I wonder how the re-financing will be structured? Obviously Standard Chartered Private Equity Limited will want their money back as soon as possible, but of course it is never certain what the copper prices will be at a certain time, so my bet is for a repayment structure based on the copper price. With current production costs and allowing some money for exploration etc, SRQ should be able to produce, maintain equipment and do some exploration at AUD$3.20/lb comfortably. Say at the current Cu price of AUD$3.58/lb then SRQ could afford to pay Standard Chartered Private Equity Limited a repayment rate of AUD$0.38c/lb or at current production rate of 27,000 tons pa a rate of $22.5 million pa.
I'd suggest that the price of copper will move back to US$3/lb over the coming months, in AUD$ terms this means that 80c/lb will be available to repay the loan ie AUD$47.5 million pa rate.
I'd suggest by 2017 it could be a different balance in the supply and demand especially when all these new infrastructure projects in Asia start ramping up, and don't forget the electricity situation in India which needs huge investment just to get a single light bulb to 100's million of people. So lets say for arguments sake that the Cu price rebounds to US$4.00/lb , I believe this is not out of the question, but the AUD$ might also climb back up to say USD - AUD$ to 80c. At a US$4/lb Cu price at current production would give a repayment rate of AUD$107 million pa.
Whilst a lot of analysts are extremely bearish on Cu prices its mainly because most of them cannot see the elephant due to the grass in front of them. Some investors have a much more informed outlook and I'd suggest someone like Lawrence Roulston of Resource Opportunities is someone who has been involved in mining most of his life, unlike half the analyst clowns who are first year out of Uni who don't have a clue. Not unlike the idiot Andrew Hodge of Wood Mackenzie who has his own special page on HC.
Nice young chap but a complete idiot http://hotcopper.com.au/threads/more-news-in-the-paper.2477977/page-19?post_id=14929318#.VSX4DvmUcus
Note that Lawrence Roulston is involved now as a Director of KBL since the deal was done with Quintana. They have just done a US$23 million for buying metals from KBL.
"While there’s no doubt that copper prices have been lower than most would like lately, Roulston advised investors not to get hung up on the short term."
“What’s happened recently in the copper market is some aggressive selling by some speculators and … there’s no question it’s going to come back,” he said.
Explaining further, Roulston talked about the consensus regarding a small surplus in the copper market a few months back. While the projected oversupply of a few hundred thousand pounds relative to the multi-billion-pound annual copper market could have been enough to “push down the price by a few nickels,” Roulston stated that recent cutbacks and reductions in guidance from producers suggest that the small surplus “might actually turn into a deficit during this calendar year.”
“In any event, the market for copper is fairly well balanced,” he said. “And there’s going to be short turn ups and downs in the market, but longer term we’ve got 2-percent annual average growth in copper consumption going back a decade or so.”
In terms of demand growth, he pointed to China’s growing population and said that those looking at headlines calling for slower economic growth from the country might want to look again.
“They forget the fact that it’s going to grow 7 percent instead of 7.5 percent, but 7 percent growth on a much larger base is a lot more copper consumed in China this year than last year,” he said. “And we’ve got growth happening around the world.” Growth in terms of supply, however, is a little more constrained, according to Roulston.
"Overall, Roulston suggested that with copper prices as low as they are, there could actually be some opportunity in the market. “[Y]ou’re going to make the most money out of buying the thing that is most out of favor,” he said. “Right now, the resource industry overall is out of favor. The junior sector is even more out of favor.”
In closing, Roulston cautioned that an investment in copper companies is “not going to bounce next week.” However, things might be a bit more bright for those who are able to wait.
“… f you … accumulate the good-quality companies in this sector over the next few months and look back in a couple years’ time, you are going to be very, very happy as an investor,” he suggested.
Lets look back at this week in a few years from now, anyone who has a stack of shares like Scythevex or mr_delta will do very nicely indeed. I'm not as fortunate as some other investors as I've been a SRQ investor for many years, but now I'm in the top 20 and hold more than 20 million shares in a few different holdings . I need about 1 cent to get my money back.
