The share price of GBG went as high as $1.98 which was a market capitalisation of around $1 billion in 2007. This happened after the BFS was released for Karara, and indicated a net present value (NPV) well above $2billion. GBG never ever traded close to its NPV, it was always significantly discounted. So, at the time, $1.70 was fair. Now $1.70 would command a $2.5 billion market cap given dilution (ie issuance of a $%^&ton more shares since then), hence not justified.
Also, since the BFS of 2007, GBG has had MASSIVE cost blow outs with CAPEX, operating costs and Working capital. The project was initially going to be deliver on around $1.6 billion or so. Its now standing over $3 billion if you include working capital... Not to mention the AUD has significantly rallied as well as operating costs. This just adds to the decreased value/profitability of the project. Then iron ore prices crashed...
Basically a perform storm of bad events.
I can assure you no other magnetite mines will be developed anytime soon. CITIC's project and now Karara are perfect examples of a disaster.
Australia's costs continue to rise too. Look at Gorgon, 20% blowout. Probably another one to come before commissioning too.
GBG Price at posting:
22.5¢ Sentiment: None Disclosure: Held
