- It's not enough for the project to just be 'profitable.' To be worth the risk of investing billions in an African project run by a one project company (i.e. no other cash flows or spread of risk), the project needs to be spectacularly profitable. There needs to be a risk premium, one which may not be large enough with IO trading @ $70p/t and below.
- You are assuming IO prices won't fall any further. Many are predicting greater supply gluts in 2015 due to even more production coming online from the majors. If Chinese producers don't exit in droves because the Chinese want the glut (and low prices) to continue, prices at some point in 2015 may drop into the 50's.
Sundance001 is correct, Chinese IO demand has grown year on year, and is again predicted to do so next year. As I have been unsuccessfully trying to beat into Matt747's head though, when supply growth is larger than demand growth, the price will still fall. This is again tipped to be the case in 2015 as further big 3 projects come on line, as well as Roy Hill.
IMO, strap yourselves in for a bumpy 2015. I sold out of EQX because I don't think there will be any action on that stock for a while. At least they have $40m in the bank though, and a cash burn that can be reduced to $500k per quarter. I'm more worried about SDL because it doesn't have cash reserves to keep it afloat for 12-18 months that may be required before the worm starts to slowly turn.
Good luck!
SDL Price at posting:
2.4¢ Sentiment: None Disclosure: Not Held