#copper
A smelter buys a 30% copper concentrate at a TC of $40 + 40c / lb RC. This basis the LME copper price of $9,000 per tonne. The copper content of one tonne of concentrate is 300kg. (30% of 1t). It is worth $2,700 (0.3t x 9,000 per t)
#copper
So if a smelter buys at a TC of $10, they are buying copper at a discount of $55 only. Their costs are still $200. So if they hedge forward sell when they buy the concentrate they are locking in a loss of $145.
#copper
So bringing this thread all together and explaining what it means.
1. TC's are trading at a level where smelters cannot make money.
2. This can only happen when smelters have consumed all available profitable stocks
#copper
3. Copper units have been drawn from the market in terms of metal in concentrates as smelters have maintained output by consuming their stockpiles.
4. This is totally opaque
5. This can only happen once
#copper
6. Once there is no more concentrate inventory to be consumed, only one of two things can happen:
a. All smelters produce a bit less copper
or
b. A smelter / smelters close.

Either way copper metal supply is about to drop.

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More from @METhompson72

26 Apr
#zinc
The global zinc market is, give or take, 13 million tonnes. China is far and away the largest producer with over a third of mine production and smelter capacity. Supply growth in China is static though with new mines barely replacing old mine capacity.
#zinc
Zinc’s main use is as a anti-corrosion coating on steel in the construction and automotive industries. This is called galvanization. Other uses include alloy (brass mainly) die-casting precision components and as a fertiliser additive.
#zinc
Consumption growth is highly correlated to Global economic growth - 2.5x geared to growth above/below 2.5%. (i.e. zero consumption growth at 2.5%, but 5% consumption GDP growth of 4.5%.)
Read 15 tweets
26 Apr
#tin
Tin is the 49th most abundant element within the Earth and has the chemical symbol Sn, which is derived from the Latin word “Stannum”. Crustal abundance is only 2 parts per million (“ppm”) compared with 75 ppm for zinc, 50 ppm for copper, and 14 ppm for lead.
#tin Tin mining dates back at least 4000 years to the Bronze Age, when tin was alloyed with copper to make bronze. Tin does not occur as the native element but must be extracted from oxide ores. Cassiterite (SnO2) is the only commercially important source of tin.
#tin Cassiterite is insoluble in water and erosional processes of deposits often results in placer deposits. Maybe 70% of all historic tin production has come from hydraulic mining or dredging of these alluvial type deposits, where grades as low as 0.015% tin can be economic.
Read 19 tweets
26 Apr
#Tin
The secret to tin investment is easy if you focus on 3 things: mineralogy, mineralogy and mineralogy.
#tin Cassiterite is THE ONLY commercially valuable tin mineral. Most hard rock tin deposits contain some stannite (tin sulphide) and tin silicates. Look at the cassiterite grade, NOT tin grade.
#tin Alluvial deposits are more attractive generally than hard rock as they are 100% cassiterite. Cassiterite is dense with a specific gravity of 7 so water action concentrates it in placer type deposits.
Read 6 tweets
26 Apr
#GOLD
Why you should only ever buy gold mining stocks and not gold.
#gold
This is going to make me unpopular with some of you, but I am going to explain why you should never buy gold. Do not confuse this with owning gold mining stocks though.
#gold
Gold is a store of value. This is true. In Roman times one ounce of gold would clothe a men nicely and the same is true today.
Read 9 tweets
26 Apr
#copper
I keep seeing this Wood-Mackenzie chart in every copper presentation. I started my career in 1994 when the market was about 10Mt and Sumitomo embarked on a massive attempted copper market squeeze.
#copper
There are copper projects out there, of course, and they are all raising capital and advancing feasibility studies. But I strongly contend that there are not enough and they cannot be built in time to meet expected demand.
#copper
10 years of below trend copper exploration has consequences.
My very strong view is the only way out of this situation is for the copper price to go to a level where demand is substituted or destroyed.
Read 26 tweets
19 Mar
Investing in #Tungsten
I start off each series on investing in a different metal talking about mineralogy – this will be no different! There are 2 commercially valuable mineral types in tungsten – scheelite (calcium tungstate) and the wolframite series (iron-manganese tungstate.)
Scheelite is generally speaking easier and cheaper to recover than wolframite, mainly because it is recoverable via gravity and flotation means whereas wolframite only by gravity. Scheelite fluoresces which can make a trip to an underground #tungsten mine very interesting!
Both scheelite and wolframite are brittle meaning that they are liable to produce unrecoverable slimes during processing. These #tungsten minerals have a very high specific gravity though, of 6 g/cm3 and 7 g/cm3 respectively, making gravity separation relatively simple.
Read 21 tweets

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