Back of envelope calculation: [1] Current quarter's cashflow The...

Back of envelope calculation:

[1] Current quarter's cashflow

The average AUDUSd for this quarter now stands @ 0.7579
The average Iron Ore price for this quarter now stands @ US$65.36

Basis of calculation: Average Iron ore index for Dec quarter was 63.48 as on 18th Nov as per Metal
bulletin, I've added daily prices in to average and calculated current average.

Which means Average iron ore prices for this quarter in AUD is AUD$ 86.25 and average realization for AGO after 20% discount stands at AUD$ 69. Lets assume the IO average for December will be USD$71 (current market price USD$80.83), then Average realization for AGO after discount for this quarter will be around AUD$71.


Possible Cashflow for December Quarter = 4MT * 20 (Realization AUD$ 71 - AUD$ 51 cost)  = AUD$80M

[2] Cashflow from March Quarter

If AGO hedge entire production for March quarter using futures then average realization will be around AUD$70 - AUD$75


Possible Cashflow for March Quarter = 3.5M * 20 (Realization AUD$ - AUD$ 55 cost) = AUD $70M


Cashflow position:

Possible total cashflow at 31st Mar = 150M (80M for Dec + 70M for Mar)
Cash in hand = 90M
Total Debt = 180M
Future mining development cost for Cronnua = 50M

= 150 + 90 - 180 -50
= -$10M

Conclusion:
Undervalued stock.