Price of Iron Ore, page-1560

It was a decent article you posted there. At the end of the day finding 63% plus hermitite resources will be far and few. It is important for FEX to take advantage of the good times, build up a resource base gradually and most importantly never borrow money from the bank in the good times.

While I am very positive for the future there is of course the risk of a brief time (could be for example to a year or 2) where prices go under 80USD per tonne. During that time to some extent the current hedging will help to bridge the gap for 6 months to a year of partial production.

Then we do want a good 50 to 100 million in the bank without debts to worry about. Unfortunately staffing will need to be dramatically reduced by around 60-80%. Pick up the odd job hualing 3rd party product in the mid west to keep as many staff on the books as possible. And mines go into passive maintanence until better days.

I did not look into Atlas iron too much but I am sure one of the things that brought them down was debt. This is exactly what happened to one of my previous investments (thankfully a minor amount) tiger resources.

Management was already saddled with some debt after opening the production. Then borrowed more to expand production. The company died because of low prices and issues concerning the upgrade works which actually reduced their production.

Flooded with debt the company could not hold on until good times came and it had no ability to borrow more money to fix the botched expansion of the plant.

6 months after the company was sold off and shareholders lost out copper prices were already well on their way to high prices of 4 to 5 dollars per pound which would have been profitable.

Anyway long story short. We aviod debts like the plague. Larger companies can survive with debts to a larger extent but small companies take a big risk taking on debt.

No matter the FE % we ride the good times make sure the bank is healthy. And ride out the eventual rainy days.

I am sure if Atlas iron survived to 2020 its shareholders would have been rolling in dividends like all iron ore producers.

Maybe in the decade the company can merge or organically grow into a medium sized producer.
But I only if our cash balance allows that to occur.

By the way Dalian futures finished today at 961.5rmb per tonne. Profits per tonne should be getting quite large for FEX. Record imports into China, lowest portside stocks of IO in China can only be good news for us shareholders.