As a general observation, iron ore flirting with $90 has got to be making many a small cap iron ore miner sweaty about survival, let alone about robust returns (the past few days worth of limit up notwithstanding).
Noting that Mount Gibson have gone into trading halt, we have a brief look at some of the fundamentals.
Cash costs of production are high, and, as a general observation, we’d note that all-in-sustaining-costs often turn out to be a little higher than you think. As such, a margin of safety is wise to build in.
It’s also worth noting that the production cycle, reserves, and remaining life have been quite volatile, at least on the numbers accessible via Bloomberg. Note the 2015/2016 data…
…and the share price trajectory leading into that period.
Which brings us to the modern era. Below is a general snapshot of realised priced, cost of good sold, and other expenses, leading us to profits. That $103/wmt is for the year ended 30 June, and on the day, the price of iron ore was ~$215. The average over that period for the 62% Fe offshore export price was $158.
As one commentator put it, that’s how we go from:
peak profits to care and maintenance in a couple of months….life comes at you fast
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