atm there is overcapicity in the chinese steel industry due to overinvestment and there is slow growth in the chinese economy due to lack of large chinese gov stimulus.
over the next few years the weaker steel makers will close up leaving bigger steel mills like ansteel more head room to produce profits.
over the next few years the weaker chinese ore miners with low grade deposits will close up leaving more head room for supplies of imported iron ore.
there is also chinese gov push to close down less efficient and high polluting steel mills.
gbg being connected to ansteel a big gov owned steel mill is in a prime spot to benefit from ansteels perceived ability to survive the chinese steel industry wars.
kml debt wont be an issue as long as the oz$ continues to drop and the ore price stays rangebound at a parity where kml can break even or better.
zhang xiaogang, ansteel chairman expects ore price to be around $110/120 for this year. he also says that new consumer driven products (cars, fridges etc) will provide some new steel growth.
he also said that the new reality will limit chinese ability to make any more big overseas investments.
general concenus is the oz$ will settle to 80c and the long term ore price will settle between $90/100/t
if this is the case then kml will be capable of being a viable iron ore producer long after all the granges and all the rest of the crop of new wannabbes fail to get of the ground due to low grades, no infrastructure, and no chinese funding.
GBG Price at posting:
9.5¢ Sentiment: Buy Disclosure: Held
