Hello. Was playing around with some figures and came up with the following. Hopefully it is ballpark at least.
Paul100 wrote: "Costs in the latest report were substantailly down from the previous quarter. The cost of milling a ton of ore was down from $49.95 to $40.75 however because of the large fall in grade this was not reflected in unit costs."
If this is correct then this is an 18.5% reduction in costs which would be a considerable improvement and a good beginning to hopefully substantially lower costs. However, was negated by the decrease in grade at 19.8%.
From my understanding, the lowering cost of milling ore is proportional to copper production costs and a lowering of grade is inversely proportional. This roughly seems to make sense as costs were approximately the same, $2.39 as oppposed to $2.37, with the proportional and inversely proportional factors roughly cancelling each other out, leading to little net change. Factoring in the slightly larger decrease in grade gives you a slightly higher price, and this also discounts the small discrepency in recovery rate as negligible.
If this reasoning is correct, then if ore grade did not dip this previous quarter from 1.31% to 1.05% , costs would be 18.5% lower also, equating to roughly $1.95 per pound, which would have seemed like a significant reduction and something I would have been very happy with as a good beginning.
Taking this a step further, however, Paul100 also stated in the last 7 quarters, only twice has the grade been lower than 1.5%, this quarter and the previous one.
However, even in the December quarter, the mined copper grade was actually 1.46%, it was only the 3rd party ore that averaged this down to 1.31% (with third party ore at 1.07% in Dec1/4). This would therefore indicate this is the first and only quarter to date from 7 total, where mined grades did not approach the 1.5% mark, suggesting, to me at least, hopefully this is an anomoly.
Also by my reckoning, continuing with the idea cash costs are roughly directly inversely proportional to ore grade, if the grade again reached its historical averages of 1.5% then at this cost of milling a ton of ore, I roughly equate it to equal $1.67, which would have been a fantastic reduction IMO.
The $1.67 cost was calculated as follows:
cost=Yxcost of milling ore/grade
whereby Y is a constant factoring in a constant recovery rate also.
As for this scenario cost of milling ore will remain constant also, let Yxcost of milling ore = Z, and therefore Z is a constant also.
Therefore, Z=gradexcost
An increase in grade from 1.05 to 1.5% = x1.429
Therefore, 1.429 x old grade = new grade.
Therefore, as Z is constant, gradexcost=1.429grade x new cost
Let new cost = cost x W
Therefore, grade x cost = 1.429grade x W.cost
Divide out old grades and costs from both sides.
Therefore, 1 = 1.429 x W
Therefore W = 1/1.429
Therefore new cost = old cost divided by 1.429.
=2.39/1.429
=1.67
:P probably a less convoluted way to explain that.
Here is the post about $1.30.
"Cash costs will be markedly reduced as this third party ore is phased out, and will be an ongoing theme of Punitaqui operations in the coming months. Cash costs are expected to decline to 1.30 per lb by end of year, with further reductions anticipated by 2009 once open cut mining is introduced."
Factor in improved recovery rates, the fact they will no longer have to negate "increased development during the period", improved infrastructure and various other improvements, and hopefully this ballpark approximation of $1.67 would lower considerably, with, hopefully, the opencut mining "With sufficient crushing, milling, and flotation capacity on site already for this expansion" then reducing costs further.
Anyway, this is my hope. I would also just like to again reiterate the disclaimer I readily admit I know little about mining, most of this was done from what seemed like logic and I know it wouldn't be this neat in actuality but I am hoping these are ballpark figures. Please correct me if I have miscalculated something.
Also, the increase in copper price is of more importance to TMR whatnogravy, I agree. Supposing TMR does manage to get costs to $1.30, and copper price does somehow reduce to $2.00 a pound, in comparison to OXR managing, I don't know, 80c? As a ratio the discrepency is huge. However, if copper stays at $4.00, or goes even higher as seems likely IMO, then this ratio becomes less and less significant as prices rise.
I could go on a lot more, but I'll stop now, especially considering half of this could be incorrect anyway ha ha. I don't know how you guys manage to write such short posts.
Just like to add I'm a massive believer in short term hardship for long term gains, if all the above is roughly correct, I don't know why the quarterly wouldn't have mentioned a reduction percentage of cost of milling ore, MMX looks good again, and sincerest condolences to my friend who sold out of ORG yesterday, 1 day before it rose 33ish% T.T
Oh wth, I will finish on another apple analogy. If you pay a kid a dollar a day to pick apples for you, and every day he picks three, if one day he suddenly picks two then it is a given costs per apple are going to rise. He has picked 33% less apples for that day! The grade in ore reduction is that dramatic (30%). However, for the previous 6 days he has picked 3 apples every day (excluding third party apples), thus suggesting an apple anomolly (sp :P)
Good luck holders (wth good luck sellers too... with other stocks though!)
TMR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)