SST operating costsI contacted management to get a better handle of the operating costs at Cozamin, Minto, and Neves-Corvo to get a better idea of the impact of copper prices, and also to refute the blind assumptions of some on this board that $0.40 zinc and lead will cause operating costs to rise to $1.50/lb.
First off, that math is not only wrong, it is on another planet. If the poster actually believes that, they are either extremely bad financial modelers or shorts intending to scare people out.
Second, this is what I learned.
Cozamin's operating cost in 2009, BEFORE hedges, will be about $1.05-$1.10 lb. of copper INCLUDING zinc and lead around the current prices. Actually, Cozamin's zinc recoveries are very low to start with (around 50%), so it never really was a big contributor to start with. Additionally, they have hedged roughly 30% of production for at least three years at about $3.15/lb.
Minto's operating cost in 2009, BEFORE hedges, will be about $0.90-$1.00/lb. of copper INCLUDING zinc and lead around the current prices. Additionally, they have hedged roughly 50% of production for the next three years at $2.44/lb.
Neves-Corvo's operating cost in 2009, BEFORE HEDGES, will be about $1.25/lb. of copper INCLUDING base metal prices at around current levels. However, due to the recent discoveries they may try to produce production signficantly from the current plan, which would likely make this $1.25/lb. number fall. I believe they are now thinking of using the unused Alljustrel mill to process additional copper ore, which would help in this process. I do not know if they have executed any hedges, but will get that answer shortly.
Moreover, of the roughly 4.5 million Ag equivalent ounces currently planned to be produced next year by SST, only about 0.8 million are anticipated to come from Neves-Corvo. So unless copper falls to something like $0.75/lb., it is hard to see how any real problems will occur from a counterparty prospective, especially as the great majority of production is coming from Minto and Cozamin, mines that share the same management as Silverstone does.
Who knows what prices will do, but right now I think there's more fear than fact in SST investor expectations.
yoyo