If we start the acquisition, we look at metals and the mining industry as our example. Mines are difficult and expensive to build from there. They are often marred by delays and cost overruns for a variety of reasons – technical, regulatory, and even weather. This means that they are often looking for additional money to carry out the project. This is where the merchant comes in. A trading company can offer the final stage of financing for a mine that is almost ready, but not without getting its pound of meat. In return (instead of or next to an interest rate), the trader may require a guaranteed option to purchase a certain portion of the mine`s annual production on pre-determined (generally advantageous) terms. This allows the merchant to have some certainty as to what his book will be in the medium term, without having to compete with his colleagues to offer each time the equipment of the mine and be sure of having equipment for sale. Ideally, the distributor will also block a sub-market premium for the hardware, so that they also block a margin.
The toll is slightly different – it is a processing plant. Back to our mining example – our mining company might need capital to build a shack, to process the ore it produces. The trader could now seek an agreement to re-process on advantageous terms any raw material it buys outside the mine. In this way, the distributor has a stable output for the ore/concentrate that it can buy elsewhere and a guaranteed supply of refined metal. Here too, an intelligent trader would ensure that the process is stuck in a margin in order to guarantee a profit for the life of the agreement. Such agreements are common throughout the range of raw materials – metals, oil (refineries) and even cotton. This is a process that can be defined as performing a specific service for a customer`s product. Of course, the company would charge a fee (more often called toll) to provide these services.
Generally speaking, a company would provide a manufacturing or processing service in exchange for the customer`s toll. A contract delivery contract usually involves a long-term contract that brings benefits to both the processor and the company. Vancouver, B.C. / TheNewswire / September 1, 2016 – CMC Metals Ltd. (the “company”) is pleased to announce that the company and Pruett-Ballarat Inc.