Bricks

In long-term contracts for metal concentrates, bricks are used as a mechanism to attenuate the impact of market conditions in the applicable terms. Bricks are standard for metal concentrates.

A brick is defined as a fraction of the tonnage under the current contract term that will be subject to a previous contract term. A contract could contain multiple contract terms (for example, one for each year). All of these contract terms could be different.

Example: 55% of the tonnage of a shipment of copper concentrates will be subject to 2009 terms and conditions (treatment charges, refining charges, price participation, price sharing, payable analytes, quotation pricing), while the other 45% will be subject to the contract terms negotiated for the previous year.

Up to three bricks are normal for copper concentrates, although there is no reason to restrict the number of bricks.

Example: There may be 3 years of contract terms. The first year may apply to 30% of the tonnage, the second year to 20% of the tonnage and the third year to 50% of the tonnage.

With multiple bricks, there is an opportunity for rounding errors. One (and only one) of the bricks can be flagged to say it will be the one to assume any rounding errors.

Example: If a 100-tonne quota were to be spread over three bricks in equal amounts, two of the bricks would have 33.3% of the total tonnage, and one would have 33.4%.

The sum of contributions for all bricks must be 100%.

Under a given term, not all concepts are necessarily bricked (for example, one contract might have bricks for quotation pricing while another contract might use only the quotation pricing under the current contract terms). When bricks are defined, each contract assumes a default bricked terms list from the configuration of the material.

For each brick, the set of contract terms to be used by the brick needs to be chosen. The bricks are specified at the contract level. If there are any contract terms not specified in the brick, they will need to be picked up from the actual contract.

When contract terms from bricks are evaluated for a particular invoice iteration type (provisional, final, and so on), they are only applied if the invoice iteration type condition specified in the contract term matches the invoice iteration type being generated.

Example:

35% of the total is to be priced using Brick 1 that uses this year's contract terms for copper concentrate. 35% of the total is to be priced using Brick 2 that uses last year's contract terms for copper concentrate. 30% of the total is to be priced using Brick 3 that uses the year before last year's contract terms for copper concentrate. All bricks specify the costing of a treatment charge, refining charge, price participating and price sharing. None of the bricks specify whether analyte or product-based pricing is used. Because there are three bricks, the invoice that the customer receives will have calculations based on applying the bricked terms (or the contract terms of the main contract) to the percentage of the tonnage specified in the brick. The invoice amount will be the sum of these percentages. In this case, the customer actually receives a separate invoice for each of the percentages, as well as a final page that shows the summarised aggregates of the first three. The formats used are generally site specific: some clients may wish to split the invoice this way; others might just have the summarised result invoice. Note that the payable analytes and quotation pricing have not been flagged as being controlled by the bricks, so instead of seeing the last year's or the year before last's values for these, you would only see the master contract values (which happens to be the contract terms for the current year). Therefore, the system takes the total tonnage for the quota/delivery, and then produces an invoice for 35% of that tonnage, invoiced with the current year's contract terms. Then another invoice is generated for 35% of the quota tonnage, but using last year's configuration for treatment charge, refining charge, price participation and price sharing, but the current year's settings for payable analytes and quotation pricing. Finally, a third invoice is generated for 30% using the year before last's contract terms.