jgroenheide, I suggest you should perhaps re-read the...

jgroenheide, I suggest you should perhaps re-read the announcements.

'For the December 2015 Quarter, average magnetite C1 unit cash cost (mining, processing, maintenance, rail, port and site administration excluding depreciation and amortisation, corporate administration, sale, royalties, ocean freight, interest and financing costs) was approximately USD1 $59 per WMT (September 2015 Quarter: approximately USD $58 per WMT).'

'The average realised CFR4 price for the December 2015 Quarter was approximately USD $52 per WMT5 (September 2015 Quarter: approximately USD $56 per WMT).'

C1 cash costs = $59 US WMT exc CFR
CFR = $52 US WMT

Total cost = $111 US WMT

Unfortuntely mate you have added together the sale price and the C1 cash cost price. Pretty hard to make a relevant financial analysis when you are adding the wrong numbers together.

What you should have been discussing is how much the CFR costs are? I think with the debt load on this puppy (interest), royalties and shipping they're probably around $20/ton. You're still right that costs are still exceeding CFR realised price, but we need some accurate data on the CFR costs to make a fair assessment. The C1 cash costs need to come down at least $20/ton for this thing to even stand a chance at current prices and for long term survival they need to be at around $20 a ton, ie. they need to shave costs by $40/ton or 2/3. The premium they receive on the ore is just not good enough to warrant this ore being twice as expensive as any other producer (currently four times as expensive as the big four). Rio, BHP, Vale and FMG can all bring extra production online at a fraction of the capital price/ton and a significantly less C1 costs than KML is currently mining at.

A worrying trend noted in the comment above is that C1 cash costs actually went up for the quarter!!!!

My only suggestion is that they bring an experienced mine manager from FMG and show these guys what they need to be doing, if it can be done. Couple that with a great process engineer to fix that processing end once and for all and they may make it through.

My underlying feeling is that when you have to mine 2.5 times the amount of ore and process that 2.5 times the amount of ore significantly more than anyone else to get 1 ton of saleable product which is worth 20% more than anyone else's it just isn't ever going to work at current and medium term prices. When we run out of DSO and IO moves to a long term price position that can support this amount of extra mining and processing then magnetite might work out. However, you look at the mining reserves of BHP, Rio, Vale and FMG and that is very very far away.

The other consideration is that they over built on the infrastructure side and their overall capital intensity per ton is sitting around $400/ton, which is just huge!!! As I mentioned above BHP, Vale, Rio and FMG can all do this much cheaper. BHP have estimated they have 65 mtpa available production that can be brought online at $30/ton of investment, 1/13 of the KML cost at C1 costs of $16 a ton!!!

Sorry to be all doom and gloom but the only reason I still hold this thing is as a reminder, to try and help me figure out why I invested in such a lemon and to never ever believe anything released publicly by a company Ie statements that commissioning was on schedule and plant ready to be online one month away and yet it took more than a year more for the plant to be commissioned. Having commissioned several plants when you're one month away you know if the thing is going to work or not.