Where´s Stantrent??, page-50

Hi Multi. I'm interested in your IO pricing ahead "... more looking to hist USD100 then 80...".

I'm not sure what time frame you have around that or, for that matter, the underlying exchange rate too.

A couple issues rattling around in my head re pricing:

(a) Pellets are CIF around USD112 now. I think the market is suspect about what's driving the price 'high' but the market has been suspect now form some time. Any number of analysts had the sky falling in months ago, but alas, it hasn't yet.

(b) China is hell bent on its visible smog. Steel milling is squarely in its sights. My hunch is that pellets demand will remain full but lower Fe content material will be discounted. The spread between the 65%Fe and 62%Fe I think will get wider

(c) At some stage, the AUDUSD rate and IO pricing will stabilise its usual pattern of alignment. ie high IO price equals high AUDUSD. Equally, low IO price equals lower exchange rate. A long way of saying fall in IO price will be loosely cushioned by fall in exchange rate.

(d) To date pricing has been predictable. That says to me that the pricing formula with the Chinese shareholder is at least stable and transparent. I do think though that the delta between FOB and CIF of around A$16/t ought to be a target for GRR.

(e) 2 years of stable income of around EBIT 8c / share will demand a rerate. IMO, 1 down, 1 to go. Insto's (becauses its OPM) will happily play catch up.

Anyway, just some thoughts.

Have a great day