Straits to pay $120m to exit processing deal
STRAITS RESOURCES is writing a $US120 million cheque to extricate itself from a costly supply deal for copper concentrate from its Tritton mine near Nyngan in NSW with the metals trading arm of J.P. Morgan.
STRAITS RESOURCES is writing a $US120 million cheque to extricate itself from a costly supply deal for copper concentrate from its Tritton mine near Nyngan in NSW with the metals trading arm of J.P. Morgan.The supply terms were entered into by the previous owners before Tritton's float on the ASX in 2002 and have become horribly "out of the money". Straits is handing over about one-third of the copper price in treatment and refining charges compared with the industry average of about 5 per cent.While copper has eased in recent weeks, the current price of $US3.80 a pound is well above historic highs and above Tritton's cash cost of production of $US2.13. That makes the terms of the offtake agreement particularly painful.To rid itself of the cash drain, Straits will pay J.P. Morgan the $US120 million in return for the agreement being replaced by one more in line with prevailing industry charges. Straits said Tritton finally would become a "clean" asset. Annual production is about 25,000 tonnes of contained copper.Because of the unfavourable offtake agreement, the mine has struggled to make a profit despite bumper copper prices. In the five months to June 30 (Straits' most recent reporting period), Tritton lost a net $4.8 million.