new target $0.70 Bullish senario:1.14 Bearlish senario:0.28
Investment Thesis
• We believe that the market is yet to
apply full value to GBG’s share of the
Karara Iron Ore Project.
• Our positive view is predicated in the
company meeting reaching its 16Mtpa
run rate during FY15.
• Iron ore remains one of our key
commodity picks despite the recent
volatility, with prices supported by
China’s marginal cost of production.
Key Value Drivers
• The company’s goal is to reach Stage
2 production of 16Mtpa by 2015.
Reaching this goal through on-time
and on-budget development is key.
• GBG is highly leveraged to iron ore
prices, which in turn are strongly
correlated with Chinese construction
demand.
Potential Catalysts
• Stage 1 Magnetite sales due to
commence in September 2012.
• Additional drilling results, resource
updates and studies from its other,
100% owned assets.
Risks to our Price target
• Development risk: The project
remains on schedule, but slippage is
an ever present risk at this stage.
• Currency risk: In relation to the project
budget this is largely past, but the
debt facility required to cover the
overrun is still pending.
• Commodity price risk: Once the
project is operational it will be more
highly levered to the iron ore price
than most peers due to the relatively
high production costs and the
premium it receives to bench mark
pricing.
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