Hi,Not sure we agree on the number of pounds they should be...

Hi,

Not sure we agree on the number of pounds they should be producing per month but have also struggled to model this mine’s performance in relation to profitability. My rough take is below:

Current nameplate processing capacity is 3,000t/mth ( achieved 95% of this in September 21)
Future Nameplate processing capacity is 4,500t/mth.

In the June update they reported that for every tonne processed they expect to recover 90% zinc sulphide and only 70% zinc oxide. The team have always said that one of the big challenges has been getting to Level 10 where the richer sulphides are so I am assuming they are getting more zinc oxide than zinc sulphide at the moment and this will carry on for a while as no announcements have indicated that they will access Level 10 any time soon.

Furthermore, the realised zinc price was

If we assume no wastage issues and processing 4,500 t/ mth, a 50% zinc oxide and 50% zinc sulphide (average 80% recovery) and a 15% zinc content our monthly production of zinc is 4500 x 0.8 x 0.15. = 540t of zinc in concentrate product. 540t (or 1,620t/qtr) is the equivalent of just under 1,200,000lbs which at 2c/lb is worth just $24,000 or $75,000/qtr.

I checked the June update again and noted that they in fact sold 632t in Q2 which is significantly lower than they number above yet they also reported a $195,000 EBITDA for the quarter. My only explanation is that the numbers I am using aren’t what I think they are and/or the Pb/Ag sales are actually making up the difference.

Whichever way you look at it, CZL needs to be making more than 2c/lb to start making reasonable money. If they could realise the $1.32/lb revenue they achieved in Q2 and bring costs back down to $1.10/lb which is the cost number from the Q1 update then my $75k/qtr profit jumps to $825,000/qtr profit! Might be a big stretch but that potential is why I still hold.

I wonder whether I will ever see such results.