Not only is the tin price down sharply, it's backwardated....

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PinchOfSalt

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04/09/22

08:28

Post #: 63506253
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Originally posted by edshann: ↑

It is worth adding that these numbers are an average for the year, so a temporary dip below $US 17500 at the current exchange rate does not produce an annual loss. Moreover if there is a world recession and the all commodity prices fall the $A is likely to be lower.

One other point is the calculation is not very sensitive to costs. If you assume a 20% rise in costs rather than 10% it only reduces profits by $10 m.
So if labour costs, fuel and covid greatly outweigh the benefits of Area 5 completion the calculations above do not change much. Costs will still determine where we are on the global cost curve and whether we can keep producing when other mines close, so they are importrant.

On cash flow we could well be close to cash flow neutral when Area 5 is completed this quarter for around $9m. There will be ongoing spending on the metallurgical improvement project and what they do with Rentails will depend on the DFS. It could be delayed or financed from exisiting cash if it looks attractive at low tin prices, if cash flow drops much further.

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Not only is the tin price down sharply, it's backwardated. Future prices are less that spot / front month. That means the market thinks there is a temporary supply shortage and speculators can commit to future deliver at lower prices. (Contango is more usual.)
I have no crystal ball but the price chart it telling me that tin will go lower. LME Tin | London Metal Exchange
Am still researching MLX and don't have a view yet. Thanks @edshann for the simple models above.

MLX Price at posting: 26.5¢ Sentiment: None Disclosure: Not Held
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0 Great analysis

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