Monty High - hedgesEssentially, roughly 90% of 2009 production will come from Cozamin and Minto, which both have operating costs of roughly $1.00/lb (at current lead/zinc prices) BEFORE the significant hedges described below.
Plus, Neves-Corvo's cost is around $1.25 (at current lead/zinc prices), well below the current copper price. And given that Lundin will be acquired by the much stronger HudBay, it is hard to see how N-C would be closed down barring a complete and utter collapse in copper prices from the current levels.
Hard to see the scenario where SST is not at least generating
cash flow and paying down its debt, even if the world falls apart.
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.