Iron Ore M&A: evaluating the opportunities Report

Insight 23 March 2016

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Report summary

We have identified seven iron ore assets supplying the seaborne market that could potentially be up for sale in 2016 - Vale's Midwestern System, Anglo American's Minas Rio and Kumba operations, Atlas Iron, Ferrous Resources, Arrium and Karara - and compared their cash margins, production and reserves. By looking at these attributes, we have concluded that the Midwestern System, Kumba, and Minas Rio are the standouts. We expect these assets will be cash positive in 2016, have positive NPV and upside to production. The remaining assets will likely only appeal to buyers with a bullish long term view of iron ore prices, a strategic interest in acquiring the assets, or a belief they can fundamentally lower costs.

Executive summary
Background
Few assets with positive margins
Limited room for production increase
Big resources, not great resources

Tables and charts

This report includes 6 images and tables including:

2016 breakeven costs by asset (62% Fe fines delivered to China)
Remaining PV vs. 2016 cash operating margin
Asset production (wet Mt)

Asset resource size and quality (bubble size as raw mineral resources in wet Mt)
2016 operating margin vs. marketable reserves
Key metrics comparative table by asset