spotlight on atlas as short sellers move in, page-23

er6n,

I agree with you. I do own AGO and am not short it. Just trying to focus on numbers that are accurate.

My previous post...

thehound,

Thinking about AGO on it's own and it's BUY price. Say for example 55 cents. My model says after years of iron ore average $US101 and currency = 0.935 then they will have a market cap of $500m. In 5 years they will have $500m cash in the bank. Assuming Capex of FY15 122m and 50m pa for the next 4 years. The word 'average' matters here! So at 55 cents you get your money back. If you think management can do something profitable with you capital. Then maybe 60-65 cents. It all depends on your view about the Iron ore price and currency and assumptions on capex. Also, will they stop at 12m tonnes or use their debt to go further in FY16. I did read somewhere that they thought they would be in debt by now so feel they are ahead of their expectations.

It changes dramatically if the average over the next 5 years is $110 or $115 or the currency falls as is expected. Note this financial year (1/7/13 to today) average is $US137. It seems so forgotten when the spot is quoted.

It is a relative risk/reward and underlying value for me. Between AGO, ARI and FMG. Iron Ore expansions made sense from a financial viewpoint at ARI and FMG. ARI (high grade 60%) port and rail expansion made sense. FMG as much sense. Both are complete! Why buy AGO when you can buy ARI or FMG. FMG has more scale upside and franking credits. ARI has the upside of steel and mining consumables. ARI is in effect a Iron ore company that is debt free as cash from Steel and Mining Cons pays all their interest two times.

Note I think iron ore will average more than $US110 over the next 5 years. I also think audusd will average < 0.90 over the next 5 years. If IO does average $US80 the currency will average 80 cents or lower. So the AUD price is what is important. I think over time (6-18 mths) Aussie higher grade ore including new supply will displace low grade high cost china domestic supply. Remember you have to run a blust furnace at a certain level, they aren't things that you can shut down overnight and then restart. It is very complicated and dangerous. So if it is operational you may as well make steel and sell it. Ride out quarters of unprofitably. While of course you have financial support.