Price Participation
Price participation is standard for metal concentrates. Price participation is a mechanism for long-term material contracts that are priced based on a commodity market quotation, to protect both parties from strong variations over the agreed expected price. They are normally defined for the main analyte in the material (for example, only copper in copper concentrates), although other analytes can also have price participation.
Price participation is defined as a list of ranges over which price participation percentages are defined.
Example:
- From 0 to 80 USC/lb—Adjustment = 10%
- From 80 to 85 USC/lb—Adjustment = 5%
- From 85 to 95 USC/lb—Adjustment = 0%
- From 95 to 100 USC/lb—Adjustment = -5%
- From 100 up—Adjustment = -10%
Under these conditions, if the price is 90 USC/lb, the applicable price participation would be zero. For a price of 83 USC/lb, the resulting price participation would be 5% * (85-83) = 0.1 USC/lb.
A cap and a floor to the value of the price participation can be defined. If the resulting value is greater than the cap, the cap must apply. If the resulting value is lower than the floor, the floor must apply.
