Ann: Half Yearly Report and Accounts, page-55

Be careful not to mix up revenue / profit with cashflow. Many of the things you mention are Income statement related and should be accounted for as an accruals basis, for example, the receivables balance from December (yes thats great for cashflow, but doesn't change the income statement), likewise your comment on December hedging. That will already be in the income statement.

I think its almost without doubt that the Iron Ridge project will deliver more in the 2nd half than it did in the 1st half due to increased iron ore pricing and also increased shipments (if they generate the 6 loads that you mention), but the reason I'm not as bullish as you, is partly around pricing, bear in mind that the hedging levels seen in H2 really did prop the Income statement up. The hedging strategy paid significant dividends in the 1st half, so the increase in IO will have a lower impact on the 2nd half than what we see in spot pricing.

If you take a look at the 3 contracts they have, in Q1 they had a contract for 50k tonnes per month at $230.30 / dmt. Then added 35k tonnes per month in Q2 at $180.66 / dmt (this hedge continues throughout all of the 2nd half). They've since locked in a further 15k tonnes per month for H2 at $156 / dmt.

The impact of that, is they had locked pricing in for H1 for 255k tonnes at an average of $209.86 (150k @ $230.30 and 105k @ $180.66) compared to 300k tonnes locked in for H2 at an average of $173.26, so the spot price needs to rise just to offset the reduction in hedging gains, which is 1 reason I'm less bullish than you on the next period. If you look at that in $ terms, thats 255k tonnes sold for proceeds of $53.5m, but the new hedging arrangements are for 300k tonnes for $52.0m, so more tonnes shipped for less revenue, hence why the spot price needs to increase to offset. They may get there, but the sensitivity of their results (due to the high cost structure) to the IO price if very high. In order to get near the $20m NPAT that you mention, they would need spot prices to average around $170 / tonne, which they may manage, its at that level right now so hopefully you are correct.

The other thing that concerned me was that the $7.8m "gain" on acquisition (which I'm not sure will pass accounting tests as its all dependent on an intercompany Intangible) will not be in the next results, so the improvement in bottom line needs to come purely from Iron Ridge. Sales volume increases will be needed for sure (those 6 sailings) but also IO price holding at current levels for the full 6 months.

I hope I'm wrong for the sake of those here still invested and I look back and wish I'd held but if I lose confidence in a BOD's I sell. Its burnt me in the past not doing that, so its a fairly hard position I take on this now.