Mount Gibson Iron records first half loss

Mount Gibson Iron has posted a first-half net loss of $869.8 million due to the low price of iron ore and the closure of its Koolan Island mine.

The company posted a net profit of $78.3 million in the previous corresponding period, highlighting the difficult conditions in which it is operating.

The loss was attributed to a non-cash impairment of $950m before tax due to the slump in the price of iron ore.

Adding to Mount Gibson’s pain, its Koolan Island hematite operation was flooded last year after pit wall instability combined with high tide caused a section of the wall to collapse.

The operation was forced to shut, with sales suspended in October 2014.

Having already cut its workforce by 30 per cent, Mount Gibson said it was targeting further cost savings by reducing employee numbers, however an exact number was not provided.

Mount Gibson is still evaluating the viability of rebuilding the Main Pit seawall at Koolan Island and its Extension Hill operation is now the company’s primary operating asset.

Extension Hill remained cashflow positive during the December half, generated pre-tax operating cashflow of $15 million in the half with an average cash cost of $49/wmt FOB, before royalties.

An added train path has led Mont Gibson to increase its iron sales by 0.2 million tonnes in the June Half, raising its total group sales guidance range to 5.0 – 5.4 million tonnes for the 2015 financial year.

Chief executive Jim Beyer described the December half as a “difficult and disappointing period of transition” for the company.

“Nonetheless, the Company has responded quickly and diligently to the changed circumstances by substantially reducing costs, preserving capital and restructuring its business according to our evolving requirements. This ongoing focus on preserving value will continue to deliver benefits in the months ahead,” Beyer said.

“Our financial strength, underpinned by substantial cash reserves, negligible debt and a clean balance sheet, gives Mount Gibson the flexibility to both adapt to the uncertain conditions and invest in value accretive growth opportunities that may emerge.”

The company has declined to pay a dividend for the December half.

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