http://www.theaustralian.com.au/business/opinion/new-era-in-shari...

http://www.theaustralian.com.au/business/opinion/new-era-in-sharing-credit-behaviour-data/story-e6frg9lo-1226851939490#


Ore smack down

another bad-hair patch for iron ore prices, the producers had a better day on the bourse yesterday as BHP Billiton's ferrous supremo talked up the long-term fundamentals.

Actually, Jimmy Wilson merely reiterated BHP's view that global steel output would remain stronger for longer.

Supply-wise, high-cost Chinese iron ore mines will be displaced over the next five years, with no sign of all those new African mines.

Still, with the benchmark price again hovering around $US100 a tonne -- more than 20 per cent off recent highs -- there'll be more short-term nerves about what sort of buffer our miners are operating on. Helpfully, UBS has estimated per-tonne landed costs adjusted for factors such as quality, moisture content and freight costs.

It's no surprise that Rio Tinto and BHP are the cheapest, at $US43 and $US45 a tonne respectively, well ahead of the pure-play Fortescue Metals on $US72.

BC Iron extracts and ships the stuff for $US70 a tonne, followed by Mount Gibson Iron ($US75), Atlas Iron ($US82), Grange Resources ($US87) and Gindalbie Metals ($US91).

Things are getting squeezy at the high-cost end. Then again, the iron ore price rebounded strongly after tanking to $US88 in September 2012 and bargains abounded.

In the meantime we'll stick with those with the soundest balance sheet. Mount Gibson (MGX, 78.5c), for instance is virtually debt free with almost $500m in the bank.


Gindalbie Metals (GBG) 8.5c

THE junior WA miner's "most costly" status is partly explained by the reality its Karara project in the Mid-West is producing too little of the red stuff.

Gindalbie yesterday promised that a review of the troubled project would be finalised this month, with a "clear plan, timetable and cost to achieve nameplate capacity".

The Karara plant has suffered from tailings clogging up the milling circuit and management already knows enough to expect a repair bill of up to $150 million-$200m.

Gindalbie half-owns the mine, but the problem is that Chinese partner Ansteel is funding the working capital and has the right to raise its share to 62 per cent and thus dilute Gindalbie to 38 per cent.

Gindalbie looks behoven to its deep-pocketed partner and we rate the stock an avoid