Ann: Trading Halt, page-47

With respect, what we need is good fixed, semi-fixed and variable cost information not C1 because that is what would enable figuring out if increase volume would just increase losses or would cut costs per unit.

The table below presents a hypothetical situation whereby $6/dmtu of costs are either variable ($1.50) or fixed ($4.50). Fixed costs cover everything from corporate, mining, processing to Site Admin. These costs shouldn't be $4.50/dmtu but they are much higher than ideally occurs because of rework, lower grades and current inefficiencies. Lets in this hypothetical scenario assume fixed costs are now spread over 600 units of production (150/qtr) rather than 200 units (50/qtr). A $6/dmtu operation drops to being a $3/dmtu operation. Where it lost money on all but high price scenarios its now making money on a lot wider range of pricing situations. If the $2 shipping/grade discount you note also narrows, you might have an operation making profits at US$4/dmtu CIF pricing despite current the current cost structure you note of US$6-8/dmtu.

In this instance C1 is not the most important metric because it depends on volume. We know volumes are low so we know C1 is high.

What is important is management implementing plans so that operational costs become something close to the original business case. It appears they are looking to do that (finally).



If this old 2020 cost structure noted fully variable costs of logistics ($1.14/dmtu) and Royalties (US$0.26/dmtu). They will be higher than this at present because embedded in the dmtu calculation is grade (33%) and if currently nearer 30%, logistics will be 10% more. High fuel costs won't have helped either.