Hi All, A few comments on Grange. This is an interesting...

Hi All,
A few comments on Grange. This is an interesting discussion thread with lot of knowledge being shared. Thankyou to the posters for taking the time to share your research.
I like the company. It has solid and reliable leadership and a good track record. However it is a high cost producer which makes it inherently risky in a volatile commodity. History has many examples of high cost producers going cash flow negative in an iron ore downturn and not surviving. Arrium and Atlas are just 2 examples.
Grange should survive a downturn because of its balance sheet. But that makes its balance sheet a necessity. Grange cannot afford a high dividend payout ratio because it needs that cash as protection in a downturn. That's why its stated payout ratio is 25% tops and that's why that payout ratio is sensible. It is an example of good decision making by the board and an example of why the company has good leadership. Hence comments on this forum about high dividends are not realistic.
The past 10c dividends were an anomaly in response to high product prices giving Grange more cash than it needed. High dividends relative to cashflow will not be repeated unless those high product prices come back.
In my time following the company, Grange has a history of being priced for long periods at an enterprise PE of about 1 or 2 factoring in the cash backing. By my maths it is priced much higher than that at the moment. This low PE makes sense given its high cost of production and hence risk profile. The PE went above that when everybody got excited about the company in 2022 but in my opinion the share price got ahead of itself and still is ahead of itself. I sold out during that period.
The block cave project is interesting. I have experience with block cave mining and I see the benefits to Grange in reduced cost but to me it just highlights the cost issues Grange has in that it is the only operating company in Australia considering underground iron ore mining. Southdown is a misnomer to me. I have been through the studies and I think Southdown is a way away from being developed. Again the status of Southdown highlights how limited Grange is for growth options.
The big upside of Grange is its product grade (65% Fe). Very few producers in Australia have such a high product grade. This grade gives it protection albeit the pelletising cost is expensive. Talk on this thread of not pelletising is unrealistic. The fine product is too difficult to ship without pelletising.
I am keen to buy back in to Grange but not yet. As a high cost producer with limited growth options I think the entry price needs to be low to reflect that situation. Unless Iron Ore and pellet prices go back to the highs of 2021 I reckon Grange will give us more attractive entry points.