Pretty sure that there is actually 2.6Mt subject to some form of forward sales. Correct me if I'm wrong though. I interpret the below statement to mean that AGO expect to receive a price for their forward sales that is equal to their received price in the previous quarter (~A$70/WMT)
“Atlas is well-positioned to continue this performance in the March 2017 Quarter due to hedging contracts in place for many of this quarter’s shipments at prices equivalent to those realised in the December 2016 Quarter."
This would leave at least 1 Mt of product to be sold on the market. Assuming IO averages US$$84 for the quarter and allowing for discount and the increase in exchange rate (I think the negative impact of the discount, profit share etc will be ~ equal to the positive effect of the exchange rate meaning AGO receive A$84/WMT ) it would be fair to assume that this quarter will generate around an extra A$14m (84-70 *1,000,000)
Therefore, I'm expecting A$70m +/-7.5m cash generated this quarter. (a$56m as per last quarter plus additional $14m from higher spot price).
Thoughts?
"To assist in managing volatility in iron ore price Atlas has continued to hedge a portion of its forward production. At the date of this report, Atlas had swaps for approximately 1.5M WMT of March 2017 Quarter sales and 0.6M WMT of June 2017 Quarter sales at an average 62% Fe equivalent level of A$96/DMT. This compares to the A$94/DMT 62% Fe average price for the December 2016 Quarter.
In addition Atlas has approximately 0.5M WMT of fixed price sales at US$61/DMT net to Atlas and cap/collars comprising 0.6M WMT with an average 62% Fe equivalent put price of US$51.50/DMT and a call price of US$62.5/DMT."
AGO Price at posting:
4.7¢ Sentiment: Buy Disclosure: Held
