Bottom price in downward cycle, page-12

HI Greatone,

I assume that $6B was RIO'S price for their 58.7% of IOC.

If you look at RIO'S annual report their share of IIC was around 10mtpa total pellets and concentrate combined.

They don't report this with their iron ore Pilbara operations, it's included under minerals along with diamonds etc...

So RIO's stake in IOC production is actually now less than CIA's. Only Arcellor Mittal produces more than CIA in the Labrador Trough, most of which goes to feed their own steel mills.

IOC is also part owned by Labrador Iron Ore Royalty Corp and Mitsubishi. TSX listed LIORC has a 7% gross royalty over IOC sales plus dividends and another $1 per tonne of output and has a MC of $2B due to their almost 100% dividend payout. They have the leases on the land that IOC have their mining ops.

So, it's hard to determine a look through valuation for CIA.
It seems to me that the real value in IOC is not so much it's profit margin but the infrastructure that enables it.
They have the mining infrastructure, concentrator, plant etc.. as does CIA. But they also own a pellet plant, railway to sept-iles and the port infrastructure.

However, its a small bolt on and fairly insignificant compared to RIO's Pilbara IO operations.

As they begin to commit large amounts of capital to ramping up high grade Simandou iron ore, I wouldn't be surprisedif they attempt to offload their IOC interest again in the future.

.