fmg the lehman of the commodities bubble?, page-23

Commsec (ie Aspect) has 6 strong buys and one hold. That's very positive. But analysts almost uniformly had it all wrong re BNB, Allco, etc and all those stocks that were supposedly all fine because their debt loads were OK (i.e. not 1987 levels). But they WERE 87 levels because the analysts all assumed there would always be debt available - until the 2007 crash humiliated them.

The Anaconda model was similar to FMG in that it was a scale exercise. But it crashed due to technical problems (i.e. processing), which in the end meant costs too high. Analogous with FMG. Massive scale relying on high prices (not low costs).

I think FMG will survive. It is the absolute dogs that are pretending to have magnetite that will fail any moment (those nano-tiddlers like LCY).

But I think iron ore at $80 is still way too high. FMG has enough scale and cash (if it can hold off its lenders) to buy out the next tier down (AGO etc) and reduce its costs or improve its grades. It will come out of this solvent but at a much smaller cap.

Forrest learned enough from Anaconda to get through this time.