GREY:FTPLF - Post by User
Comment by
belowIVon Aug 22, 2013 5:55pm
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Post# 21690986
RE:RE:RE:belowiV
RE:RE:RE:belowiVThe cashburn has been substantial looking backwards but I'm not concerned about where we've been - just where we are today and some reasonable estimates about what's infront of the company. Remember, this is not a business that is in decline like newsprint whereby you'd expect the cashburn to continue and perhaps worsen in perpetuity. This is an asset that is ramping up on the bottom of the commodity cycle in an oversupplied market. It's operating efficiency consistantly improves and it's reasonable to expect the asset to roll EBITDA + in the next couple of Q's (Q4:13 or Q1:14). Mark Kennedy (CIBC Analyst) is projecting $7.6M of cashburn, including capex, for the balance of 2013 and expects Q4:13 to turn EBITDA +.
The DP cycle in the last few years has seen DP prices peaking around $2600/mt and bottoming now around $890/mt. It would be risky to use either DP price and extrapolate them into the future. Using data from either the peak or trough of the commodity cycle would give the analyst a false sense of euphoria or panic. Best to consider a reasonable mid cycle average. Using a number that is below the cash costs of many suppliers remains conservative in an oversupplied market.
Maybe $1000 or $1100 - you decide. For the record, CIBC uses $1125/mt.
Once cogen is back up the cash costs should fall below $800/mt.
Investors seems to be in disbelief that the Thurso project has a happy ending and adds to the bottomline rather than taking away from it.