FitnFam, "mixed magnetite and hematite deposits"??? All the magnetite comes from the one pit, by itself !! It is processed and mined completely separate to everything else. If they stop mining magnetite this would mean no pellets. The hematite/DSO is mined from different pits all together.
With current IO Price and Exchange Rate see below
|
Column 1 |
Column 2 |
| 1 |
Iron Ore Price USD |
56 |
| 2 |
Iron Ore Price AUD |
73.68 |
| 3 |
Exchange Rate |
0.76 |
| 4 |
Discount IO Price AUD (~85% of 62% Fe Platts) |
62.63 |
| 5 |
Production Cost AUD |
57 |
| 6 |
Profit/Loss Per Tonne |
5.63 |
| 7 |
Annual Production |
8-9MT |
| 8 |
Annual Profit/(Loss) rough approximation |
$ 47,000,000 |
With targeted cost savings production costs set to fall to AUD 50. Notice i have increased the exchange rate to 0.78 usd/aud. I have not increased IO price.
|
Column 1 |
Column 2 |
| 1 |
Iron Ore Price USD |
56 |
| 2 |
Iron Ore Price AUD |
71.79 |
| 3 |
Exchange Rate |
0.78 |
| 4 |
Discount IO Price AUD (~85% of 62% Fe Platts) |
61.03 |
| 5 |
Production Cost AUD |
50 |
| 6 |
Profit/Loss Per Tonne |
11 |
| 7 |
Annual Production |
8-9MT |
| 8 |
Annual Profit/(Loss) rough approximation |
$ 94,400,000 |
If the company over achieves on cost reductions and can extend life of mine. Why would you shut down a business that is turning close to $100 million ebit? Any increase in IO price in this time will add significantly to this. If they can hang on for the next 2-3 years markets will recover and the cash will start flowing in once again. As production continues the depreciation costs of assets decrease meaning that processing becomes cheaper as plant/equipment is paid off.
Once the contracts run out, negotiate better ones that are not so costly to break.
I don't think we should be writing off mining and Whyalla too early. If they are able to mine at break even costs between $40-45 USD then keep em going. It keeps people in jobs, returns cash to the business and sustains steel production in SA.
However if they start losing cash quickly again. I suspect we will see GSO/Board act a lot quicker to stem the flow.
I've tried to be clear, and of course most of this is my own opinion.
DYOR
