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clock Created with Sketch. 24/09/15
14:39
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Originally posted by stockanalysisguru
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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.
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Beautiful analysis guru. Holders won't like hearing it, but these guys are salesman as you said. As far as I can see, strip ratios will start to increase from now. furthermore, the accounting tricks such as shuffling inventories (draw down), borrowing more debt to keep cash constant at $2.4b cannot be repeated as inventories are now low.
(20min delay)