All of the resource companies that have reported to date are guiding costs upwards, due to inflation.
For instance, Teck is now guiding unit costs on copper up approximately 6%. Their major capital project at the moment (QB2, a massive copper project which is nearing completion) just ramped up their own costs once again and is signalling that production will not begin until early 2023 instead of 2H-2022 as expected.
Cenovus’ 2022 projected capital costs are going up 10%.
The rest of them will be roughly similar to this – rising costs everywhere.
The impact of inflation will be permeating through the entire economy. Just because companies are going to be making good cash on a high commodity price environment does not make them immune on the cost side.
Commodities are a price-taking industry, the producers more or less sell at whatever the market is willing to give them.
Companies that are price-making (e.g. SaaS like Microsoft) have a lot more power in this environment, but there is an element of elasticity depending on exactly what you’re selling. Those companies that have wide moats will do very well in an inflationary environment.
Sacha,
The new release from yellow pages include the following line:
Plan of Arrangement On August 4, 2022, the Company’s Board of Directors (the “Board”) approved a distribution to shareholders of approximately $100 million by way of a share repurchase from all shareholders pursuant to a statutory arrangement under the Business Corporations Act (British Columbia). The arrangement will be effected pursuant to a plan of arrangement which provides that the Company will repurchase from shareholders pro rata an aggregate of 7,949,125 common shares at a purchase price of $12.58 per share, which represents the volume weighted average price for the five consecutive trading days ending the trading day immediately prior to August 5, 2022.
The arrangement is subject to the approval of at least 66 2/3% of the votes cast by the holders of shares at a special meeting of shareholders that will be called to approve the arrangement. Shareholders holding in excess of 78% of the outstanding shares have agreed with the Company to vote in favor of the arrangement. The arrangement is also subject to the receipt of the approval of the Supreme Court of British Columbia .
I assume further details will follow, don’t recall seeing that too often company force a buyback by plan of arrangement. Tax treatment wise, is it pretty much the same as a ‘substantial issue bid’ where basically the payment is counted as a dividend while reducing your cost base to zero.
Thanks.