GRR vs MGX, page-8

I tend to agree with your last two statements, hence why I have been reducing my position since the June quarterly was released, and have sold out of my last clip today.

Rather than in terms of price-to-book ratio, I tend to think in terms of price to NCAV (NCAV = [Net Current Asset Value] = [Current Assets] - [Total Liabilities]) and monitor the dynamics of NCAV over time. Because full balance sheet data are published only semi-annually, a way of monitoring NCAV dynamics is by looking at quarter-on-quarter differentials in the aggregate value of [Cash]+[Net Receivables]+[Stockpile]. Having adjusted for the dividend payment occurred in September, the figures from the quarterlies show that the Company has hardly increased its NCAV over the past five quarters.

Now, the average realised (FOB) pellet price over the fifteen-month period has been around 87A$; the fact that NCAV has not changed over the same period means that the average all-in cost (inclusive of capex, corporate, etc.) has also been in the neighbourhood of 87A$. We are talking about a relatively long period of time, so that quarter-specific issues such as one-off weather/capex/maintenance items do not distort the figures (or if they do, then they are not really one-offs).

This means that a) the Company has yet to prove that they can sustain all-in costs of 80A$ or below (which is what I used to base my expectation of 5c/share/year Free Cash Flow on) and b) the Company needs a CFR pellet price in the region of 100A$ to break even.
Yes, it can be argued that there is an expectation of all-in costs dropping significantly going forward, driven mainly by an expected reduction in capex, but having seen the last two quarterlies I now want to see it happen, before being prepared to pay a premium to NCAV for the shares.

That being the case, and given that the Company has been trading at a small premium to NCAV over the past couple of months, I decided to reduce my position first and then get out altogether (after the last quarterly). I got in at a 30% discount to NCAV and collected a dividend along the way, so it has still worked fine for me, but holding on to a large position (for my standards) in absence of positive NCAV dynamics at elevated pellet prices started feeling speculative to me (or at least no longer ticked all my boxes for an "investment-grade" proposition). Might get back in, depending on were pellet prices are, if the SP goes back to a steep discount to NCAV, or if there starts to be some evidence of FCF-generating capabilities.

Cheers, and good luck to all holders. IMHO+DYOR.