Last year I was fortunate enough to pick this up at the low of...

Last year I was fortunate enough to pick this up at the low of around 61c and made good profit although admittedly sold a little earlier.

I couldn't believe my luck when the stock once again reached this level but now this time the iron ore price was around $50 higher! I picked some up at 58c and again at 50c and 46c. Can't claim I picked the low this time around but I have the feeling it is close. This is not based on the charts but on the fundamentals.

We are at 47c with around 27c a share in cash. The market cap is $500m and cash is at $280m. Admittedly the cash may have been depleted by the recently paid dividend, however 3 months of cash flow would have accrued which I think should see our cash balance sitting at around $300m.

So we are a company with an enterprise value of around $200m. We made $37m in net profit in the first half selling our 4 or so million tonnes at $94. Given that the iron price is holding above $135 I think we can conservatively say the average achieved price will be at least $120 or $26 more than last half. Our margin at a sale price of $94 was $15. At $120 it is around $41. A $41 margin on 4m tonnes should see operating cash flow of around $160m. Less tax and expenses we should have around $100m in NPAT. For the year our net profit will be around $140m. Not bad for a company with an enterprise value of $200m. An EV/E multiple of 1.5x is about as low as I have seen for any company.

The share price is collapsing based on a anticipated $90 iron ore price from 2015 (Thank you Rio and Goldman Sachs). What i see is a $500m company that is on track to have $500m in cash this time next year and hopefully around $400m in cash within the next 4 months.

I am not calling a bottom but I am calling MGX extremely good value at these levels. This is baby with the bath water stuff.

Go MGX! Good luck guys!