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C1 cost incorporates the payability, that's why it is quoted on...

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redsceptre

5,336 Posts.

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25/08/20

10:48

Post #: 46792357
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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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C1 cost incorporates the payability, that's why it is quoted on a 'payable Zinc' basis, you shouldn't double count that

NCZ Price at posting: 19.5¢ Sentiment: Buy Disclosure: Held
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