Trading in and out of MGX in the past I can see the value is definitely there, sentiment and 'Expert consensus' are killing the SP. Might I say the same experts who were the idiot bears last year then we got the massive upswing in io prices. Perhaps one should ignore the flock of sheep that most of the experts are due to their need to avoid professional scrutiny if they get it wrong. So what are the facts?
Cost of production about $US63 a tonne for MGX with RIO and BHP under $US40.
Chinese GDP targets for 2013 are unchanged at 7.5%.
Industry opinion ?
Fortescue chief Nev Power maintained iron ore was not likely to drop below $US100 a tonne.
"We need another 300 or 400 million tonnes of new supply or contraction in demand," Mr Power said.
Golmans thinks 2014 will see the structural oversupply hit.
Is there a twin negative of growing supply and falling demand ?
In my opinion there will be, but it has been overrated, especially short to medium term.
I can't imagine the likes of Rio bringing in supply large enough to damage prices too far. It just doesnt make sense. Even when considering future projects like the ones in brazil or africa, i am sure the majors would get a Stranglehold on any supply threats. Perhaps $US100 will be a stable level.
The other point specific to MGX is great cash in the bank that not only adds value sitting idle earning interest, but also opens up potential for investments in diversifying assets. This also carries risk if the wrong investments are chosen, but mangement have shown their careful attitude by not jumping into anything gung ho.
Another important technical point is holding 50 cents as a psycological resistance point. However when this stock moves it can jump and missing the boat is possible.
Chinese data over the next month should help paint a better demand picture and probably make this stock a no brainier if you are open to risk/return.
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