RE:RE:RE:RE:Treatment charge confirmation?Yearly Treatment Charges are little bit comparable to the LIBOR. The big guys in the Zinc industry = Korea Zinc as the top refiner and Teck Resources/Glencore as the top producers - sit together each year in March and fix the yearly TC. Not all, but many smaller producers then sell their Zinc concentrate to the refiners for that fixed yearly price.
In the zinc industry one always has to watch 2 prices: the zinc price (end product) and the treatment charges.
A little bit of history therefore explains the future: In 2016/2017 there was a fear in the market of a possible Zinc shortage. Prices went up a lot which pumped up production of the mines in 2017/2018. The result was that there was too much zinc concentrate (unrefined zinc) and with that refineries started to negotiate higher and higher Treatment Charges. The record came in March this year JUST before Corona hit mine production with a 12 year record high in Treatment Charges at 300 USD/tonne. Then with mine closures due to Corona and due to uneconomical production, 500.000 tonnes of Zinc concentrate (!) was produced LESS then normally expected.
The result of this is that we do not (yet) have a shortage in refined zinc. But that with a lot less Zinc being delivered to the smelters/refiners these companies had to lower the Treatment Charges and as I posted they are now down to 120 USD (from 300 before Corona).
I personally dont see a shortage in Zinc prices coming, but that very much depends on the Chinese buying 50% of Zinc. Just today I read an article that many chinese zinc mines will close in winter which might support the zinc price and keep Treatment Charges down. But thats speculation.
What is quite clear though is that the double burden of low zinc prices due to an oversupplied end market PLUS high Treatment Charges due to an oversupplied zinc concentrate market has ended. The concentrate market is back to more or less normal supply, treatment charges therefore will be fixed at a normal rate that is sustainable and profitable for all currently producing miners = around 200 USD/tonne.
Treatment Charges alone will not decide the future of Trevali, but of course also zinc prices themselves. But TC going down from their record high will make production in 2021 substantially cheaper and as already mentioned allow for more capex and debt reduction.
All these things are not evident to understand and its good you guys posted your questions. This forum is finally doing what it is supposed to: be a place for an exchange of information and market opinions.