up 25 percent, page-13

Would have to agree that valuing Iron Ore is a bit of science mixed in with a bit of magic.

Underlying the assessment of the "worth" of a deposit is the current contract price for Fe.

It is rumored that Fe in this years round of negotiations is going to be fixed for contract at around $US2.20 per "unit", where a unit is 1% of Fe.

Now, not to cloud the issue, but spot prices are currently in the order of $US3 per unit, but Im sure you'd want customers locked in before commiting some hundreds of millions of dollars to a project rather than be a swing producer like the majors.

So, back to units, generally Aussie Haematite Iron Ore runs in the order of 55-60% (thats 55 - 60 "units" or $US120 to $US130 per tonne).

Now, If you were setting up a project of 10M tonnes a year, you'd be looking at capital costs, production costs, transport costs and all those other things to be taken out of your $US120-130 per tonne.

So... capital costs... road? rail.. $1M per kilometer if its not already there

Plant costs? $5-10M per 1M tonnes (its pretty basic crushing and screening after all or the project wont work)

Mining operational costs $10-20 per tonne or more..

Transport costs (if you include shipping) about $20-30 per tonne.

and then of course, theres the penalties if the Iron isnt top quality (ie too much phosphorus or sulphur or silica in the ore) minus x percent per unit.

so 126M tonnes... how long is your string from the mine to the smelter? but lets say... capital cost of $500M, operating costs of $500M per year, 12 year mine life..

anywhere from $1B to $4B total,

say $50M profit a year up to $200M a year, and for a direct analogy to RSL, I'd be looking at TTY and how their operation of about 1M tonnes a year is performing financially.



cheers.