Pellet Price, page-133

ValueSeeker/Anyone else

Maybe cashflow is going to be even stronger than your calculations:

1. Do you know the difference in the specs between the Metal Bulletin 65% Fe Blast Furnace Pellet Index (CFR Qingdao) which I think you are quoting being at USD118 and the ISIX65PU Index (65% import pellet in USD) sourced to Custeel and quoted on Bloomberg at USD145. By my calculation Grange's realised price has averaged around a USD20 discount to the ISIX65PU index over the past few years (range 12-28) which should be largely explained by freight costs. I don't know the difference between the basis for the two indices (Metal Bulletin and Custeel), but if Grange can realise a USD20 discount to the ISIX65PU index in Q4 2017 we are looking at close to a USD120 realised price!

2. The Metal Bulletin report is quoting an implied pellet premium of around USD47 and a pellet price of USD117 which means the iron ore reference price is about USD70. 62% FE Fines are trading at around USD70 so is there a disconnect in the quoted implied premium as the pellets are 65% FE vs 62% FE Fines?

3. I appreciate Grange has spent a lot of capex/capitalised expense on pre-stripping the North Pit, nearly completing the SDTSF, replacing the second autogenous mill shell, fleet upgrades etc. In my opinion all this capex has obfuscated the amount of cash Grange has generated over the past couple of years in a much less favourable pellet price environment. Do you have a view on how much capex is still required to complete some of these initiatives (e.g. complete and get the SDTSF permitted, pre-strip the west wall of the North pit, remaining equipment upgrades etc) and what is the sustaining maintenance capex requirement for Grange from here? It is an area that management could and should be much more transparent. A clear dividend policy would also be a big step forward.

All the above is just my data analysis/opinion only. I could be very wrong.

Thanks
Monty