Pretty much I would say. Your overheads are a constant and suspect production cant just stop. The object of the exercise at this stage of the game is to manage the bleed.
Theres lots of moving parts but rough and ready we know run of mill product is a touch above 33%, been released a number of times now. Benchmark MN was around as below, currency was close, biggest moving parts are the grade discount from 44 down to 33% and the fob/cif adjustment as we know. I have adjusted to fit the cash receipts!! Nothing more than a guess.
The FOB/CIF adjustment allowed for in the PFS of .39 was too low regardless. Should have been closer to .55 IMO. Matters not at this stage. Could we have paid 4X what they allowed. Given what the Baltic Dry index has done, absolutely.
Your overheads on a per tonne basis will look bad until they get to nameplate. Thats a given. Theres no rush to get to nameplate because its a negative sum game so its a matter of managing the burn.
Im guessing but I think they are probably producing @20,000 a month atm, so there will be one shipment in this quarter of 50,000. For it to even get close to paying its way shipping costs have to halve, down to double the PFS assumption. I'm also thinking Baltic dry at 2,000 v current at 3,500 We also need the mineral credits and some modest price appreciation in the MN benchmark.
Not going to get the credits this quarter and shipping and benchmark price need to keep moving in their current direction. Cash will get burnt this quarter, there will be @30,000 unshipped product at the end of the quarter as well. It should be less than last quarter because the benchmark is higher, we have gone to a bigger ship and some of the pressure has come of shipping costs. How much better. Could be a little, could be a lot. Wont even be able to guess until its closer to shipment time.
So, once shipping at least partially normalises, I would like to see them push up to nameplate, but not before they start receiving the mineral credits because it makes a difference. At the above levels they are close to B/E Need more volume to spread the overheads and/or a more favourable combination of pricing factors.
The shipping by far is the wildcard. It has dropped 25% in the last 9 days. Where will it be when we ship in 3 or 4 weeks. Need a Delorean to be able to answer that one I'm afraid.
E25 Price at posting:
$1.69 Sentiment: Hold Disclosure: Held
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