Noranda Income Fund Unit T.NIF.UN

RE:RE:RE:RE:Zn TCs explained part deux

[Bigbird999]

Have a look and understand the graphs on page 8.  The circle graph shows the cyle of concentrate to metal.   Follow the arrow around and you will see how a surplus in one quadrent leads to changes in the metal price and/or TCs in the next quadrant. 

Then look at the graph below the circle.  it shows the smelter revenue share from 1992 - 2009.  Prior to 2006 the smelter's share was 45% - 55% where it had been wince the 1920's.  In 2006 there was a huge jump in the miner's share to 70%.  (i.e. 30% to the smelter)  Since 2009 (past the end of the graph) the smelter's share has been 30% to 45%.  For the past couple of years it has been about 40%.  We are in the bottom left quadrant moving to the bottom right with the shortage of concentrate  shifting the power to the miners.  Be aware that the %share is Result of the negotiation of the TC.  It is not a target. 

WRT to grade: The cons from every mine are different.  Zn cons are typically 50 - 54% Zn.  There are penalties if it is below 52%.  If I recall corectly NIF reported 52.6%. 

When the benchmark price is reached it is only an indication of market price.  The negotiations are mildly adversarial. Each smelter will negotiate to get a bigger share of the revenue than benchmark terms i.e. increase the TC.   Each miner is trying to get a bigger share i.e. a lower TC.  like any negotiation the person with the power has an advantage.  Today the miners seem to have the power because concentrate is projected to be in short supply.

If/when a benchmark agreement is reached it will get published somewhere like MB.  You will be able to find it by googling "Zinc concentrate treatment charge 2016" or similar terms

BB