To take Cliffs production costs for a mine "bloom lake" where they have had nothing but operational troubles and a change in strategy for a couple of quarters is "wrong".
I guess I am cynical...
There are a lot of companies that overpromise and underdeliver. You can always blame failures on "operational troubles"... every mine has them.
I looked at your blog...you have asia pacific production costs at half of what they are.
I don't know. I could definitely be wrong but I don't know which part you are talking about.
Your timing of your report is at the crash point of the iron ore market...your assumptions are on prices that are unsustainable for producers in the market globally not just the Labrador Trough.
I really don't know where iron ore prices are headed and I don't have a strong opinion on it.
Normally I'd rather not mess with iron ore because the price of iron ore and production of iron ore has gone up several times over the past few years. This is highly unusual... theoretically you might expect a wave of overbuilding to eventually occur. But... it's possible that iron ore prices don't crash. Apparently China's infrastructure isn't overbuilt... even though they have too much high speed rail, real estate (their RE is the most overpriced in the world), too many malls, etc. they are lacking in other areas of infrastructure (e.g. sewers). So I really don't know. China is a huge anomaly in the iron ore/steel market and it could stay that way for a long time.
Example of the Alderon bash was that they used $115 in their PEA...instead of the market price of $135 at the time of production....
"which may indicate that they think the price of iron ore is coming down over time"....should they use $170 for the feasibility study if they think it will go up from the current $155?
The standard practice is to use the 3-yr trailing average. I believe that's what the engineers are taught in school.
If they are assuming a low iron ore price, it makes the economics of the project look worse than if you assumed a higher commodity price. So the technical report may potentially be understating the economics of the project.
At the end of the day... my thesis is that the Alderon/Kami mine will have economics slightly worse than Bloom Lake (take Bloom Lake's opex and add $15/ton). That is my wild ass guess. We'll see what happens...! At current prices, I think I would rather be long Alderon than short it if I was forced to pick a side.
As for the bloom lake and Alderon bashing you have been doing...I will give you the benefit of the doubt as you and everyone else that joined the crowd in being wrong on iron ore pricing in August to October...
I don't really know where iron ore prices are headed.
We are talking about nothing when prices are this high...bloom lake production costs will come down and Alderon will be a successful mine.
I don't think Bloom Lake's opex will come down much. I don't think that they will find operational efficiencies because they should have found them all after a few years of operation. Larger operations (BL is expanding) will reduce opex since there are some economies of scale to larger operations.
Over time, opex will likely go up due to cost inflation, a higher strip ratio (*depends on the geometry of the deposit and the pit), lower grade ore, etc. Inflation in mining costs has been much higher than the CPI over the last decade and I expect this trend to continue. We are only finding lower quality deposits... they take more people and machinery to mine. Higher demand for people and machinery is pushing up costs. There hasn't been major technological advances that have pushed down exploration or mining costs (e.g. technology like what 3-d seismic did for oil/gas, shale exploitation for natural gas).
I do think that a Kami mine will be built.
And in your genius you will make a fortune on Altius!!!!
Yes we are both long Altius... why are we arguing!!
Cheers
