Hi Scatterbrain, No ... I believe that is different. What that...

Hi Scatterbrain,

No ... I believe that is different.

What that says it that it sold both its 935,000 lb delivery obligations (at $51-$53 lb) AND 900,000 lb of spot market purchase contracts (that PEN purchased at a much lower price) to offset these.

i.e. the buyer of this package makes a guaranteed arbitrage profit and in return paid PEN a % of that profit as $$ now in consideration.

What I was/ am concerned about is the remaining contracted delivery obligations that PEN has on its books during the period that Lance is only dribbling out production (i.e. out until mid 2020 or so).

It is possible that the delivery obligations are much greater than Lance's production ability (until it fully ramps up again using low pH chemistry).

During that time the shortfall will be purchased in the spot market. However, my concern is that the spot market/ U market is starting to react to the supply destruction and has been moving upward ... effectively reducing PEN's margin.

If, as a couple of HC'ers (thanks urabull) have stated, PEN has locked in additional spot market purchases at a fixed price then this risk is removed.

The only thing is that PEN doesn't appear to have disseminated this information widely ... if correct.

Cheers
John