is mgx misleading market ?

Today's Weekend Australian reports that miners "mislead market" on costs
by saying that the costs of production are away below the spot price of the commodity while making minimal bottom line profit.

The article cites FMG's profitability being called into question in September even though the IO price then was $90/ton and FMG's reported cost was $45/ton. The article further quotes Glyn Lawcock of UBS saying that AGO, GRR & MGX "slipped into loss-making positions during the Iron Ore price fall despite reporting operating costs well below the spot price of the time".

IMO the best way to cut through the details is to :

- (a) Divide the NPAT by the tons sold to get the net profit/ton
- (b) Then subtract the net proftt/ton from the average sale price/ton

That will give genuine cost and if the sale price drops below this value
(all other things being equal) then it is reasonable to assume that the
company will be in the red.

In fairness to MGX since Sept it has reduced the workforce by 270 workers,
that costs for the increased stockpile were included in the Sept Qtr report
and that the rail/loading bottleneck has been resolved.

I guess that the Dec. Qtr report will tell the tale because the cash in the till
will either go up , down or stay put.

Cheers
Moorookamick