Let's do a simple profit exercise shall we let's just use fake numbers for these two fake companies:
Two companies produce 200k Oz they generate around 600 million in revenue a year, both companies make around 10% profit to revenue. This is based on the POG being at $3000 with an aisc of $2700 based on profit margins of 10%.
200k Oz x 3000 = 600 mil
200k Oz x 2700 = 540 mil
profit = 60 mil or 10% of revenue
Now let's say company a decides to make a hedge at let's say 2600 for 250k Oz.
Company b decides to hedge make a hedge at 3000 for 100k Oz and make the same 10% revenue.
Now over the course of two years company both companies have aisc of 1080mil anything after this is profit. Let's say the POG is now at $3500 and stayed at that throughout the course of two years.
Company a has generated 1175mil
250k Oz x 2600 = 650 mil
150k Oz x 3500 = 525 mil
Company b has generated 1305mil
100k Oz x 3000 = 300 mil
300k Oz x 3500 = 1050 mil
Both companies have an aisc of 1080 company a has generated 95 million over the course of two years on around 1 billion revenue while company b has generated 225 million over the course of two years.
If the POG was at $3000 and didn't move and the aisc was at $2700 then let's use neutral company c as a control.
Neutral company c has made 120 mil over the course of 2 years at 10% profit margins on a revenue of 200k Oz at $3000 with an aisc of $2700.
This means over the course of two years that company a has basically lost 25 million, while company b has generated an additional 105 million. Why does this matter? Basically profit margins to revenue, on company a their profit margins have dropped from 10% to something like 9% while profit margins on company b have gone to something like 19%.
Now it might seem like a small number it's just 10% difference in profit who cares... Well it doesn't quite work like that. When you have something like 9% profit margins Vs 19% you're actually looking at a year of profits. That's the difference between a whole year of profits being made each year.
Over the course of 2 years that's 4 years of profit being made by company b while only 2 years of profit have been made by company a.
If revenue was tied to 10% a year company b has accomplished what would normally take 4 years of profits in 2 which I would say is a huge achievement. Company a on the other hand has only made 2 years profit in 2 years. Effectively company b has extended their "mine life" by 2 years in terms of profitability.
Anyway just an exercise in profits and why that 10% matters.
- Forums
- ASX - By Stock
- If the deal goes through - which way did you vote and why?
Let's do a simple profit exercise shall we let's just use fake...
-
- There are more pages in this discussion • 3 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add SLR (ASX) to my watchlist
(20min delay)
|
|||||
Last
$1.45 |
Change
-0.085(5.54%) |
Mkt cap ! $1.355B |
Open | High | Low | Value | Volume |
$1.51 | $1.53 | $1.43 | $8.493M | 5.791M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
2 | 22084 | $1.44 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$1.45 | 15720 | 4 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 19000 | 1.440 |
2 | 6369 | 1.435 |
3 | 12483 | 1.430 |
3 | 22191 | 1.425 |
3 | 52307 | 1.420 |
Price($) | Vol. | No. |
---|---|---|
1.450 | 10399 | 3 |
1.455 | 16869 | 3 |
1.460 | 11099 | 3 |
1.465 | 20689 | 2 |
1.470 | 20689 | 2 |
Last trade - 16.10pm 03/06/2024 (20 minute delay) ? |
|
|||||
Last
$1.43 |
  |
Change
-0.085 ( 5.01 %) |
|||
Open | High | Low | Volume | ||
$1.51 | $1.53 | $1.43 | 1784647 | ||
Last updated 15.59pm 03/06/2024 ? |
Featured News
SLR (ASX) Chart |