Key Points
(all currency in Australian dollars unless stated otherwise)
1.
Iron ore sales of 1.0 million wet
metric tonnes (Mwmt) in the quarter, comprising 0.44 Mwmt of high-grade
direct shipping ore (DSO) from Koolan Island and 0.59 Mwmt of low-grade
material from Extension Hill in the Mid-West. Iron ore sales for the
nine-month year-to-date period total 3.8 Mwmt.
2.
Quarterly sales revenue* of $82
million Free on Board (FOB).
3.
Group cashflow of $19 million for the
quarter before investments in Koolan Island capitalised waste stripping
($16 million), airstrip construction ($5 million) and positive working
capital movements, for an overall increase in cash and investment
reserves by $4 million. Cashflow and sales performance at Koolan Island
reflected the impacts of adverse cyclone-related weather on mining, and
operating restrictions arising from the Company’s COVID-19 management
plans.
4.
The Mid-West low grade sales program
continued as planned. Additional sales arrangements were finalised
during the quarter to extend the program to at least the middle of this
year, and further sales are being investigated.
5.
Cash and liquid investments of $402
million at 31 March 2020, and no borrowings.
6.
Group unit cash costs* of $80/wmt FOB
for the quarter before Koolan airstrip construction costs, and $71/wmt
FOB for the year to date. Koolan site cash costs were $127/wmt FOB for
the quarter including capitalised waste stripping investment. Mid-West
cash costs were on plan at $41/wmt FOB.
7.
In response to the COVID-19 virus
pandemic, significant changes have been implemented to site operating
protocols, travel arrangements and workforce rosters to ensure
operational continuity.
8.
Group sales and cost guidance for
FY2019/20 was withdrawn given the difficulty of reliably predicting
performance in the prevailing uncertain regulatory and global
conditions. However, production and sales for the June quarter are
expected to improve on the March quarter.
PERFORMANCE AT A GLANCE
|
Unit |
Mar-19 |
Jun-19 |
Sep-19 |
Dec-19 |
Mar-20 |
2019/20 |
Quarter |
Quarter |
Quarter |
Quarter |
Quarter |
YTD |
Standard DSO product sales |
kwmt |
402 |
370 |
664 |
733 |
439 |
1,836 |
Low Grade sales |
kwmt |
- |
237 |
711 |
649 |
587 |
1,948 |
Total Ore Sales |
kwmt |
402 |
607 |
1,375 |
1,382 |
1,026 |
3,784 |
Platts 62% Fe CFR price, average |
US$/dmt |
83 |
100 |
102 |
89 |
89 |
93 |
Platts 65% Fe CFR price, average |
US$/dmt |
95 |
115 |
110 |
98 |
104 |
104 |
Realised Koolan fines FOB price* |
US$/dmt |
- |
106 |
95 |
73 |
86 |
84 |
Realised Mid-West fines FOB price# |
US$/dmt |
44 |
29 |
29 |
26 |
27 |
27 |
Realised Mid-West lump FOB price# |
US$/dmt |
58 |
36 |
35 |
35 |
37 |
36 |
Minor discrepancies may occur due to rounding. |
* Realised Koolan FOB prices reflect a mix of month of shipping
(M), M+1 and M+2 averages, referencing the Platts 65% Fe Index.
Realised prices are shown after shipping freight, provisional
pricing adjustments, and specification adjustments/penalties. #
Realised Mid-West FOB prices are shown after shipping freight
and specification adjustments/penalties. Mid-West sales since
the June 2019 quarter have comprised only shipments of low grade
cargoes. |
kwmt = thousand wet metric tonnes. US$/dmt = USD per dry metric
tonne. |
For the purpose of wet to dry tonnage conversion, moisture
content typically averages circa 3% for Koolan Island fines and
circa 4% for Mid-West products. |
COVID-19 BUSINESS RESPONSE
Since early March 2020, the rapid global spread of Coronavirus
(COVID-19) has necessitated significant and evolving responses by
industry and government to slow the transmission rate of the virus. This
has involved severe restrictions on the movement of people into and
within Australia, and the implementation of strict social distancing
requirements.
In collaboration with relevant authorities, the Australian resources
sector has developed a range of stringent protocols allowing controlled
movement of mining sector workers, notably fly-in/fly-out personnel, in
order that essential activities and production can be maintained whilst
limiting the potential spread of COVID-19 within the Australian
population.
The wellbeing of its employees, contractors and local communities
remains Mount Gibson’s primary consideration. Accordingly, the Company
has implemented a range of measures across its business consistent with
advice from state and federal health authorities. The measures are
particularly stringent for the Koolan Island operation given the
Kimberley region is subject not only to the Western Australian
Government’s travel restrictions but also to Federal Government
biosecurity requirements.
These measures have included stringent pre-travel screening and
documentation, detailed social distancing during travel and at site,
enhanced cleaning and personal hygiene measures, extended rosters to
minimise travel, relocation of interstate personnel to WA, and
replacement of commercial flights for Koolan Island personnel with
dedicated air charter services. Site manning levels have also been
reduced since mid-March by deferring non-essential work and implementing
a freeze on interstate recruitment.
Mount Gibson’s iron ore operations on Koolan Island in the Kimberley
region, and at Extension Hill and the Geraldton Port in the Mid-West
region, have consequently been able to continue albeit with increasing
travel and operating constraints resulting in additional costs. This
includes increased expenditure associated with bringing forward
procurement of critical spares and consumables to avert potential supply
chain interruptions.
OPERATIONS
Sales of high grade Direct Shipping Ore (DSO) from Koolan Island
totalled 0.44 Mwmt in the March quarter. In addition, 0.59 Mwmt of low
grade material from Extension Hill was shipped from the Geraldton Port
in the quarter.
Mount Gibson is pleased to report that, notwithstanding the current
global uncertainty, its customers have all continued to perform their
obligations under its various offtake agreements for both its Koolan
Island and Mid-West operations.
Koolan Island
A total of 3.7 Mwmt of ore and waste was mined at Koolan Island during
the March quarter, a reduction of 9% from the prior quarter. This
reflected the previously reported cyclone-related heavy rain events in
January, further disruptions associated with additional cyclonic
activity in late February and early March, and the necessary operational
changes implemented as part of the Company’s COVID-19 response.
Ore production reflected the waste stripping schedule. As previously
indicated, the planned elevated stripping phase of the mine, during
which waste movement is at its highest and ore production at its most
variable, is scheduled to be completed over the next 18 months.
Thereafter, sales will rise and costs will decline in step with the
significantly reduced waste to ore stripping ratio.
Ore production in the March quarter totalled 545,000 wmt, approximately
29% lower than in the preceding period. Ore sales in the quarter were in
turn restricted to six shipments totalling 439,000 wmt of high-grade DSO
fines, taking sales for the first nine months of the 2019/20 financial
year to just over 1.8 Mwmt.
The average grade of shipments in the quarter was 65.6% Fe. Sales from
Koolan Island are made under long term offtake agreements on FOB terms,
with the sale occurring upon shipment loading at Koolan Island. At
current spot prices for high grade iron ore and based on the average
life-of-mine product grade of approximately 65.5% Fe, each Panamax cargo
has a gross value of approximately $9 million FOB.
Notwithstanding the reduced physical performance, Koolan Island
generated operating cashflow of $15 million in the quarter before
capitalised waste stripping investment of $16 million and initial
construction costs on the new airstrip of $5 million. The net site
cashflow was a deficit of $6 million.
Mining performance improved during March as mine planning and scheduling
initiatives have been progressively implemented. As noted in Mount
Gibson’s operational update released to the market on 30 March 2020,
mining and ore production are expected to improve further in the June
2020 quarter, subject to there being no further interruptions related to
COVID-19 or significant adverse weather events.
Geotechnical works on the island-side Main Pit footwall (i.e.
depressurisation drilling, cable bolting, shotcreting and installation
of safety mesh) have also proceeded well. Seawall (hanging wall)
instrumentation and monitoring data continues to demonstrate that the
new seawall, which incorporates the installed impermeable seepage
barrier and has been under full tidal loads for well over one year, is
safe and performing to design expectations.
The site also successfully loaded its first Kamsarmax-class bulk carrier
during March. These vessels are capable of carrying up to approximately
80,000 wmt relative to conventional Panamax vessels of approximately
72,000 wmt. Further use of these vessels may facilitate some modest
shiploading and transport efficiencies.
Infrastructure Investment - Airstrip
As previously reported, in the December 2019 quarter the Company
approved construction of a new 2.1 kilometre sealed all-weather airstrip
in the centre of the Island, with estimated construction and
commissioning costs of $20 million.
This new airstrip is expected to deliver significant safety and
efficiency benefits to the operation by enabling direct flights by jet
aircraft from Perth. This will reduce average transit times for
Perth-based employees, helping minimise fatigue and improve general
employment conditions. It will also deliver operating cost benefits over
the life of the operation. Regular charter flights to/from Broome and
Derby will be maintained to accommodate the ~20% of site personnel
residing in the local region.
The onset of the global COVID-19 pandemic has further demonstrated the
value of this development, which will eliminate the need for most of the
Koolan Island workforce to transit through Broome. The new airstrip is
now considered a key element of Mount Gibson’s longer term COVID-19
management plan.
Construction of the airstrip is proceeding well, with initial flights
presently anticipated for October this year. Opportunities to expedite
the schedule of this project are being pursued.
Mid-West Operations – Extension Hill
Mount Gibson commenced the existing low-grade sales program from the
Extension Hill mine site in June 2019. Sales since that time have
totalled nearly 2.2 Mwmt. Cashflow from the program is modest but these
sales will also assist in final site rehabilitation works.
Sales in the March quarter were in line with plan totalling
approximately 587,000 wmt, comprising 233,000 wmt of low-grade lump
material and 354,000 wmt of low-grade fines. Cashflow for the quarter
totalled $5 million including $2 million from the ongoing rail credit
refund. Sales for the nine-month period have totalled 1.9 Mwmt.
Marketing to further extend the program has resulted in sales
arrangements recently being finalised for the balance of the financial
year. Possible further sales beyond that point are under investigation.
Operations in the Mid-West continue to proceed well and costs remain in
line with plan. Recently introduced regional travel restrictions to
limit the spread of COVID-19 are not at this stage anticipated to
significantly impact the Mid-West operations, however this will be
further assessed over time.
Quarterly Operating Statistics
|
Mar-19 |
Jun-19 |
Sep-19 |
Dec-19 |
Mar-20 |
2019/20 |
Quarter |
Quarter |
Quarter |
Quarter |
Quarter |
YTD |
KOOLAN ISLAND |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
Mining & Crushing |
|
|
|
|
|
|
Waste mined |
4,148 |
3,588 |
2,985 |
3,276 |
3,113 |
9,374 |
Ore mined |
8 |
544 |
651 |
763 |
545 |
1,959 |
Ore crushed |
5 |
425 |
661 |
722 |
432 |
1,815 |
Shipping/Sales* |
|
|
|
|
|
|
Standard DSO Lump |
- |
- |
- |
- |
|
|
Standard DSO Fines |
- |
370 |
664 |
733 |
439 |
1,836 |
Total |
- |
370 |
664 |
733 |
439 |
1,836 |
MID-WEST |
|
|
|
|
|
|
Mining & Crushing |
|
|
|
|
|
|
Waste mined |
- |
- |
- |
- |
- |
- |
Ore mined |
- |
- |
- |
- |
- |
- |
Ore crushed |
57 |
385 |
882 |
694 |
484 |
2,060 |
Shipping/Sales* |
|
|
|
|
|
|
Standard DSO Lump |
254 |
- |
- |
- |
|
|
Standard DSO Fines |
148 |
- |
- |
- |
|
|
Low grade Lump |
- |
120 |
473 |
478 |
233 |
1,184 |
Low grade Fines |
- |
118 |
238 |
172 |
354 |
763 |
Total |
402 |
237 |
711 |
649 |
587 |
1,948 |
CONSOLIDATED DATA |
|
|
|
|
|
|
Shipping/Sales* |
|
|
|
|
|
|
Standard DSO Lump |
254 |
- |
- |
- |
- |
- |
Standard DSO Fines |
148 |
370 |
664 |
733 |
439 |
1,836 |
Low Grade Lump |
- |
120 |
473 |
478 |
233 |
1,184 |
Low Grade Fines |
- |
118 |
238 |
172 |
354 |
763 |
Total |
402 |
607 |
1,375 |
1,382 |
1,026 |
3,784 |
kwmt = thousand wet metric tonnes. |
* Mount Gibson ships in Panamax vessels which contain an average
of 60,000 wmt from Geraldton Port in the Mid-West, and generally
72,000 wmt from Koolan Island. |
Minor discrepancies may appear due to rounding. |
(To contact the reporter on this story: cody.wang@steelhome.cn or 86-555-2238837 18725550282) |