copper price, page-28

Renegade

Pan at 90c for c1 cash costs is at the very top of the second quartile of cost producers (ie half the copper produced in the world is produced at a lower cost). This is normally a pretty nice spot to be sitting, particulaly when looked at over the whole cycle of metal prices. It is however not uncommon for prices to fall well into the second quartile at the bottom of a downswing and stay there until mine closures occur for the 3rd and 4th quartile producers and supply / demand rebalances. We saw this in 98 through 2002. As Paul100 said this has started to happen with some of the other metals but copper is behind the curve so in my opinion copper prices will be depressed for longer.

The problem for Pan is the lack of cash reserves to put up with a cash burn situation while they are waiting for other producers to drop off and rebalance the supply demand equation and push price up.

Based on the 90c c1 costs, admin costs from their last quaterly and their debt servicing costs they should be well underwater at current copper prices so unless they can find more cash to see them through a burn period they will in my opinion go to the wall.

It is unfortunate cause they have indeed done well as an Aussie startup to build a great little mine but cash is king. They should have built it with equity and not debt and they may just squeeze through but in my opinion they would certainly want to make sure Q4 is cash positive.