Hey The Mole, You need to re-include the cost of Ocean Freight...

Hey The Mole,

You need to re-include the cost of Ocean Freight in your calculations. You need to read the fine print in the QTLY, GBG are paid on a CFR basis which means the price they receive does not include the cost of shipping and they have to pay this. The C1 cash costs only include the cost of getting it to the port of Geraldton and any associated admin costs.

'For the December 2016 Quarter, average magnetite C1 unit cash cost (mining, processing, maintenance, rail, port and site administration) excluding depreciation and amortisation, corporate administration, sale, royalties, ocean freight, interest and financing costs was approximately USD(1) 52 per WMT'

'The average realised CFR (4) price for the December 2016 Quarter was approximately USD $83.05 per WMT (5) on a provisional basis (September 2016 Quarter: approximately USD $59.93 per WMT).'

'(4) Cost and freight (CFR) indicates that all costs related to transportation of goods to a named port of destination are paid by the seller of the goods.'

Your previous analysis was right on the money, I think GBG is sitting at roughly break even excluding depreciation etc and the unknown cost of ongoing capital requirements.

The highlight of the QTLY are the significant uptick in production, above nameplate capacity, although we need to see this for more than a quarter as most plants nameplate is higher than annual production as maintenance and shutdowns are calculated into annual production but not nameplate. The reduction of C1 cash cost is good however, I do not think it can actually get much lower as they're mining three times as much, processing three times as much and are a much smaller outfit than the majors. This may be more to do with Fx and 20% more production reducing the fixed price elements rather than actual cost savings or improvements in efficiency. Regardless, it's nice to see and if they can maintain the increased output then it is sustainable.

It will be interesting to see the avg price for FMG et al for the quarter. For Sept FMG received $48 vs GBG $60 therefore a 25% percent difference between low grade ore and high grade magnetite. However, FMG had a C1 of $13.5 vs $61, so at these prices FMG et al are making a motza and GBG is just surviving!!