gbg - cost basis and break even

Below Tim Netscher has gone on record stating the cost breakdown at Gindalbie. This shouldn’t be a surprise to most long termers.

http://www.businessspectator.com.au/article/2013/6/11/markets/markets-spectator-gindalbies-protest

This is my calculations (correct me if I am wrong)

Nameplate Production is 8,000,000 tons per annum.

Iron ore price between $110 - $120US/ton

assume $110US/ton and 20% bonus for high grade

Therefore Revenue is 110 x 1.2 = $132 per ton

Shipping costs are 5%, assume the $132US/ton higher figure

Therefore shipping costs are 0.05 x 132 = $6.6US per ton

Production costs are $72 – 76US/ton, assume higher figure therefore $76US / Ton

Profit per ton = $132 - $76 – 6.6 = $49.4US/ton

Based on nameplate 8,000,000 Tons

Profit = 8,000,000 x 49.4 = $395.2 Million per annum


Sensitivities based on iron ore price:

What is the lowest iron ore price that GBG can manage?

($76 + $6.6) / 1.2 = $68.83US per ton (divide by 1.2 to account for 20% grade bonus)

All this does not take into account repayment of initial capital expenditure costs. I am also assuming that all reliability based capital improvements (Regular CAPEX) are accounted for in the production costs.

I expect the company to capitalise the initial capital costs to manage depreciation and tax, does anyone know how long the capitalisation period would be, 10, 20 or 30 years?

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All the above is my opinion only.