FMG Market Cap: 13.9 BillionGBG: 594 MillionBig difference.FMG:...

FMG Market Cap: 13.9 Billion
GBG: 594 Million

Big difference.

FMG:

- DSO Revenue p/t : $US 55.50
- DSO cost p/t : $US 25.02

- Expected Margin p/t : $US 30.48

GBG

- Concentrate revenue p/t: $US 72.75
- Pellet revenue p/t : $US115.50

- Concentrate cost p/t : $US 34.50
- Pellet cost p/t : $US 57.50

- Concentrare margin p/t : $US 38.25
- Pellet margin p/t : $US 58.00

Margin wise GBG significantly surpasses FMG. The key is tonnage, which FMG will always surpass GBG. The issue is FMG's cash flow and debt. It's already had to raise in excess of $500 million to meeting working cap and interest service. Also FMG has a significant amount of Debt maturing as follows:

- H2 2011 = $US 250m
- H2 2012 = $EUR 299m
- H1 2013 = $US 318m
- H2 2015 = $US 1,026m

FMG produced around 27mt for the YE 2009. However its infrastructure has around 40mt capacity I believe. FMG is now planning to reach 40mt by YE 2010 (this year), or 2012.

FMG now has huge expansion plans with the help of China via $US 5.5 to 6 billion in loans, in return selling ore @ a further discount. The issue is, how will they pay this back, and how long will it take to reach it's NEW ultimate goal of 90mtpa. I doubt it'll be before GBG reaches 11mtpa in YE 2013. Although GBG should do around 7-8mt in YE 2012.

Major, you talk about Ansteel running GBG into the ground? Yet what about FMG's proposed debt with China? Very interesting.

FMG has done well, however its model is "all or nothing". GBG is doing it safer with a JV partner, our consolidated debt will be about 600m, tops. Our production expansion will be slower, however we won't have billions in debt to service as a start up miner. I much prefer a more steady approach to expansions like traditional mining companies.

A 90mtpa operation will produce significant revenue/profit, however a $US 8 billion debt will carry significant interest expense, further dilutiion risks, and payback risks. Based on a 90mt operation FMG is running roughly on a 7PE, it is by no means undervalued. The chances of FMG reaching $13 again is very low compared to GBG surpassing old highs given projected earnings.

Simply looking at the market capitalisations of each company its obvious GBG can provide large returns. For FMG to reach old highs it needs a market capitalisation of around $40 billion, this will not happen for a very very long time. 90mtpa with $US6-8 billion will not justify this. GBG's YE2012 & YE 2013 earnings will easily justify a $2.5+ share price given expansion probabilities. FYI GBG at $2.5 = $1,790 million market capitalisation. Much more logical for higher shareholer returns.

Goodluck all. I could go on for pages, but I think I have written enough for a basic analysis.