Vale posts surprise loss, page-36

Hi Westcott. Two companies have taught me valuable lessons in matters such as these. Firstly bankers and financiers are ruthless dogs unshackled by empathy and understanding. Greed and opportunistic behaviour are their sole motivators. The Akl story is a case in point. Simplifying the case The directors assumed their plant construction would be completed by a set date as it was subject to contract penalty clauses. They forward sold what was expected production. Meanwhile the plant construction was behind schedule and the price of Kaolin rockets. This resulted in a massive loss and no physical to deliver. Deutcherbank changed the locks and we all did our rectums. My point is the detail of financing is so critical to the equation that it cannot be ignored and can have an impact on cost of funding which in turn leads to cost of production. Added to this the terms of debt reduction included in financing can be sooo aggressive that the smallest hiccup in IO pricing and production costs can lead to disaster very quickly.
Although production is possibly 4 years away it's fair to assume the current price of IO. After all your numbers included today's numbers re cost of transport. You have assumed rail cost of $35 per tonne which is presumably today's cost. Until we know the final details of the overall finance package and subject that to analysis how can we possibly make the sort of assumptions you have other than in a vacuum?
The second company is obviously SDL and those lessons are obvious with a few more lessons to be learned I suspect.