td on metals"Rising interest rates, inflation, recession worries, and COVID-19 lockdowns in China — have combined to pull metal prices down from their peaks earlier this year. For the time being, global demand is slowing at a slow rate, but the U.S. Federal Reserve's aggressive tightening agenda, combined with soaring energy and food prices, threaten to accelerate the slowdown in growth over the coming months. This leaves few tailwinds for commodity demand in the immediate term, before China's stimulus supports growth into the new year. We expect recession fears to accelerate over the next several months — although our base case remains that a recession will be avoided. We have run a sensitivity scenario, assuming that a recession will occur in 2023. Under this scenario, we have lowered our commodity prices such that they average approximately the 90th percentile of the C1+sustaining capital cost curve for 2023. Historically, analysis by Wood Mackenzie indicates that, on an annualized basis, during periods of slower growth/recession, metal prices settle at the 90th percentile of the cost curve, albeit prices can overshoot into the 75th percentile of the curve for brief periods. Using this as the basis, for our 2023 Recession Scenario, we have assumed annual average 2023 pricing of US$2.75/lb for copper, US$1.00/lb for zinc, US$7.50/lb for nickel, US$150/t for steelmaking coal, and US$80/t for 65% Fe iron ore. We have also assumed a U.S. dollar/Canadian dollar exchange rate of US$0.78. FCF would disappear, but balance sheets are in excellent shape. Under our 2023 Recession Scenario, FCF for next year would be almost eliminated, EBITDA would decline by an average of ~67%, and implied target prices would drop by ~36%. By and large, the base-metal miners have strong balance sheets, substantial available liquidity, and limited debt maturities in 2023. Assuming that the global economy does not enter a protracted slowdown, we see very limited risk to balance sheets in the sector. We would expect that while base dividends are maintained, performance dividends and share buybacks would be halted. We also believe that management teams would take a "go-slow" approach on sanctioning major capital expenditures"
CS had production cost at $2.70 for copper last Q. It is just below the price projection for 2023.