Roy Hill is certainly higher than the cost curve than FMG, but importantly contributes to bringing the higher end down. The steepness of the curve matters as does the ease at which new supply can comes on. The Lt equilibrium price is an inexact science but still the best model the industry and analysts have.
On the demand side, both BHP and Rio have moved away from the McKinsey driven peak China Steel demand. Both would also prefer more copper than more iron ore as the Chinese move to consumption accelerates.
The FMG/BHP thing sounds absolutely out there to me in terms of practicality and likelihood and my understanding of the industry, but will leave that alone beyond that. As I posted elsewhere FMG has certainly carved a lot of value out of BHPs/Rios/WA govt value pie.
Genuine question: Were you a true believer on the Sinandou project or did it feel nice on PowerPoint, but never deliverable?
Happy consulting - you sound like you have a lot to offer.
FMG Price at posting:
$6.26 Sentiment: Sell Disclosure: Held
(20min delay)