Iron Ore US$134/tAre RH shareholders recognising the...

Iron Ore US$134/t

Are RH shareholders recognising the significance of the current and forecast IO price? Are the stars lining up for us long suffering RH minority shareholders? Well the IO price is doing the right thing and is now around US $134/t! Some forecast are saying US $140-150/t next year. Do shareholders understand the potential implications if prices stay around the US $134 mark or higher for the next 3 or 4 years?

The RH Scoping Study was based on Platts IO long term forecast of just US $89/t. The current IO price is around US $35/t higher than the forecast price used in the study. If current prices were to remain or improve over the next few years the Blacksmith project NPV could well exceed US $1billion. That extraUS$35/t adds more than an additional US$100m pa (at 3mtpa) on the margin. That is about A$150m which is way above RH’s current market cap for every year that US $134/t price holds over and above the Scoping Study US$89/t long term forecast if we move 3mtpa! Imagine if we can get a few early years at that sort of rate!

Current market cap of RH is about A$110m. Current SP about 61c. So RH could be looking at an annual margin (scoping study margin plus price above scoping study) worth more than A$1per share! At that return what might the SP be? Who likes BIG dividends? Wouldn’t it be reasonable to expect 50+% paid as dividends after capex is paid off?

Can and will RH accelerate their plans to maximise this opportunity? Should RH also plan to increase tonnage pa? Lots of good reasons to move even faster. Lots of good reasons for RH to also secure some hedging.

Will there be an acquisition or will RH go to production? Either is looking good, IMO.

My assumptions and calculations may be incorrect so do you own research and due diligence.