Ann: Agreement for Construction of Very Large Ore Carriers, page-29

the rubberiness likely comes from the opaque world of shipping costs.

the index price is an FOB (freight on board) price, where the buyer pays for shipping

- so $89.30US/t FOB for 62.5% Fe FOB was overnight index price. FMG gets between 8-14% discount on that price because they have lower grade iron ore.

For my earlier calculation i averaged the entire 155Mtpa at 12% discount - ie $US78.58 / tonne

FMG produces at $US72/t inclusive of its interest and sustaining capital costs.

So the margin would be $6.58/t FOB

But where it can get complicated is CFR - thats where FMG pays for shipping the ore - but price received is obviously a lot higher to compensate them for that cost.

This is an area notorious for deal and kickbacks and with arbitrage opportunities for the shipper./

I dont know the current rate but it is likely FMG can make a few extra dollars per tonne through management in this area.

But it is also very fluid and can go against you - so in any long run set of assumptions i think its safest just to assume no margin for it.

esp with oil prices up. but this is also why FMG is taking those super large ships.

But anyone telling you FMG has a $US25 margin at $US90/t 62.5% Fe is wildly inaccurate at current AUD/USD rates.

I doubt CFR earnings would average more than $US3-4/tonne over any long term basis - or the CFR rate would fall as competition closed the gap.