Newb Fundamentals Question

[fiftyeight]

I would assume that large companies accounts are highly scrutinized and therefore pretty accurate.

Why then is there debate around FMGs cost of production?

 

[skc]

I would assume that large companies accounts are highly scrutinized and therefore pretty accurate.

Why then is there debate around FMGs cost of production?

1. The term "cost of production" is defined differently by different people. Are interest costs included? Are drillling costs to increase and replenlish extracted ore included? Or depreciation costs? Or costs associated with the one-off repairs? Or temporary maintenance shutdown? Or costs related to owned infrastructure vs accesssing 3rd party infrastructure etc...

2. FMG is expanding production while trying hard to reduce costs. So the cost of production is not a static number. Even if you just take last quarter's total cost divided by total production, you still won't get the "perfect" picture as both terms are constantly changing.

3. I read that UBS (or Macquarie) said that FMG is underwater as of today.

Perhaps the mods could move this to the FMG thread?

 

[burglar]

I would assume that large companies accounts are highly scrutinized and therefore pretty accurate ...

Would you have assumed that about Enron?

 

[luutzu]

1. The term "cost of production" is defined differently by different people. Are interest costs included? Are drillling costs to increase and replenlish extracted ore included? Or depreciation costs? Or costs associated with the one-off repairs? Or temporary maintenance shutdown? Or costs related to owned infrastructure vs accesssing 3rd party infrastructure etc...

2. FMG is expanding production while trying hard to reduce costs. So the cost of production is not a static number. Even if you just take last quarter's total cost divided by total production, you still won't get the "perfect" picture as both terms are constantly changing.

3. I read that UBS (or Macquarie) said that FMG is underwater as of today.

Perhaps the mods could move this to the FMG thread?

I thought management generally put cost of productions as "costs of goods sold/services rendered"?
The other costs are "General, Selling and Administrative Expenses"... then a few other special items.

But yea, different people define it differently... I'd also just add them all up as costs. Whether R&D or tendering costs... if it's part of their business then it all should be total expenses. Break-down may be useful when trying to predict future earnings... but then you could just use their margins to get there, I think.

 

[fiftyeight]

Thanks for the replies

I thought this maybe the case