quarterly report analysis

So what does the quarterly tell us and what can we look forward to?

1. Cash position - is still very healthy at $138.9 million. Note that debt was paid down by $5.8m, dividends amounted to $11.6 million and the pellet stockpile increased by 45,000 tonnes - which at $136/tonne was equivalent to another $6m - when you add all these up the cash position has not really changed at all.....BUT

2. Production ore grade was 25% DTR - which is HALF the reserve grade. Point here is that with seriously bad headgrade they managed to stand still cash wise.

Production year to date has been 850,000 tonnes of pellets and is forecast to be 2 million tonnes for the year - or 1.15 million tonnes in the second half - or a 13.5% lift on the first half. How can this happen? Because mining will go back to the North pit when the slip has been removed and average ore reserve grades will be mined again - instead of them having to mine low grade ore whilst they remediate the slip that occurred last year.

3. Price - the received US$136.34 FOB (not CFR China) ie at the port in Tasmania - they get a premium for pellets and for grade so when the price for 62% Fe is around US$125 CFR China they are getting US$135 FOB Tasmania.

4. Exchange rate
they received an exchange rate of 0.9847 - so the A$ price they got was A$128/tonne. Now with the A$ at 0.92 the A$price received would be $147/tonne

Looking forward.... production will increase with the result that C1 costs will reduce (assume they are currently US$136/t as the cash didn't move)to around US$100 - and margins will increase because of this AND the weakening A$ to around A$40 per tonne which at a run rate next year of 2.3 million tonnes of production is around $100 million of free cash.

IN summary the cash they have now plus the cash they could make next year adds up to their market capitalization today....and this mine has a 17 year mine life - CHEAP as CHIPS!