Ann: Trading Halt, page-36

The below is a complete opinion of a very uneducated person on the iron ore market and GBG:

The only good thing about this never ending trading halt is it gives us something to talk about. I think the last time I posted was during the impairment write down trading halt.

So my quick thoughts:

1) I see no reason for all the junior miners to join together. If I were looking for a merger I would be looking for synergies, economy of scale, or knowledge transfer. In my uninformed position I don't see any of the three happening in any type of junior merger (so we can throw out that idea). My only exception would be Mount Gibson giving us a sympathy takeover for us selling their excess ore to fill the rail contracts. I think their sympathy was fulfilled with the 15mm tenement divestiture. I am not sure they want to take part in the debt load we are currently facing

2) This never ending debate about BHP and iron ore expansion on the impact to the iron ore industry. Let's go back to simple economics Demand/Supply = inflation or in this case the never ending increase in supply is leading to deflation.

The current price of iron ore might not be an all time low, but you always need to look at the price of iron ore in context of the AUD (i.e. Iron ore price * exchange rate). With a high exchange rate the net Iron ore price is pretty bad. For GBG the USD price is actually ok to look at as they have USD denominated debt so a natural hedge that the AUD decline would not fix.

So yes BHP and everyone has the right to produce as they wish and we shouldn't blame them now on the price of iron ore. However, would the market be in a better position if they reduced supply to match demand and maybe improve prices (e.g. tonnes produced * (price - cost to produce) = profit if you balance the reduction in tonnes to the impact of price you might come to the same profit). Yes, Australia is not the center of the universe and if we reduce supply someone might increase, but in the space of the iron ore universe we are a very large sun in my opinion.

3) So with a merger unlikely and the majors holding steady where does that put GBG and this current trading halt. GBG has a high cost to produce and still has not hit production expectations. The price of iron ore has dropped but they are still well below expectations from my limited perspective. I think this leads us to an unfortunate negotiation with our China JV to try and stay liquid. Ansteel would probably say you brought us into a dud project and GBG would say we knew as much as you and have done everything in our power to course correct... Ansteel would say not enough and time to call it quits (by the way that is only my imagination on what the convo would be, I really know nothing).

Yes I still hold shares and yes I hope I am wrong in point 3. There is always an argument Ansteel who have been very gracious along this journey is just negotiating with the bank and continuing to hold firm with us. I do believe if they stick it out that it shows tremendous courage and the true leadership China would bring to any future JV with Australian companies. We really won't know until the trading halt ceases, but look forward to reading other HC posts on their thoughts.

Let's hope for the best but beware of the possibilities