I have summarised my assessment of the position of KML at present prices and costs in the table below.
I think the $52.00 sale price includes a deduction for freight. It states the realised price and footnote 4 states that freight by KML, so I think the freight price is deducted from sale price to arrive at $52 realised sales price.
KML has loan of $1.481billion plus a new facility of $300m. If we allow 3% interest annually $53m. This is very low.
Remember there is also about 2m tonnes of DSO. I have allowed $30/t sale and $25/t cost.
My figures are as follows.
Column 1
Column 2
Column 3
Column 4
0
million t
Sales
TOTAL
1
Annual production
7432
$52.00
$386,464,000
2
DSO
2000
$30.00
$60,000,000
3
Total Sales
$446,464,000
4
Cost
7432
$59.00
$438,488,000
5
Hematite
2000
$25.00
$50,000,000
6
Costs
$488,488,000
7
Loss
$42,024,000
8
Interest
$53,439,600
9
Royalties
9432
$3.00
$28,296,000
10
TOTAL LOSS
$123,759,600
To break even the sales price has to be a minimum of $68.85 per tonne.
I have not included depreciation into the calculations and given the cost was $2.7b depreciated over 30 years simplistically adds another $90m pa to "costs". If that was included it would add another $12 per tonne. Total accounting losses probably $US220m per annum
So sales price of $US80. is the benchmark. If I remember correctly at one stage during construction hematite was $275/tonne, so no need to be economical on the construction costs! - only ran over by $1.2b.
KML cannot get down to BHP, RIO or FMG as they have huge processing plant.
If you want to know the sales of hematite look at Grange Resources (ASX GRR). The only difference between GBG and GRR is that GRR produce pellets. Unsure whether this is better price wise.
GBG Price at posting:
2.0¢ Sentiment: Hold Disclosure: Held
