Net smelter return (” NSR”) is a measure of net income for a tonne of metal concentrate. It is net of all costs such as concentrate treatment charges and penalties, refinery charges, freight costs, insurance, and marketing. It is also occasionally applied to gold doré, which is an impure form of gold containing 10% or more of silver and other contaminants.

For copper, nickel, molybdenum and platinum group elements the NSR is typically 55-60% of the gross value. For lead and zinc, it could be as low as 40%. Gold and silver would raise these percentages.

The NSR per tonne of concentrate (or concentrates) must be high enough to cover operating costs, sustaining capital, exploration, etc and still leave enough for a meaningful positive cashflow. A profitable NSR will be highly variable, depending upon the underlying deposit. However, for a mid-size polymetallic deposit, including gold, with a clean concentrate, a profitable NSR would be in the range AUD200-300/t.

At the exploration stage NSR can be calculated using factors from similar deposits. It is useful because it reduces the measure of an intersection to a single value, thus allowing ready comparison of drill holes and simplifying presentation of data.

During evaluation NSR facilitates optimisation of cut-off grades, throughput, circuit design etc.

Once in production NRS provides a reliable basis for grade control and for refining process circuitry.

In practice it is rare to see NSR used in resource/reserve statements. This should be reviewed by deposit owners, as NSR allows investors a ready way to determine relative values of various deposits. It is also reassuring because it suggests that sufficient work, such as metallurgical testwork, has been completed to allow its calculation.

 

Footnote

Equivalent grade is more widely used than NSR. Here, all the metals are converted into one metal, such as copper equivalent or gold equivalent. This is very misleading and should not be relied upon. Read more about equivalent grade, including a worked example, here.

19 January 2021 Commodities, Resource Sector Tags: , , , ,