I don't think they can sell it on the open market otherwise they...

I don't think they can sell it on the open market otherwise they would. There is actually no premium on this product, they get pretty much the same price as RIO/BHP/FMG, sometimes less. During one quarter FMG got about $1 less per ton for their FMG blend, which is 58.5%.

You're assessment is not bad Mole, but I think your shipping costs and debt costs are pretty low, the interest rate would most likely be higher (given the marginal nature of the site) and the shipping costs cannot be compared with a major, bigger ships and more bargaining power to negotiate long term contracts. My gut has always said around $75-80/ton is where they're sitting at for all cash costs. Unfortunately I think there is just too much marginal and latent production capacity that can be brought on if this recovery is sustained to see a long term price for IO being above $60/ton, or $80/ton.

It is just not possible to mine three times the amount of ore and then process all of this ore to get the same amount of product and then pay the finance costs on the extraordinary cost of building the capital required to operate such a facility. I'll be writing off the loss on this one at some point this year!! Maybe in 10-15 years time when haematite ore reserves are significantly depleted and there is no more cheap production available then the cost curve can be reset but Hancock, Rio, BHP, FMG and Vale are all sitting on enormous reserves of the stuff.