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Price, Volume, Costs and Cash, page-18

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Alex385

115 Posts.

9

23/08/20

12:31

Post #: 46747018
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Originally posted by miningnut: ↑

One of the first things you should realise is that the C1 costs they are quoting(and which is standard practice) is based on a 'payable metal basis' which for NCZ amounts to around 83.5% of gross production - so the first charge the smelter takes is this 16.5% 'free metal' charge.
So when NCZ produces 100k lbs of zinc, the smelter gets 16.5k lbs for free - the C1 costs they are quoting is based on 83.5% of their gross production.
Let's do the example:
1. Most investors think that when they quote C1 costs of 80c/lb when the zinc price is 110c/lb that they are making 30c/lb.
2. The correct answer to the above example is that the C1 cost of 80c/lb has to be compared with 91.85c/lb(being the zinc price of 110c/lb less the 'free metal' portion of 16.5% or 18.15c(16.5% of 110c). So the correct margin is 11.85c/lb.
And from that margin you have to deduct C3 costs that mainly comprise admin and corporate charges and interest costs.

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Jun Qtr rev 64m, production 34k zinc zinc price 89c

Sep Qtr production 40k
zinc price $2400
rev should be 96m USD,
give it 25% discount, 72m USD 100mil Aud
50% growth

NCZ Price at posting: 18.5¢ Sentiment: Buy Disclosure: Held
3 Upvote

0 Great analysis

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