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re: Ann: Successful Completion of Southdown P... they are big...

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    re: Ann: Successful Completion of Southdown P... they are big numbers to digest....I'm a bit of a conservatist so

    say they spend $4.0bn upfront
    pellet price $115 / tonne AUD
    production cost $90 / tonne (slight blow out on the estimate, plus shipping and royalties which arent included)
    production 6.3 Mt/year (pellet plant operating at 90% capacity)

    net cashflow 157 mil / year

    so we're talking a 20 year payback without accounting for NPV! Doesnt sound good to me.

    However the pellet price is currently a lot higher, so say we replace $115 with $190 AUD and you get a payback four times faster and if they keep the cost down well even better.

    Risks to consider....
    - capital blowout
    - operating blowout / improvements
    - source of funding - debt or equity issue?

    But long-term iron ore price is really what you need to believe in with this project.

    I'd guess there are probably better returns out there for a minimum 3.5bn investment??

    I've done this pretty quick and nasty so would be happy to see someone with a different analysis.

    DYOR.
 
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