Iron ore miner Mount Gibson Iron has warned of a big, non-cash impairment of between A$850-million and A$950-million in its interim results for the period ended 31st December 2014.
The Perth-based company said that the impairment is mainly due to declining market conditions, but also listed recent developments at its Koolan Island project as one of the reasons.
“The December quarter was particularly challenging for Mount Gibson, in light of the continued decline in iron ore prices to five year lows and the failure of the Koolan Island seawall. These factors have necessitated significant reductions in the Company’s workforce and will unfortunately require a substantial non-cash impairment to be recorded in our upcoming half year financial results next month,“ said Mount Gibson Chief Executive Officer, Jim Beyer.
“However, the Company remains in a very strong financial position with substantial cash reserves and negligible debt. We have responded diligently and promptly to preserve capital and further reduce costs while we assess the potential way forward at the Koolan Island operation. With efforts at Extension Hill continuing to focus on efficiencies and unit cost reductions to ensure the operation maintains a positive cashflow, and near term expenditure significantly reduced at Koolan Island and the Perth office, Mount Gibson has significantly greater flexibility to adapt to changing circumstances.”
According to the company’s ASX Announcement, ore sales in the December quarter totalled 1.2 million tonnes, reflecting continued strong performance at Extension Hill, and reduced sales from Koolan Island as a result of the failure of the Main Pit seawall.
Ore shipments from Koolan Island during the December quarter totalled 331,000 wmt, including the final shipments of Rizhao Special Product (RSP) totalling 142,000 wmt.
Revenue for the quarter reached A$72-million free-on-board.
The company also announced that it achieved an average realised price for its standard iron ore fines of $US60 a tonne, after grade and provisional pricing adjustments and penalties for impurities and that it had applied to the WA government’s iron ore royalty relief initiative, which was introduced to help miners struggling with the historic low prices.