Mount Gibson Reports $99M Revenue on 0.7Mwmt Iron Ore Sales in Q4
Mount Gibson Iron reported a stronger December quarter with increased iron ore shipments and cashflow, while preparing for a potential accounting impairment due to recent price fluctuations.
- Iron ore sales of 0.7 million wet metric tonnes at 65.2% Fe grade generating $99 million revenue
- Quarterly cashflow of $16 million and total cash plus investments of $451 million
- Koolan Island operating costs reduced to $94/wmt FOB, down 5% quarter-on-quarter
- On-market share buyback of up to 5% underway with 15.3 million shares repurchased
- Potential non-cash impairment review triggered by iron ore price volatility
Operational Momentum Builds at Koolan Island
Mount Gibson Iron Limited (ASX: MGX) delivered a robust operational performance in the December 2024 quarter, marked by a significant ramp-up in iron ore production and shipments from its flagship Koolan Island mine. The quarter saw iron ore sales reach 0.7 million wet metric tonnes (Mwmt) at an impressive average grade of 65.2% Fe, generating $99 million in revenue on a Free on Board (FOB) basis. This represented a notable increase in ore extraction, up 42% from the previous quarter, driven by the successful reconfiguration of the Main Pit haul ramp which enabled greater access to high-grade ore in the eastern half of the pit.
Mining activity maintained a steady total material movement of 2.5 Mwmt, with a reduced waste-to-ore stripping ratio of 2.9:1, down from 4.7:1 in the prior quarter. This improvement is a key cost driver, as lower strip ratios typically translate to more efficient mining operations. The company expects this ratio to average below 2:1 for the remaining two-year life of the mine, underpinning operational sustainability.
Financial Strength and Cost Discipline
Mount Gibson’s financial position remains solid, with group cashflow for the quarter totaling $16 million, bolstered by increased sales volumes and ore grades. The company ended the quarter with $431 million in cash and investment reserves, excluding its $20 million stake in Fenix Resources Limited, bringing total liquid assets to approximately $451 million or $0.37 per share. Notably, the company operates with zero bank debt, providing flexibility amid market uncertainties.
Cost management remains a priority, with Koolan Island’s cash operating costs declining 5% quarter-on-quarter to $94 per wet metric tonne FOB, comfortably within the FY25 guidance range of $95-100/wmt. The commissioning of a tertiary crushing circuit has enhanced processing efficiency, reducing rehandling and enabling more cost-effective treatment of harder ore from the eastern pit sections.
Capital Management and Market Positioning
Mount Gibson has initiated an on-market share buyback program targeting up to 5% of issued shares, having repurchased 15.3 million shares at an average price of 31.3 cents each by the end of December. This move reflects confidence in the company’s valuation and a commitment to returning capital to shareholders.
CEO Peter Kerr emphasized the company’s focus on maximising production and cashflows over Koolan Island’s remaining mine life, while maintaining a robust balance sheet to pursue strategic investments and opportunistic acquisitions. The company continues to explore opportunities in bulk materials and base metals sectors, holding equity positions in junior resource companies and advancing exploration projects in Western Australia and Queensland.
Navigating Price Volatility and Accounting Implications
Despite operational improvements, Mount Gibson faces challenges from recent iron ore price volatility. The benchmark Platts 62% Fe CFR price averaged US$103/dmt in the quarter, with the premium 65% Fe fines price at US$118/dmt. The company’s realised FOB price for Koolan Island fines rose 23% quarter-on-quarter to US$91/dmt after adjustments. However, fluctuating prices have prompted a review of the Koolan Island carrying values, with a potential non-cash accounting impairment expected to bring forward depreciation and amortisation charges. This accounting adjustment, while non-cash, could impact reported earnings in the upcoming half-year results scheduled for release on 19 February 2025.
Mount Gibson has also prudently increased its hedging activities to protect pricing for approximately 588,000 tonnes of iron ore over the first half of 2025, alongside foreign exchange hedges to mitigate currency risks.
Outlook and Market Context
Looking ahead, the company remains on track to meet its FY25 shipping guidance of 2.7-3.0 Mwmt at targeted cash operating costs, although it acknowledges potential disruptions from the northern Australian wet season. Operational safety continues to improve, with zero lost time injuries recorded over the past 12 months and a declining total recordable injury frequency rate, underscoring a strong safety culture.
Mount Gibson’s strategic focus on high-grade iron ore production, disciplined cost control, and financial resilience positions it well to navigate the cyclical iron ore market. However, the looming impairment review and ongoing price volatility warrant close attention from investors as the company prepares to release its half-year financial results.
Bottom Line?
Mount Gibson’s operational gains and strong balance sheet offer resilience, but iron ore price swings may cloud near-term earnings.
Questions in the middle?
- How significant will the potential non-cash impairment be on Mount Gibson’s half-year financial results?
- What impact could the northern wet season have on Koolan Island’s production and shipping volumes?
- Will Mount Gibson pursue further acquisitions or expansions given its strong cash position?
