Assuming current pellet pricing and a return to 2015 cost...

Assuming current pellet pricing and a return to 2015 cost performance, GRR could generate around $100m operating cash surplus over the next year. This would most likely lead to a sustained or even higher dividend, however, the market is likely to wait for evidence that the assumptions hold true before re-rating the share price.


I don't buy the argument that Shagang isn't concerned about managing costs. In March quarter GRR achieved their lowest cost performance on record. I suspect that they pushed too hard to reduce costs and over-aggressive extraction plans may have been a factor in the subsequent wall failure.

My assumption is that costs will fall marginally in the current quarter before returning to normal levels in the new year. Sustained high pellet prices could translate into modest share price increases over the next month but I think we will have to wait until at least the next quarterly before there is any possibility of a major re-rate.