Reality check

Guys, the SP has gone from low of $1.92 to a high of $2.38 in a matter of days following release of the Dec report.

During Dec I made a lot of money buying large amounts amounts when SP dipped and selling when price increased by around 0.05 or more.

I got caught out in January buying at $2.80 and then buying more as price dropped to average down. I hold 550,000 @ $2.62 and have reduced my loss by half in the last 2 days which I am pleased with.

My point is that the SP only moved because they reported better than expected reduction in costs, with the bulk of the cost reduction amatil unt being luck with shipping & fuel costs going down, the drop in the dollar has also helped.

We all agree that IO price and ability to service and reduce debt are the drivers of the SP with each metric reliant on the other.

My concern is the debt repayment schedule $1.0b in 2017,$400m in 2018, $4.9b in 2019, $1.5b in 2020 & $1.0b in 2022 years is a big concern now, unlike last year when the cash flowed in & they repaid $3.6b of debt, we all know what's happened in the last 12 mths to IO price.

They should be able to meet the $1.0b in 2017 & $400m in 2018, but what about the $4.9b in 2019 followed straight after by $1.5b in 2012

Any talk of paying a dividend at this stage would be folly & the market I feel would react negatively.

They should now be well into negotiations with their lenders to rearrange repayment dates in particular for the $4.9b in 2019 & $1.5b in 2020,this would please the market and offset the cash flow strain should the SP continue its decline or remain at current levels.

By my estimation if they do not renegotiate loan terms they would need the IO price to recover to average around $75.00mt plus (unlikely) from now to 2020 to have any chance of meeting full repayment under the current loan terms, dividends would need to deferred or at least reduced from the current half yearly 10.00c payment.

The IO price is not in their control, they can only further reduce costs marginally, increase ore grade etc...

What is in their control is approaching their lenders to renegotiate repayment dates.

They currently are making $7.00-$10.00 mt, apart from IO price their is a danger fuel & shipping costs start increasing again and the AUD gaining ground, all these factors are also out of their control.

I know that they can sell assets, JV with some of their mine assets & capital raising ( very dilutive)

Andrew & Nev should this weekend be in New York talking to their lenders

Standard & Poors have reaffirmed their credit rating which is a positive, now is the time to be sitting at the boardroom table with the lenders, if IO price declines further so will their credit rating and cost of funds

I believe that an announcement will be made shortly about refinancing, they would be mad if this is not their no. 1 priority.

Do we all agree???