##{"id":59816,"date":"2012-04-18T14:44:24","date_gmt":"2012-04-18T04:44:24","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/04\/18\/bc-iron-the-weather-beater\/"},"modified":"2012-04-18T14:44:24","modified_gmt":"2012-04-18T04:44:24","slug":"bc-iron-the-weather-beater","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/04\/18\/bc-iron-the-weather-beater\/","title":{"rendered":"BC Iron, The Weather Beater"},"content":{"rendered":"

\n\t – BC Iron delivers solid quarterly performance
\n\t – High leverage to iron ore prices an attraction
\n\t – BC Iron rated as a Buy by all brokers offering coverage<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tWhile the March quarter saw wet weather and cyclones impact on a number of resource projects in Australia, BC Iron ((BCI<\/span>)) has managed to deliver a strong quarterly production report. <\/p>\n

\n\tAs BA Merrill Lynch notes, BC Iron remains on track to achieve its targets for FY12<\/span> of five million tonnes<\/span> per annum of export production and to export 3.5 million tonnes<\/span> of ore by the end of FY12<\/span>. Stronger shipments were particularly evident during the quarter, Macquarie noting shipments for the period were 1.03 million tonnes<\/span>, an increase of 51% relative to the December quarter last year.<\/p>\n

\n\tStronger shipments were matched by improved margins, Macquarie noting BC Iron's received price of US$124 per dry metric tonne<\/span> was an increase of 7% over the December quarter. The margin outlook going forward appears attractive, as BA-ML expects costs should trend down from current levels of $58-$60 per tonne<\/span> to a range of $40-$50 per tonne<\/span>. <\/p>\n

\n\tThe increases in sales and production in the period has boosted BC Iron's cash position, which now stands at 52.5% against debt of $19.3 million.<\/p>\n

\n\tThe other highlight for the quarter in the view of BA-ML was that BC Iron has lifted reserves at the Bonnie East project to 7.7 million tonnes<\/span>, which the broker sees as supportive for valuation. Total ore reserves for BC Iron now stand at 42.4 million tonnes<\/span>, grading 57% Fe.<\/p>\n

\n\tUBS remains conservative with respect to a ramp-up of production by BC Iron, while changes to the broker's iron ore and currency assumptions have impacted on earnings forecasts. In earnings per share terms UBS is forecasting outcomes of 40c<\/span> this year and 78c<\/span> in FY13<\/span>, which compares to consensus EPS forecasts according to the FNArena<\/span> database of 41.1c and 82.2c respectively.<\/p>\n

\n\tLooking forward, UBS's Buy rating acknowledges the fact with much of BC Iron's capex<\/span> already spent, the stock is highly leveraged to iron ore prices, operating expenditure and the Australian dollar. Given the stock is trading at a 23% discount to net present value but offers the potential for upgrades to production and earnings over the next 12 months, UBS sees value at current levels.<\/p>\n

\n\tMacquarie agrees, suggesting investors in BC Iron are well placed to benefit from iron ore price upside, especially as the company has a simple operating model and low execution risk. BA-ML agrees, the broker's positive view supported by the potential to lift capacity beyond the current target of five million tonnes<\/span> per annum.<\/p>\n

\n\tThe consensus price target for BC Iron according to the FNArena<\/span> database is $3.60, which is up from $3.47 prior to the quarterly result. Targets range from BA-ML at $3.50 to UBS at $3.75. This is up from $3.35 prior to the quarterly update.<\/p>\n

\n\tIn a stronger overall market shares in BC Iron today are stronger and as at 1.30pm the stock was up 6c<\/span> at $2.91. This compares to a range over the past year of $2.00 to $3.11 and implies upside of more than 22% relative to the consensus price target in the FNArena<\/span> database.
\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"