 and are in addition to Trevali’s existing hedging program which covers the period from October 2020 to December 2021.