RE: Prepare for near term squeeze/Tech-Lindsay pre
I have believed the price floor in this cycle to be around $6 000/tonnes, i.e. $2.7-2.8/lb.
If Don Lindsay is correct, the floor must be higher.
Maybe $3/lb is the bottom? It surely bounced off that level lately.
https://www.metalbulletin.com/Article/3205990/Search/Actual-copper-production-costs-20-higher-than-estimates.html
Actual copper production costs 20% higher than estimates – Teck
May 15, 2013 - 11:35 GMT Location: London
The actual cost of production for the world’s top ten copper producers is about 20% higher than average estimates provided by third-party researchers, Teck ceo and president Don Lindsay said.
“In copper we have become convinced that the cost of producing copper is being underestimated,” Lindsay told delegates at the Bank of America Merrill Lynch Global Metals, Mining and Steel conference in Barcelona on Tuesday May 14.
The disparity between research estimates and the actual cash costs of production for the top ten producers – which collectively produce about half of the world’s mined copper – should be borne in mind as investors and producers formulate their assumptions for long-term copper prices, Lindsay said.
The consensus estimate for the “right long-term price for copper” is $2.50-2.75 per lb ($5,500-6,050 per tonne), but taking account of the underestimates would raise price assumptions to $3-3.25 per lb, Lindsay said.
Taking into account the deferral of stripping costs – an accounting practice whereby some producers spread the cost of stripping out over the life of a mine – would raise long-term price assumptions still further, up to as much as $3.50 per lb, or $7,700 per tonne, he told delegates.
Three-month copper prices were trading below $7,200 per tonne on the London Metal Exchange on Wednesday. Expectations that prices could fall significantly further before impacting production may be misplaced, Lindsay suggested.
“When investors ask why is the copper price so far above what appears to be the marginal cost of production, the real answer is that the marginal cost of production isn’t what it appears to be,” he said.