Result Description We misunderstood management guidance on...

Result Description
We misunderstood management guidance on costs. Further discussions have led to revised FY07 costs, NPAT and valuation.


Impact
We had previously assumed life of mine cash costs of approximately $31/t. On top of these costs we added capital expenditure for waste mining in advance. Our understanding was life of mine costs of $31/t did not include capital expenditure for waste mining. Management has indicated a life of mine unit costs of $30 - $35/t includes waste mining costs.


As a result unit costs have fallen in FY07 raising our forecast NPAT from $33.3m to $50.3m. We raise our valuation from $0.60 a share to $0.72. Our valuation assumes a long term iron ore price of A$38/t and a 10% discount rate.


MGX is confident production will meet its 3Mt forecast in FY07. Our FY07 NPAT assumes 3Mt iron ore production.


Recommendation Impact (Last Updated: 04/07/2006)
Upgrade our recommendation from Reduce to Hold. MGX has attractive near term multiples and production growth in train.