I've been doing some back of the envelope calculations to work out the potential margin that MMI could make going forward based on the reduced freight costs from both the falls in the Baltic Dry Index (down 50% on October highs) and the move to Cape Class ships.
Comments welcome as I'd like to get this more structured.
In the Sept quarterly, freight costs were $35.05 AUD a ton and MMI lost $5.29 AUD per ton. Management have guided (in the Sept quarterly report) to a saving of at least $10 USD or $13/$14 AUD due to the move to Cape size and this doesn't count the fall in shipping costs that has occurred from late October to now.
Shipments should be between 1.6m and 1.8m tons to hit the range the guidance range of 3.3m - 3.5m.
Based on the above, conservatively MMI are looking at EBITDA of circa $8 per ton or between $10m and $14m in the quarter.
The risks are timing as October freight costs were much higher than November and December look to be so the shipped schedule will be important, and also how long MMI can produce before the wet season.
MMI Price at posting:
2.0¢ Sentiment: Buy Disclosure: Held
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