Pellet price, page-20

Until January this year, GRR had never pushed past 15c in approx 3 years but was previously above 60c about 5 years ago. i note i have been in and out of GRR for the last 5 years with many profitable trades and have been amazed why 15c was always the stopping point. Earlier last year I had bought a lot under the 10c level and was debating whether to sell and move on or otherwise. Anyway, I decided to put together a spreadsheet to understand why this company could not get beyond 15c and what i worked out is that iron ore pellet pricing was extremely good in AUD in the earlier years but over last 3 years it was quite average and that gave me a better understanding of why 15c was so difficult to breach. My findings led me to believe that GRR was going to push past 15c this time for the first time in 3 years so rather than sell I backed up the truck and also sold other shares to buy as many as i could with a view that I did not want to sell any i already owned and only willing to sell/trade the additional I was accumulating below 20. I have attached a printout of my calculations which is essentially a wrap up of all the quarterly reports over the last 5 years. In the chart you can see that most of the last 3 years the AUD FOB price has been unable to reach above $120- . If you consider that we could be looking at $140+ AUD FOB figure next quarter and a potential return to dividends 2-3c per annum it is possible this time we could be breaching the 40c or 50c mark. I thought I would share this info as i know a lot of people look at GRR and think the price may not be sustainable as it has pretty much doubled in value in 2 months but I believe the show is only just starting and so I continue to hold my original holding and also buy the dips for some quick trades. The only thing that could convince me to sell any of my core holdings is a steep sell off on iron ore and/or a suddenly increasing AUD to USD, both of which will reduce the margin GRR receive. I note that currently based on their cash, trade receivables and inventory being worth about $200 million + (or about 18c per share) that only leaves the difference (currently 7.5c) as company value or about $90 million.

I should also add that this chart starts at the March 2012 quarter and back then the share price was around 60c per share. GRR at 60c = about $700 million market cap. at current AUD FOB prices this company would make over $100 million profit per annum. at 60c, that would be a P/E of about 7 which is still quite low compared to many other stocks out there. I could even see it possibly hitting $1.00 but i take a conservative approach and dont like being too optimistic. Last year I made heaps by cashing in my SLR which I purchased in 2015 below 20 and selling about 3 times that level. Im expecting this year is my GRR year