It is interesting to understand the factors that smelters consider important to make a gold concentrate attractive and command a higher purchase price. Where gold mines and a smelter are owned in part or completely by the group, some preferences are often given to gold concentrates from the gold operations associated with the smelter. In this case the gold grade and the tonnage produced by the gold operations have an impact on what gold concentrates are appropriate for the balance of the smelter operation. There is other group of smelters whose operation depends exclusively on gold concentrate commercialization from the international market. This second group of smelters usually blends gold concentrates that optimizes their refining process efficiency, profitability and the environmental considerations when the concentrates present some impurities.
The gold concentrate delivery defines the interest of subsequent purchases. In this way a dirty gold concentrate shipment needs a large volume of high grade gold concentrate to dilute undesirable compounds present in the dirty concentrate. Then, commercialization and purchases of dirty gold concentrates are prevented until the first shipment is consumed. It is important to mention that the supply of gold concentrates is important for smelters and the main restriction is the gold grade and volume available for commercialization. Basically, smelters try to assure a constant supply of gold concentrates that optimizes their profits at minimum cost. Other factors to consider is the fact that smelter prefer gold mining operations whose shipments will not be affected by weather conditions, plant capacity restrictions or political situations.
About the contracts, when the gold concentrate is of good quality, smelters will look for a long term contract with the suppliers indicating the tonnage and gold content of the concentrates to be shipped. It is common that gold concentrates commercialized under long term contracts may be supplemented with one-off or stop purchases at any moment of the year. Some of the clauses are the duration and period of the contract, shipment medium, treatment charges, penalties, escalation factors, payments, moisture determination, assays protocol, exchange rates, arbitration, and losses.
Probably, payment terms and revenue calculations are the most important. The first one is influenced by treatment charges, net smelter return and cash flow. Basically, payment terms are negotiable and tend to vary with the gold market conditions. The revenue calculations are performed by the gold mining operation after determining of the costs and commercialization terms of the concentrate. Essentially, calculation of the net smelter return has an important impact and it is important to determine its value to an acceptable level of accuracy.