The 'elephant' in the room that Bell Potter seem to have omitted in their financial assumptions on page 20 is sea freight costs.
They have the C1 costs at US$45/t
They have AISC at US$14/t (high start-up costs loaded onto initial FY2024e 2.7 million tonnes sales)
Therefore total FOB cost US$59/t
They have assumed US$95/t realised price for GEN's product in 2024 & therefore US$36/t or so profit margin x initial 2.7 million tonnes sales FY2024e for EBITDA approx US$100M.
This is a reasonable forecast but where is the sea freight costs in their calculations?
If China is the main customer for GEN's product, then currently the Capesize rate is the same as the C1 cost of U$$45/t.
This is the rate from Brazil to China (C3 rate) currently & **on would be the same distance by sea to China.
https://en.sse.net.cn/indices/cdfinew2.jsp
Shipping is currently at a 13 year high, so likely will come back down significantly by 2024.
However, It is also best to assume 62% Fe price in 2024 at US$80/t as per Fosters report.
Right now half of CIA's total costs is shipping & it's hitting their profit margin as much as the iron ore price.
In summary, GEN's PFS will have to accurately assess the long-term Capesize rate as this is as important as any IO price assumption.
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