Penalties and Bonuses

• Penalties and Bonuses
• • Penalty and Bonus Examples
  • • Analyte Exceeds Limit
    • Escalating Tiers
    • Hedging Profit and Loss

Penalties and bonuses are standard for base metal concentrates and semi-refined metals. A penalty/bonus is a contract charge or payable analyte charge configured in a set of contract terms.

The penalty/bonus can be entered as a fixed, calculated or tiered value, or determined from a premium matrix. The penalty/bonus impacts the invoice value, unit price or payable analyte grade. For a penalty/bonus that impacts the unit price, the resulting charge value is based on a mass, such as the wet mass or unloaded dry mass. The configuration of the resulting charge value includes settings for rounding of decimal places, minimum and maximum values, how the penalty/bonus is applied, and how the penalty/bonus affects invoices. For example, for a contract with product pricing, the penalty/bonus may display on the invoice without affecting the total invoice value, or may be included as a separate line item, or included in the calculation of the revenue line item.

Penalty and Bonus Examples

Analyte Exceeds Limit

Penalties may apply if the content of a particular analyte or combined content of a set of analytes exceeds a predefined limit.

Example: Iron: USD 1.00 each 1% > 8%. This specifies that if the iron content is greater than 8%, there is a penalty of USD 1.00 for each percent over 8%. If the iron content were 10.5%, the charge would be 2.50 USD/t.

Escalating Tiers

Penalties and bonuses can have escalating tiers, so that the higher the content of a specific analyte in a material, the higher the penalty or bonus.

Example: Copper concentrates contract with a tiered arsenic penalty: As of 2.5 USD/dmt for each 100 ppm (the step) if As between 2000 ppm and 4000 ppm and 3 USD/dmt for each 100 ppm if As over 4000 ppm.

• As = 1500 ppm incurs a penalty = 0 (The range including 0 ppm is considered by default to be the penalty-free range.)
• As = 2500 ppm incurs a penalty = 12.5 USD/dmt = 2.5 * (2500 - 2000) / 100
• As = 4500 ppm incurs penalty = 65 USD/dmt = 2.5 * (4000 - 2000) / 100 + 3 * (4500 - 4000) / 100

Hedging Profit and Loss

Penalties and bonuses can also be used to calculate hedging profit and loss made by hedging despatch orders.

Example: A company has a sales contract with a customer where the despatch orders are hedged. The hedging profit or loss at settlement is calculated using the HedgingProfitOrLoss() calculated expression.

Penalties and bonuses can be used to calculate linked hedging profit and loss made by hedging despatch orders of linked contracts.

Example: A producing company provides a commodity to a marketing company who then on-sells it to a customer organisation. A sales contract is raised for the customer organisation by the marketing company. A transfer contract is raised for the marketing company by the producing company. If the marketing company hedges the despatch orders to the customer organisation, the settlement profit and loss can affect the amount charged for the commodity to the marketing company by the producing company. This amount is entered into the transfer contract as a penalty/bonus contract charge. The linked hedging profit or loss at settlement is calculated using the LinkedHedgingProfitOrLoss() calculated expression.