RE:RE:RE:RE:RE:Numbers: TC and profitability (very gross and high level)ss
GPM is calculated by: Total Zn + by product Sales - operating costs - Net cost of Feed
Think of it this way when you compare the different scenarios:
- the tonnes of zinc sold is the same for all scenarios because they all treat the same tonnage of concentrate at 52.6% Zn and have the same recovery (97.3%) .
- The sales revenue is constant (same tonnes of Zn recovered sold at the same LME price + premium
- The by product revenue is the same for both (same tonnes Cu and acid)
- The operating cost is the same for both (identical tonnages and cost)
- The only thing that is different is the net cost of the zinc in the feed so that is all you need to compare to determine the difference between various concentrate supply agreements
The TCs and terms are a complicated way of determining the price that the smelter pays for each pound of recoverable Zn contained in concentrate
Under the current SPA NIF pays for 96% of the Zn at LME. They recover 97.3% of the Zn so they have a metal gain of 1.3% of the contained Zn. They charge 40.5 cents CDN treatment charge for each pound of the 96% of the Zn that they pay for.
One dmt of concentrate contains 2204 x 52.6% = 1159 lb Zn
Nif recovers 1159 x 97.3% = 1128 lb Zn which they sell for LME
NIF pays for 1159 x 96% = 1113 lb
For example @LME $1500 US and FX 1.40 it costs NIF
1113/2204x US$1500 x 1.4 = $1160 CDN to purchase the 1128 pounds of Zn that they recover
NIF charges a TC of $0.405 CDN x 1113 = $450
Net cost to purchase Zn in con is $1160 - $450 = $710 CDN for 1128 lbs of Zn recovered
$710/1128 = $0.629 CDN per lb of Zn
Performing the same calculation at market terms gives
One dmt of concentrate contains 2204 x 52.6% = 1159 lb Zn
Nif recovers 1159 x 97.3% = 1128 lb Zn which they sell for LME
NIF pays for 1159 x 85% = 985 lb
For example @LME $1500 US and FX 1.40 it costs NIF
985/2204x US$1500 x 1.4 = $939 CDN to purchase the 1128 pounds of Zn that they recover
NIF charges a TC of
$200 US per dmt con x 1.4 = $280 CDN
Net cost to purchase Zn in con is $939 - $280 = $659 CDN for 1128 lbs of Zn recovered
$659/1128 = $0.584 CDN per lb of Zn
Difference = 62.9 - 58.4 = 4.5 cents per lb = $99 per tonne Zn = ~$25 million EBITA better with market terms
The above compares the net cost per pound of zinc in feed under the SPA with the net cost under market terms at a TC of $200 US/dmt, FX = 1.4 and , LME =$1500 US per tonne. The Calculation is VERY SENSITIVE to FX and LME. If you run the same calculation at FX = 1.3. the difference in EBITDA is close to zero.
BB