Ann: CISA Conference Presentation, page-4

eyeswideopen and rvm I think you need to have a closer look at the financials. The $2.4Bn cash balance includes $1.2Bn in prepayments (i.e. cash received in advance of providing ore which will incur future costs). Their net assets actually decreased in the FY15 year, with debt increasing. And that happened in a year which had a higher average iron ore price than current prices. Also their cost of servicing debt has now increased compared to last year. Their presentations seems very salesy, front page they put $18/t as their cost, when they have not ever actually achieved that, it is their FY16 guidance which may not be met. They should be putting their actual achieved costs front and centre. In FY15 they ran down their inventories by year end to increase cash, that is a one off which they can't do again. Their customers will be less willing to continue with the prepayment system as fmg's creditworthiness declines, unless they offer a bigger discount which will decrease revenues.

So they have almost $6 Billion USD due for repayment in 2019. Current cash (excluding their prepayment liability) is $1.2 Billion USD. They need to therefore generate $4.8 Billion USD in free cash flow by 2019 to make those repayments. That equates to $1.2 Billion USD in free cash flow per year for 4 years. In FY15 they had virtually zero free cash flow after paying dividends, interest and capex. Iron ore price is currently lower than the average FY15 price and looks set to stay that way for a year or two.

Their stated net debt position of $7.2 Billion USD, or $10.3 Billion AUD, while huge, is misleading because included in their cash balance is $1.2 Billion USD of prepayments (cash received in advance of providing ore) so their real net debt position is $8.4 Billion USD, or $12 Billion AUD.

This is why they are looking at asset sale options. I'll grant you that if they were able to sell all their assets in the next 2 years at book value you will make a good return from here, as they are trading 40% below book value. The market is saying their assets are not worth their written down value. Twiggy is a good salesman if he can sell something substantial ($3 Billion USD +) for book value or more in order to reduce debt then he will have pulled a rabbit out of the hat and this stock would have a brighter future. As it stands with Roy Hill about to come online FMG is going to come under huge amounts of pressure over the next 12 months.

All imo dyor