Hey DDzx
I like your work! Someone who understands the numbers!
We all knew that TTY's Frances Creek mine is a relatively high cost mine $69 per tonne is around the ave for any magnetite miner, so no different there to the Granges, Gindalbie(going live next year).
One thing to remember, is that this $100 per tonne is going to be the low point in this latest cycle. Have a read of the article below.
The Indian Govt is again looking at increasing taxation on iron ore exports, which will reduce supply. Their local steel industry is actually calling for an outright export ban of iron ore to China, however this is highly unlikely. If they do, in future years, ever decide to ban the export of iron ore, the spot price should rise to $280-420 per tonne.
Word around the traps is the export tax will rise by the end of 2010 to 30% from the current 20%. Which will result in supply of iron ore being redirected to internal infrastructure use.
We are also seeing the Chinese govt beginning to increase lending again, the first time since early April. They have also been pulling back orders of iron ore from Australia, Brazil and India over the last 3 months, and using existing inventory in China.
THE MOST IMPORTANT THING is that they actually mined the highest amount of iron ore from within China in its history. Trying to substitute Australian and Brazilian iron ore with their own, to help to reduce the spot price for Q4 2010. (Basically their busiest period of the year) Their wet season is coming to an end over the next month, by September, they will come back into the Sea Borne Iron Ore market, and watch for iron ore prices to hover between $120-150 again in the spot market.
TTY's cash cost is $70 per tonne, as you correctly stated.
If they continue to produce 2Mt per annum $135-70 = $65 per tonne Gross Profit. x 2Mt = $130,000,000 profit!
In terms of their JORC compliant resource, the Indicated Tonnage is sitting at 7.1Mt @ 59.3%Fe as at April 30th 2010. Now we all know Indicated Resource is a very accurate measurement. They have produced 565,000 tonnes of ore during the quarter, so this resource should reduce to approx 6.4Mt @ 59.3%Fe. TTY will release an update in August 2010. At this rate, without any successful exploration, they will be able to continue to sell iron ore for the next 11 quarterly periods or 3 and 3/4 years. WHich we already knew.
They have already stated that they do have iron ore below the existing mining pit, but at lower concentrations and higher sulfer levels that werent economically viable to mine. With world demand for iron ore keeping prices above $100 in Q32010 and above $120 in Q42010 onwards, this now becomes a viable extension of the existing resource!
Go TTY!
http://www.steelguru.com/raw_material_news/Spot_prices_for_Indian_iron_ore_likely_to_break_silence/156306.html
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