debt debt and more debt vs none

Came across an interesting article;


http://www.smh.com.au/business/iron-ore-bubble-to-bounce-or-burst-20120904-25cj3.html


It touches on issues of the debt held by Fortescue and Atlas, i think MGX has a much more attractive balance sheet and is lower risk play.

I also think arguments against a higher cost base for MGX are flawed by the assumption that other iron miners are de-risked by their cost structures. When taking their debts into consideration, the cost per tonne in my opinion would be higher than is visible.


I pasted a part of the article below:

Jim Chanos back in April will ring in Twiggy's ears. Is it only five months since Chanos rather famously described Fortescue as a ''value trap''? Particularly seeing it came with a stinging kicker that the company was characterised by ''a somewhat promotional management team''.
Chanos punted that iron ore prices were headed south big-time and with it Fortescue's share price.
''Increasingly, with any kind of reversion to the mean of iron ore prices to $US100 per tonne or less, we're going to see a dramatically lower ability to service the debt and to service the capital programs they have. And a stock price materially lower than it is today,'' Chanos said.


Read more: http://www.smh.com.au/business/iron-ore-bubble-to-bounce-or-burst-20120904-25cj3.html#ixzz25aZqqKTl