cashflow positives, page-3

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mwilson25

2,650 Posts.

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07/05/17

11:59

Post #: 24523797
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Originally posted by Clements ↑

At the end of the day, AGO is still highly cashflow positive at US$50 which I believe is roughly where the 58% IO price is ATM (unless I'm missing something). Basic cals: US$50 equals $AUS68 (at 0.74) and full cast costs for this half are estimated at $AUD56. There's $AUD10 in the margin and based on a 8,000,000 million tonnes being shipped that's still $80 million cashflow. Worse case, allow for another $2 on increased ship costs and that's still $AUD64 million. It's no BHP but there's minimal debt compared to the rest. FMG can't pay it's debt off in one year but AGO now can - even allowing for CD capex. Based on 10,000,000+ tonnes shipped over a full year, we're talking $100 million cashflow and approx. $60 million free cashflow for diversification. Breakeven appears to be about US42. I'd also note that unless AGO has unwound its forward puts for this half (already), it'll make a big gain on these when it does realise - and that's real cash - so expecting a good half result despite the low price. Sentiment is horrid but the balance sheet looks solid and price highly undervalued. Expecting a rerate in July when options completely disappear and the June results are out.

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My view is that IO trading in the $65 to $75 usd range for 62% is the goldilocks range. Good profits for AGO at this level by your analysis, even though we must accept a discount for our lower grade. Should keep the very high cost producers out of the market at this level.

Personally, I think it is not so unrealistic to believe that IO may steady in the above price range. I am hoping/believing that the many positive signs on China and world growth can keep the price from falling to some of the doom and gloom forecasts being shopped around by the AFR and others.

Go IO, Go AGO, Go Trump.

AGO Price at posting: 1.3¢ Sentiment: Buy Disclosure: Held
5 Upvote

0 Great analysis

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