Hi Micky 78,I have a different perspective from yourself re...

Hi Micky 78,

I have a different perspective from yourself re magnitite.

In my mind, there is too much focus on grade and not enough on cash costs and margins.

It may be a big call, but I think that the Braemar Iron formation could be the next Pilbara - but with better margins.

Of the current Braemar discoveries, CAP is the only one to release a feasability study (please correct me if I'm wrong, ROY's due out soon). Once you take into account the premium price for 69% magnetite, my calc's are that CAP will have a similar margin to BHP and Rio (see my post on CAP on 04/09/12 for support for this comment). Whilst I am bullish on CAP because it will be a long mine life low cost producer, I'm not trying to cross promote, but use CAP as the basis for my expectations for ROY.

As for your comments about high CAPEX - consider this as an interesting comparison, I recently read Rinehart's Roy Hill mine is expected cost $9.6B to produce 55 million tonnes a year for 20 plus years.

CAP's CAPEX is $2.8B for 20 tonnes per annum for 20 plus years.

It's not hard to see which is cheaper. Once again, expecting ROY to provide a similar outcome.

The main reason for the lower CAPEX is that the Braemar iron formation largely follows an existing rail line and is generally not far from existing infrastructure with port options (although upgrades will be required if a number of Braemar mines get up). Further, the Braemar Alliance means that producers are more likely to pool infrastructure resources and lower costs for all than use it as an advangate against competitors.

As I said at the start, don't just look at grades, look at cash costs, prices and margins. With costs, look for things like wide mining widths (less to dig per tonne of ore), hardness of ore (all Braemar discoveries comment about soft ore which means less power, less abrassive on crusher, cheaper crusher cost etc).

China knows their local mines have a high cost to mine and the issues that brings so any mine with a low cost could be an attractive acquisition/JV.

Looking forward to ROY feasability results to confirm my thoughts.