Ann: BMX pre-auction bid, page-156

@pastperformer

A sensible contrarian point of view, somewhat rare on these threads. Thank you for bringing some evidence and logic based analysis to these boards. It’s views like this that provide important balance.

I would however challenge that view based on some of my own assumptions:
1. PLS is still a growth and expansion company with significant capital spending power. I’d challenge that the P/E ratios attributed to more established, high yield dividend paying miners are the right comparison points

2. Contract prices are lagging spot prices by around 3-6 months at least, which suggests that even if spot prices start heading down in the near term there is a very long lead time before contract prices retreat back. Same thing is playing out at the moment but in reverse.

3. PLS are at the stage of the mining cycle where they don’t care about the costs of mining. In the same way FMG in the early days didn’t really care about the cost per tonne to get iron ore out of the ground when it was fetching north of $150/t. At some point they will care about cost and will bring it down. Once upon a time I remember them mining at closer to ~$80/t rather than $20/t. There will be room to move down the cost curve to prop up margins as the operation matures and scales -but I acknowledge pricing is the more sensitive factor.

4. Linked to point (1), PLS is looking to diversify and move across the value chain and put its cash reserves to good use. Depending on what you want to believe about return on capital, a billion dollars put to good use could generate you strong annualized returns.

5. Depending on where you believe the AUD/USD exchange rate is headed, that could factor into calculations

6. The supply / demand equation also has swing potential

7. I expect the plant capacity will increase over time and PLS will be selling more for less but still generating significant returns in aggregate absolute dollar terms.

I’m sure there are other points that I may have missed. Things may not play out per the above, but this world is based on assumptions and educated guesses. They are just some of mine.

Thanks again for bringing constructive (albeit unpopular) views to the table.

IMHO - DYOR - GLTAH