It doesn't mention any discount to LME so why do you assume thats the case? I looked for details of SFR off take and couldn't see any mention of discounts linked to LME for them. Do sales of 99.99% NCu metal also attract a discount to LME or would a premium apply?
OFFTAKE AGREEMENT FOR SALE OF MINERAL CONCENTRATES FROM ROCKLANDS GROUP COPPER PROJECT COMPLETED WITH CHINA OCEANWIDE INTERNATIONAL HOLDINGS CO. LTD (“China Oceanwide”) OCEANWIDE INTERNATIONAL RESOURCES INVESTMENT CO. LTD (“Oceanwide”) TO SUBSCRIBE FOR A$130M OF SHARES IN CUDECO CuDeco Ltd is pleased to advise its shareholders that the Company has completed the Offtake Agreement with our new cornerstone investor, the Hong Kong based investment and resources group. The material terms of this agreement are:- a. China Oceanwide has agreed to purchase a minimum of 60% of the total product from the Rocklands Project. b. Cudeco has the right to sell the entire 100% of production to China Oceanwide but at CuDeco’s future discretion. It is common within the industry to allow for 40% of the product to be sold on the spot market when copper/gold/cobalt prices fluctuate from time to time. c. The term of the agreement is for 20 years. d. Under the terms of the Offtake Agreement, as well as purchasing the copper/gold concentrates, the buyer is also purchasing the pyrite/cobalt concentrates, which are anticipated to be approx. 200,000 tonnes per annum. On current prices the margin on the pyrite/cobalt alone is approx. $US805 per tonne. The pricing for the offtakes will be linked to the prices on the London Metals Exchange and the London Bullion Market Association.
The terms of the Offtake Agreement includes a guarantee from the group to purchase 100% of the product produced at Rocklands, which provides significant hedging against any softening of market demand. The agreement is a win-win for CuDeco and the cornerstone investor and is extremely favourable with respect to common Offtake Agreements, but in some respects, differs from traditional Offtake Agreements, with respect of providing timely funds transfer and adjustment. The Company was determined to link up with an investor that respected the value of CuDeco shareholders and the Rocklands project, and who took this into account over and above the market capitalisation as given by the recent ASX valuation.
CDU Price at posting:
$4.32 Sentiment: LT Buy Disclosure: Held
