West coast thanks for your kind words just taking a top down rational approach. I have followed AGO for many years from its humble beginnings to its super cycle pinnacle at $4. Plenty of shorting indeed, it has already crippled the coal sector and word is that iron ore price may keep falling to the $50s which would be a feeding frenzy for the manipulators and bots.
Yeatesy great post. Current Scenario - I take on the fact that lower FE content would reduce AGO top line however with $A expected to reach 80c by year end a tradeoff against the $4/t current loss on grade will result in a breakeven event given that the ore price lingers around $70.
Worst Case - Iron ore drops to $50-60. AGO have the capability to scale back H1 and ride out the cycle. H2 will be placed on c&m. Many producers will shut shop.
I am not even contemplating the operations of NWIA and H2 at this point in time. This expansion along with the rail deal will only take place in the next wave of the cycle when demand begins to pick up. Management's short term focus should be to control H1 costs and utilize the most optimum mines in its H1 pool. Utah Point is the focal point - AGO could even lease out its capacity if it does decide to cut back production to those mines that are running at an optimum operating cost.
Also I do not factor in depreciation loss of $15/t. This is a stat result and not cash. With all due respect to ER6N the calculation of a companies fundamental earnings is driven by EBITDA .
This is a robust company priced at IPO levels. It's a waiting game. China and India require infrastructure to support their billion plus population. Global growth will continue. DYOR guys only invest what you are prepared to lose.
AGO Price at posting:
20.0¢ Sentiment: Hold Disclosure: Held
