On the revenue side, if the iron ore price is at US$80/dry tonne, AGO doesn't actually receive US$80/t. You have to back out:
- moisture content to convert wet tonnes to dry tonnes (off the top of my head around 5%)
- Fe adjustment for the fact that AGO's ore content is approx 57.5%, not 62%
- Fe quality discount
- contaminants discount (eg Si, Al, P, S etc)
So potentially you could slash a further US$10-25 a tonne off the actual price received.
On the expense side, what about adding to your costs, for the purpose of guessing NPAT:
- cost of shipping to China (unless the quoted all in cash cost is on a landed basis)
- depreciation expense?
- interest expense?
- amortisation?
Once you do this, you get a more accurate picture.
AGO Price at posting:
37.0¢ Sentiment: Hold Disclosure: Not Held
