iron ore price settled, page-7

SEOUL, May 27 (Reuters) - South Korea's POSCO (005490.KS) will follow its Japanese peer Nippon Steel and accept a 33 percent cut in iron ore prices, sources said on Wednesday, a deal that moves the agreement one step closer to being accepted as a global benchmark.

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSSEO27343120090527

Article from: The Australian
RIO Tinto has settled iron ore contracts with Japan's Nippon steel, agreeing to a 33 per cent drop for fines and 44 per cent for lumps.

The mining major said today under the new agreement for its Hamersley products, the price for fines will drop from US144.66 cents per dry metric tonne unit, which reflects a common base measure of iron ore content, to US97 cents and from US201.69c to US112c for lump.

Iron ore is sold on a percentage basis, which means the new prices settled equate to around $US72.50 a tonne on a normalised figure including freight, which is still above the spot price of around $US67.50.

Rio Tinto iron ore chief executive Sam Walsh said the settlement was a realistic outcome for both parties.

http://www.theaustralian.news.com.au/business/story/0,,25540635-643,00.html


Looking like a benchmark is being established. If AGO strikes some similar deals for its ore coming online the near future is looking rosy.

Say

US $72.50/T ($Au94.15/T)
Opex quoted ~ $Au40/T
EBIT $Au54.15/T
6MT/year (2010) = 54.15*6 = $Au324.9M EBIT
324M/302M shares = $Au1.08/share
PE 5 = $5.38/share

Just my crude musings but still looks good. Feel free to correct me as necessary