MGX Diversification, page-31

I have held MGX in the past, so am genuinely interested in what they do.

Given mining is such a capital intensive business, I think you have to be counter-cyclical when the opportunity arises and look for assets that people have already suck much of the costs into developing. Many of these MIGHT currently be marginal given their debt, scale and development costs. These guys can't think like share traders, the asset has to produce over years and decades.

Things like Au and Li would add significant processing costs - not just a bulk mining operation as per Fe - so for things like these the processing plant has to be built already, or you need a partner or close by infrastructure to help process otherwise you'll be waiting a while and spending more $. They would get a nice quick SP pump though!

As for the diversification they want, I do like Au as a hedge here, if the price is right - I was just pondering where in the gold cycle we might be and there seems to be lots of noise around both Au and Li. You are right though, diversification for its own sake is not a good move.

And to get a big diversification tick, they have to make sure it isn't a major component of steel or its products and markets of course - zinc, coking coal, manganese, chromium, nickel...

So I was suggesting they might buy something outside the above steel inputs that will make good money over the long term - IF it is a loss maker then it must be something they can expand to increase margin, take costs out or restructure (pay down debt for example) to make a good return.

However, there are many ways to skin a cat and I'd expect them to try to think outside this box a little so they aren't competing on assets too hard - we are presuming they will leverage their mining skill set, contacts and infrastructure in a bulk mining operation, but they may find a different way to use these.

It will be interesting to see which direction they take.