Product Marketing Contracts

Allen, George J. ; Allen, Laura A.
Organization: Society for Mining, Metallurgy & Exploration
Pages: 12
Publication Date: Jan 1, 1986
Introduction This section of the text presents a general review of the different types of concentrate marketing contracts. Too often the marketing strategy is ignored in the design phase of the project and the producer is left to the mercy of the buyer. Many items such as concentrate grade, impurity levels and moisture content of the concentrate my enhance, or severely restrict the producers ability to make a profit it. Close attention should be paid to the design of the concentrator which can improve the quality of the concentrates, thus the ability to increase the rider of potential buyers can be enhanced. Difficult at best, is the position of the miner who only has one outlet available for its production. Obviously, the trade offs must be evaluated. For example, concentrate grade vs recovery and grind/filtering capacity vs moisture of the concentrate all must be weighted against freight cost to a potential buyer. In addition, the above considerations must be weighed against the capital cost to the miner. This chapter is intended to highlight important articles that are included in short and long term agreements and to give a new miner/producer some insight into hat my or my not add value to the product. Unless the miner sells the product directly to a consumer such as a gold, or silver producer, or to a large enough operation that has a totally intergrated system to make a finished product, most miners are forced to sell to buyers who ultimately will refine and market the product. Types of Contract Agreements There are many types of contract agreements just as there are colors in the rainbow, however, most contracts fall into three basic categories. (1) Smelter Schedules: Designed for the small producer, the odd lot of concentrate, smelter flux and precious metal ore. Albeit custom smelters are becoming fever by the day, because of pollution control requirements and financial difficulties, most remaining custom smelters have a smelter schedule. A smelter schedule is a posted list of charges and conditions that the smelter will buy material from a seller. Smelter schedules exist for copper, lead, zinc, silver and gold (Handbook for Small Mining Enterprises, Montana Bureau of Mines). (2) Short Term Custom Contracts: Large mine producers frequently use Short Term Contracts where the seller has the buyer frame a contract that is tailored to the sellers’ production. The short term contract my be as long as one year. A spot sale qualifes as a
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