Iron ore price, page-3417

Tangshan is plan to close half of pelleting plants this Chinese winter, which caused the premium of pellets to sky rocketed.

65% Pellet Premium over 62% Fines:
- 2/5/2017: US$14
- 1/6/2017: US$22
- 3/7/2017: US$28
- 1/8/2017: US$29
- 1/9/2017: US$33
- 29/9/2017: US$50.5

According to Vales FY 2016 Report, this is their pellet numbers:
- Shipped 47.709MT
- Revenue US$3828M
- Cost excl. Interest/Tax/D&A US$2002M or US$42/T

Current pellet premium of US$50.5 means 65% pellet price of US$110+.

If FMG‘s 20MT mine is approved, and assume same cost as Vale, (Vale has higher shipping cost but FMG would have higher energy cost and lower volume, Vale‘s D&A for pellet was US$7.10). We are looking at potential margin of 110-50=US$60 per ton, or NPAT of US$800M+.

And that is just 20MT, imagine replace 50MT of Hematite with Magnitite, at current realised price around US$40 for FMG‘s Hematite, NPAT could increase from US$1B (170MT Hematite) to US$3B (120MT Hematite + 50MT Magnetite).

This will easily increase SP to $10+.

DYOR.

Frank.