Pellet Price, page-590

Below is a cut and paste of a previous post I submitted talking about my theories of valuation.

If I was putting a PE on the stock, a conservative PE of some where between 3 and 4, say 3.5 I feel should be applied to the company at the moment, so on last years earnings we should be somewhere around $0.61 cents, and remember over half of the $203 million total yearly earnings happened in the last quarter of 2020, that's just over $0.10cents for the quarter, and obviously due to the jump in ore price late in the year.So to 2021, after the March quarter results are released I think Grange will have another re-rate, they are on track to make in excess of $0.10/share profit for the quarter based on selling 650k tonnes, that's at least and additional $115 million EBIT to add to the approximate $203 million cash that they already have, earning half their bank balance in EBIT in the first quarter, this is when the next re-rate will happen. And as the pile of cash in the bank swells quarter on quarter this year the overall price of the company will have a new floor under it as it should have over $400 million in after tax and dividends profit by years end. If you took a conservative approach to these earnings based on the first quarters numbers and assumed they earned $0.30cents/share ($350 million) for the year that would give us a share price of around $1.05 based off a PE 3.5.

These figures are of course based on ore prices staying elevated, and at the moment the demand is there for more ore as the prices are still creeping up slowly and the stimulus packages haven't really kicked in yet. If Vale get all their mines back to full production over the next 12 months I still see a deficit in supply going forward for several years. The numbers for steel production out of China are amazing, and they are planning on annual growth of at least 6%, that 6% growth is also now based on a much larger and cashed up economy than what they were even say 2 or 3 years ago, we are talking 6% compounding growth year on year, the growth multiples on that are huge, and that's just China, all Western Governments are expecting massive growth number for the next couple of years.