Some actual estimates may be useful in calming the waters wrt the drop in byproduct credit values. Shrill noises only go so far (and are not very professional). Therefore I present an attempt at understanding where these currently stand.
Using the metal in conc ratios from the March Q we get 0.56 lb copper per lb nickel and 0.068 lb of cobalt per lb of nickel.
Based on forex and spot prices at the weekend (copper A$12,500/t, cobalt A$44,700/t) and the simplifying assumption that payability is the same for each metal, then this spot data results in A$3.17 of copper credits per lb payable of Ni, and 1.37 of cobalt credit for a total of A$4.54/lb.
The company’s recent base case assumption were A$12,000 per tonne for copper and $74286 for cobalt.
Doing the same for the base case assumptions we get $3.07 and 2.28 for a total of A$5.35 /lb payable.
The two main points to come out of this are: 1. Credits are probably currently down about 80 c AUD from recent guidance. 2. Copper is currently the main credit (and looks to me very much to have or to be flooring).
A third observation I would make from looking at the cobalt price curve would be that roughly half the drop in cobalt credits (ie about 40 cents/lb) would have impacted the March Q.
I will also be bold enough to say that imo the risk is currently mostly to the upside wrt byproduct credits. My focus therefore remains very much on the nickel price and the production numbers (with unit costs largely sorted if production is sorted).
EL
Caution: 1. The above are only my estimates, and I am not immune from the odd numerical error. 2. Payability of copper and cobalt may be considerable lower than that for nickel in which case the importance of byproduct credits is less and also the importance of the drop in them also less.
PAN Price at posting:
9.7¢ Sentiment: Buy Disclosure: Held
(20min delay)