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?
--------------------------------------------------- All the above is my opinion only.
GBG Price at posting:
13.5¢ Sentiment: Buy Disclosure: Held