lme copper future

Just a thought. a way to manage the project risk...

1tone = 2205 lb
the current LME Copper Future 27 month BUYER/SELL = US$6100/tone = US$2.77/lb

URL's initial planned production capacity = 50k tone and then later changed it to 34k tone.

1. URL can revise the plan to 17k tone/year capacity

2. buy/issue 10 thousand tones of 15 and 27 month FUTURE SELL(right to sell) @ US$6100/tone?

3. @ US$2/lb, 19.5 per cent internal rate of return
@ US$3.50/lb, 62 percent internal rate of return.

Just assuming than @ US$2.77/lb, the return would be somewhere around 40 per cent.

4. if URL build a plant and start production within 15 months, the copper FUTURE will guarantee URL to sell 10k tones (22m lb) @ $2.77/lb

5. with 40% return, 10k x 6100 x 0.4 = US$24m = AU$30m

6. by a contract, URL can issue another 10k tones of FUTURE SELL (right to sell) after 6~12 months.(depends on the price)

wouldn't it help URL to get the debt finance?

---------------
LME Official Prices (US$/tonne) for 20 Jun 2007 COPPER

CASH BUYER 7,625.00

CASH SELLER & SETTLEMENT 7,625.50

3-MONTHS BUYER 7,545.00

3-MONTHS SELLER 7,550.00

15-MONTHS BUYER 6,865.00

15-MONTHS SELLER 6,875.00

27-MONTHS BUYER 6,095.00

27-MONTHS SELLER 6,105.00