Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
A question for James - in your video with Peter O'Connor on Thursday he mentioned that at current iron ore prices of around $US 100 a tonne Fortescue are making about $10 margin. In their last report they stated that their costs are approx..$US15/tonne. By my calculation that is about $US85 a tonne margin - am I missing something?
Cheers, Carl
Hi Carl,
A great question as Peters numbers and comments may have confused a few subscribers. There are a few additional things to take into account. FMG mines lower quality ore so the rate they achieve is a discount to the spot price we see, in the last quarter, they realized 73% of the benchmark price which is lower than their historical average of 85%. What you find is in a bullish market the gap closes, and a bearish market it expands. His comment also took into consideration capital expenditure i.e. reinvestment for the future as opposed to just churning out cash with no thought to what comes next. So, C1 cash cost will be $15-$15.50/wmt plus capex of $2.8-$3.2b.
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