'The marginal addition in C1 costs due to lower metal production was partially offset by a slight reduction in overall treatment charges (TCs). The full effect of lower spot TCs is yet to flow through to the cost-base for New Century, with the September quarter shipping schedule requiring the majority of shipments to be delivered under existing long-term contracts (at a discount to the benchmark TC of US$299.75/t) as opposed to spot TCs which progressively dropped to US$110/t during the quarter (see Figure 1). New Century anticipates further reduction in average realised TCs in the December quarter and into 2021 (providing a strong tailwind for C1 costs), with the average TC for the September quarter being US$259/t, however the Company’s most recent signed spot TC shipment contract (for December quarter delivery) was US$157/t. Lower spot TCs, combined with a likely significant drop in the annual benchmark TC in 2021, will provide a significant C1 cost benefit for New Century. For example, a US$100/t drop in average TCs represents ~US$0.10/lb on C1 costs, which is equivalent to US$24.8 million per annum (~A$35 million) in additional earnings based on an annualised September 2020 quarter production rate alone.'
NCZ Price at posting:
18.5¢ Sentiment: Hold Disclosure: Held
