RE:RE:RE:RE:RE:RE:Two Companies,Two Headlines, Two MetalsMacRellen wrote: Interesting Trevali story. Thanks for sharing. And I'll check out firecracker74's posts.
I assume the offtake rights ("a right to acquire 100% of the offtake from the Assets on market terms") mean Santacruz is obligated to deliver its concentrate to Glencore smelters. So Glencore will get income both through 1.5% NSR and smelting fees. But the smelting fees would be the same at any smelter, so that doesn't reduce Santacruz's potential profit. RIght?
And the bottom line is that as long as one sees a silver / zinc bull market in the coming years, this is probably a good aquisition for Santacruz. If prices should fall, then not so good - but then again that's always a risk when buying assets.
MacRellen, yes smelter fees are standardized...set every year by refiners around March then applied back to/from January. And yes, the bottom line is SCZ is running with the bulls...sure it could work out beautifully.
But consider this cautionary tale. In 2015 Trevali owned one small zinc/silver mine in Peru. Zinc was .80 lb. Share price .30. Today zinc price $1.60 lb.!!! Share price .20. Why?
1. Debt. Credit facility maxed out to pay acquisition costs for two African mines purchased from Glencore.
2. Massive dilution. See debt above. Over 800 million shares and counting.
3. Trump trade war in 2018/19.
4. 2020 smelter fee increase from $200 to $300/ton.
A perfect storm of sh-t which does happen. But Glencore got its money for the mines...and smelter fees.
SCZ has now changed. It was a sweet little turnaround. It had put its house in order, cleaned up the balance sheet, purchased Zimapam. All signals go. Bring on the silver bull market...for me not a question of 'if' but 'when'. And I really didn't mind waiting.
Now they're in the zinc business. Moreover they're in the zinc business with Glencore...in commodities aka Darth Vader.
Now we have to sweat this thing for...dilution (a given in my opinion)...zinc price...recession. I was practically rooting for the global debt bomb to go off...which it is, slowly, bringing on inflation and a flight to precious metals.
Now we have to root for a never ending economic expansion.
It was a simple story. In my investments I need 'simple'. Now its any thing but simple.