this could end badly, page-11

I really love this board, there are so many dissenting opinions and "interesting" ideas on how to value a company.

The original assessment that started this discussion, you are credited with points for a good dialogue but your facts are so far from reality you get a net 0 for your post.

Some suggestions how to value a company:

1) Use the cash costs, GBG said something like ~76, but that might be running at full speed so maybe higher. Someone on here posted depreciation costs which are irrelevant accept to calculate tax. SG&A who knows, use a comparative company?

2) Take a guess at iron ore over the long term, the fact that iron ore is at X today doesn't mean much if that is short term (see point 3 as I guess it does matter a little). If you think its long term then it matters a whole lot, but pick an iron ore price for each year of your model (e.g. now youc an see how so many people get so many different values, no one knows who is right)

3) Total Debt, where in the world did 500mm come from? I believe total debt (i.e. working capital revolver plus debt facility is ~1.8billion so GBG is half depending how you model the JV). If the short term iron ore price is too low that they can't repay their debt then yes okay it matters but goto point 4.

4) Liquidity - can they repay their debt in the short term without the Cash flow. There are a lot of scenarios and I love how everyone assumes a capital raising. That is one of many possible solutions, not the only solution (Gindaldan, for all your great posts that assumption was not a highlight).
a) Change their loan facility to delay interest payment or take on more debt
b) Sell Assets - Shine, etc. btw where is everyone getting the reference to a power sale? I don't see that in any announcements, but could you post me a link.
c) Sell a higher stake to Ansteel (love the posts on FIRB board)
d) Ansteel being the white knight they are and continuing to prepay for iron ore sales
e) Sell their stake to another producer in the region who can raise the equity
f) Do another JV on one of their other projects with a negotiated up front payment (as opposed to a sale in B)
g) Last, and I do hope it is last... Raise equity through the capital markets.

The solution they take on liquidity will be dependent upon what they can actually achieve. I am not sure what interest there is in any one of the above points, but that is what will dictate strategy.

The fall in the FX price, I already posted on this but I will say it again. The debt is denominated in USD, the revenues denominated in USD. This equates to a natural hedge so falls in AUD don't drive as much favourability as you want. As the AUD falls potentially there is a correlation of a fall in the iron ore price (maybe?)

Management team, the MD is a former big 4 so I trust his strategic approach. I will attend next years AGM and hopefully it is to congratulate them on working through these short term issues, or maybe to cry over a beer. Although it is fair to say a unfortunate project estimate did put them where they are today.

Anyways the biggest risk is the company goes bankrupt and the creditors own the assets. Ansteel do not have to purchase them. However, I am buying whatever I can based on all my assumptions so thank you for selling.

Do your own research because this valuation can go anywhere from bankrupt tomorrow to a double.

Love your work everyone!

Cheers,
The Thunder from Down Under (my new self proclaimed nickname)