This one's for oscarWon. Please explain how AGO is going to deal with a company like BHP and others like RIO selling at ridiculous prices. BHP sold 1 million tonnes of iron ore last week at a price it would cost AGO to produce.
If you are an astute investor which i know you are it would do you no harm to call AGO tomorrow and ask them how much it costs AGO to produce 1 tonne of iron ore. Then you can apply your "maths101" formula to AGO's valuation.
Published 2:52 AM, 20 Nov 2008
Terminal Expansion Faces Hurdle As Ore Sales Fall
Plunging prices for iron ore have complicated BHP's Port Hedland terminal expansion, which is needed to convince the European Commission that the miner is serious about increasing production to meet customers' demand faster, whatever the market conditions, the AFR reported.
BHP must approve the $10 billion outer harbour expansion so that it can achieve its growth plans, but that would require it to commit to a huge outlay of capital spending at a time when it has admitted iron ore sales have plummeted, the paper said.
The miner said it was completing a pre-feasibility study for the expansion project in June, but the paper reported time was running out for a final decision.
Meanwhile, BHP has continued to sell iron ore on the spot market at prices that are significantly less than contract rates.
Mining sources told the AFR BHP sold one million tonnes of iron ore at less that $US60 a tonne at the end of last week, while another lot of product was sold at $US50 a tonne this week.
The paper reported that by flooding the spot market, BHP was giving Chinese steel makers reason to expect a big decrease in the benchmark price for iron ore next year.
AGO Price at posting:
55.0¢ Sentiment: None Disclosure: Not Held
