Major, GBG's market cap is well under half of MGX. Hence the potential value. As per your previous post: GBG is trading at it's highest level ever due to the recent dilution. Pre GFC we saw $1.80ish at 525million shares giving a $945 million MC. Post placements we have 935 million (off the top of my head) @ $1.175 = $1.1 billion MC.
Hopefully no more raisings will be needed and an appropriate loan is given to service working capital requirements. Although the high AUD may cause some problems.
Also MGX's mines have a very short mine life remaining. The issue for MGX is that Koolan Island is running out and the infrastructure there will be useless given the ore is almost depleted. Hence MGX will need to build new infrastructure and find new sources of iron ore. It will find it's cash balance is quickly depleted and possible dilution via script takeovers. MGX is fully valued in my opinion, unless of course George Jone's bullish outlook on Iron Ore continues. However I'm skeptical given the large expansions by BHP, RIO and FMG etc that will significantly increase the seabourne supply.
GBG is building its initial infrastructure to handle 16-32mpta. Cost savings will be passed on in the years to come. Not to mention the sheer size of Karara supporting a good 60 years at initial production rates. Hopefully GBG can deliver the project on time and within the revised budget. Given Ansteel's experience and skill with magnetite I assume our proposed margins are fairly accurate and commissioning shouldn't be too much of a problem. Of course their will be more raisings to fund expansions, but overall it would be positive to EPS.
You're still very bearish Major. I'm curious if you believe their is any value in any of the Australian IO hopefuls? Personally I like very few: GBG and FMG. I know AGO is a hotcopper favourite, but I dislike it. All it has shown the market is that it can truck high cost low grade ore at a loss when the IO spot market is at a near high. 6mtpa is an impressive accomplishment, however we need to see they can produce a decent profit. Long term IO prices could kill AGO. Economies of scale may have little affect on AGO due to the fact that it mines and trucks from several different locations.
Anyway have a great weekend guys. Happy to see GBG finally catching up to the general market movements.
GBG Price at posting:
$1.14 Sentiment: Buy Disclosure: Held
