FMG Technical Analysis, page-849

Dazza, I think part of the reason FMG's current costs are so low is due to the fact that most of their infrastructure has probably been depreciated/written down. If FMG had to lease the infrastructure they own and pay market rent to a third party, I am fairly certain they couldn't achieve anywhere near a cost of $12.50 USD per ton.

The budgeted costs on the new mine, I imagine are much higher due to the depreciation on the new infrastructure to be built. I could be wrong but that's why I wasn't concerned when I saw the higher costs of $42 per ton. I would imagine this cost per ton would reduce when depreciation on the new infrastructure starts to decrease over time.

Whilst depreciation is good from a tax perspective and assists with reducing reported cost per ton mined over time, it also results in the balance sheet not properly reflecting the true value of the infrastructure which the company owns. IMO the assets in the balance sheet are undervalued due to the historic depreciation charge and the current reported cost of around $12.50 USD per ton is also understated due to historic depreciation.