Price Participation
Price participation is standard for metal concentrates in long-term material contracts that are priced based on a commodity market quotation. A price participation protects both parties from strong variations over the agreed expected price. Price participation is configured as a payable analyte charge in a set of contract terms. Price participation is 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.
The price participation can be entered as a fixed, calculated or tiered value, or determined from a premium matrix. The price participation impacts the invoice value, unit price or payable analyte grade. For price participations that impact 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, and how the price sharing affects invoices. For example, for a contract with product pricing, the price participation 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.
Price Participation 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.
