Key Points (all
currency in Australian dollars unless stated otherwise)
• Iron ore sales of 1.2
million wet metric tonnes (Mwmt) in the quarter, comprising 0.52 Mwmt of
Koolan Island high-grade fines and 0.64 Mwmt of Extension Hill low-grade
material from the Mid-West. For the 2019/20 financial year, iron ore
sales totalled 4.9 Mwmt, comprising 2.3 Mwmt of high-grade Koolan Island
fines and 2.6 Mwmt of Mid-West low-grade material.
• Group cashflow for the
quarter of $24 million before Koolan airstrip construction costs of $9
million, and for the financial year of $72 million before Koolan
airstrip construction costs of $14 million.
• Cash and liquid
investments of $423 million at 30 June 2020, and no borrowings.
• Group unit cash costs* of
$79/wmt Free on Board (FOB) for the quarter and $72/wmt FOB for the
financial year. Koolan site cash costs were $113/wmt FOB for the quarter
reflecting the investment in advanced waste stripping as well as
COVID-19 impacts, and Mid-West cash costs were below plan at $39/wmt
FOB.
• In response to the
COVID-19 pandemic, Mount Gibson ensured operational continuity through
significant changes to site operating protocols, travel arrangements
(including the direct chartering of jet aircraft) and workforce rosters
in line with Government and health advice.
• For the 2020/21 financial
year ahead: At Koolan Island, the
focus will be on increased mining movements to substantially complete
the planned open pit waste stripping phase. Shipment volumes are
expected to be slightly lower than in the year just completed but will
increase significantly from 2021/22 onwards;in the Mid-West, the low
grade sales program is now expected to continue to late 2020;planning work is well
underway for development of the Company’s Shine iron ore project, with a
development decision scheduled for the current September quarter.
• Production and cost
guidance for the 2020/21 financial year will be provided when Mount
Gibson releases its 2019/20 full year financial results on 19 August
2020.
* Sales and cost information is
unaudited, and subject to period-end adjustments. Cash costs are
reported FOB and include operating costs, royalties, sustaining capital
expenditure and allocated corporate costs.
Comment
Mount Gibson Chief Executive
Officer, Peter Kerr, said: “Mount Gibson achieved an improved
performance in the June quarter despite substantial operating challenges
related to COVID-19 restrictions in the Kimberley region biosecurity
zone, and the business ended the first full year since Koolan Island’s
restart in solid shape.
“We successfully added to our
cash and investment reserves over the year and enter the new financial
year well positioned to complete the planned stripping phase at Koolan
Island and set up the operation for strong production and cashflows in
future years.
“Meanwhile, our Mid-West
business continues to deliver positive results. Low grade sales from
Extension Hill will now extend into late 2020, while additional
near-term production opportunities, notably the Shine iron ore project,
are under consideration as we continue to pursue longer-term growth
ambitions.”
PERFORMANCE
AT A GLANCE
|
Unit |
Jun-19 |
Sep-19 |
Dec-19 |
Mar-20 |
Jun-20 |
2019/20 |
Quarter |
Quarter |
Quarter |
Quarter |
Quarter |
Year |
Standard DSO product sales |
kwmt |
370 |
664 |
733 |
439 |
516 |
2,352 |
Low-grade sales |
kwmt |
237 |
711 |
649 |
587 |
643 |
2,590 |
Total
Ore Sales |
kwmt |
607 |
1,375 |
1,382 |
1,026 |
1,158 |
4,942 |
Platts
62% Fe CFR price, average |
US$/dmt |
100 |
102 |
89 |
89 |
93 |
93 |
Platts
65% Fe CFR price, average |
US$/dmt |
115 |
110 |
98 |
104 |
108 |
105 |
Realised Koolan fines FOB price* |
US$/dmt |
106 |
95 |
73 |
86 |
97 |
87 |
Realised Mid-West fines FOB price# |
US$/dmt |
29 |
29 |
26 |
27 |
28 |
27 |
Realised Mid-West lump FOB price# |
US$/dmt |
36 |
35 |
35 |
37 |
40 |
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
From early March 2020, the
Coronavirus (COVID-19) global pandemic necessitated significant and
evolving responses by industry and government to slow the transmission
rate of the virus, including restrictions on the movement of people into
and within Australia, and strict social distancing requirements.
The wellbeing of employees,
contractors and local communities is Mount Gibson’s priority.
Accordingly, a range of measures have been implemented across Mount
Gibson’s operations consistent with advice from state and federal health
authorities. These measures were particularly stringent for the Koolan
Island operation which was subject to travel restrictions imposed by the
Western Australian Government and Federal Government biosecurity
requirements from late March to early June 2020. Mount Gibson’s site
personnel responded admirably.
Measures included pre-travel
screening and declarations, social distancing during travel and on site,
enhanced cleaning and personal hygiene measures, extended rosters to
minimise travel, support for the relocation of interstate personnel to
WA, and replacement of commercial flights for Koolan Island personnel
with dedicated jet charter services. Non-essential work was deferred and
a freeze placed 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, were consequently
able to continue albeit with increasing travel and operating constraints
resulting in some additional cost.
The staged relaxation of travel
and social restrictions has now allowed a return to “normal” FIFO
rosters (notably 2 weeks on/1 week off). However, various general
protocols have been maintained to reduce the risk of virus transmission,
including pre-travel screening, dedicated charter flights for Koolan
Island FIFO personnel and enhanced cleaning and hygiene measures on
site. Mount Gibson remains ready to respond promptly in the event of any
required reinstatement of government restrictions.
OPERATIONS
Sales of high-grade ore from
Koolan Island totalled 0.52 Mwmt in the June quarter. In addition, 0.64
Mwmt of low-grade material from Extension Hill was shipped from the
Geraldton Port in the quarter.
Koolan Island
A total of 3.9 Mwmt of ore and
waste was mined at Koolan Island during the June quarter being a 5%
improvement on the prior quarter despite adverse impacts of unseasonal
heavy rainfall totalling 270mm in three days at the end of May. Such
rainfall is unusual outside the November-March wet season, and disrupted
operations in the bottom of the Main Pit in the first half of June.
Mining activity returned to targeted levels in the latter half of the
month.
Performance in the quarter was
also impacted by operational changes implemented as part of the
Company’s COVID-19 response and by slow mining rates in the western end
of the Main Pit where mud sediments arising from the 2014 pit flooding
were extracted. This work has since been substantially completed.
As previously indicated, the
planned elevated stripping phase of the mine, during which waste
movement and operating costs are at their highest and ore production is
most variable, is scheduled to be completed over the next 12-18 months.
Thereafter, sales will rise and cash costs will decline in step with the
significantly reduced waste to ore stripping ratio.
Ore production in the June
quarter totalled 805,000 wmt, 48% higher than in the preceding period.
Ore sales in the quarter increased 17% but were restricted to seven
shipments totalling 516,000 wmt of high-grade fines due to the
unseasonal heavy rains in late May, which deferred a scheduled June
cargo into the first week of July. Ore sales for the financial year
totalled 2.35 Mwmt.
The average grade of shipments
in the quarter was 65.1% Fe and for the year 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 an average
product grade of 65% Fe, each Panamax cargo has a gross value of
approximately $10 million FOB.
Geotechnical works on the
island-side Main Pit footwall (i.e. depressurisation drilling, cable
bolting, shotcreting and installation of safety mesh) continue to
proceed to plan. Seawall (hanging wall) instrumentation continues to
demonstrate that the new seawall, which incorporates the installed
impermeable seepage barrier and has been under full tidal loads since
late 2018, is safe and performing to design expectations.
Notwithstanding the weather and
COVID-19 related disruptions, Koolan Island generated operating cashflow
of $22 million in the quarter before capitalised waste stripping
investment of $7 million and construction costs on the new airstrip of
$9 million. The net site cashflow was therefore $6 million. Operating
costs are detailed in the Cost Performance section of this report.
Infrastructure Investment -
Airstrip
As previously reported, the
Company is constructing a new 2.1 kilometre sealed all-weather airstrip
in the centre of the Island. Construction and commissioning costs are
estimated at $20 million, with first flights anticipated in October
2020. Expenditure in the quarter totalled $9 million.
Construction has proceeded in
line with plan. Foundation earthworks and sealing activities were
completed in June, and line marking in early July. Remaining activities,
including construction of the terminal and refuelling facilities,
installation of lighting and instruments, and formal certification by
regulators, are anticipated to be completed in the current quarter.
This new airstrip is expected to
deliver significant safety, efficiency and cost reduction benefits to
the Koolan Island operation by enabling direct jet flights from Perth.
The COVID-19 pandemic has further demonstrated the value of this
development.
Mid-West Operations
Mount Gibson commenced the
existing low-grade sales program from the Extension Hill mine site in
June 2019. Sales since that time have totalled over 2.8 Mwmt.
Sales in the June quarter were
in line with plan totalling approximately 643,000 wmt, comprising
232,000 wmt of low-grade lump material and 410,000 wmt of low-grade
fines. Sales for the year totaled 2.6 Mwmt.
Cashflow for the quarter
totalled $6 million, including $2 million from the ongoing rail credit
refund.
Operations in the Mid-West
continue to proceed well and costs remain in line with plan (refer Cost
Performance section of this report). Regional travel restrictions to
limit the spread of COVID-19 were lifted in May and did not
significantly impact the Mid-West operations. Mount Gibson remains ready
to respond promptly in the event of any required reinstatement of
government restrictions.
Marketing to further extend the
low-grade sales program to the end of calendar 2020 is being finalised
based on remaining available low grade stockpiles.
Shine Project
Planning work is underway for
development of Mount Gibson’s Shine iron ore project located
approximately 85km north of the Extension Hill mine site. Mount Gibson
expects to complete its assessment and consider a development decision
during the current September quarter.
Development of the Shine project
was deferred amid deteriorating market conditions in late 2014 but the
project now represents a potential near-term production opportunity with
minimal start-up capital requirements and total Measured, Indicated and
Inferred Hematite Resources of 10.8 Mt grading 58.2% Fe1.
The project is well advanced
with regard to permitting and approvals. During the June quarter, the WA
Government renewed the State environmental approval for Shine, thereby
extending the time in which development can commence to June 2023. Mount
Gibson is reassessing previously reported capital expenditure and
operating cost estimates in light of optimised open pit mine planning
and available logistics/transport options.
Sales and Cost Guidance for
2020/21
For the 2020/21 financial year
ahead, the focus at Koolan Island is on increased mining movements to
substantially complete the planned open pit waste stripping phase ahead
of ore shipment levels rising significantly from the following year
onwards. Shipment volumes for Koolan Island in 2020/21 are expected to
be slightly below those in the year just completed and will increase
significantly from 2021/22 onwards.
In the Mid-West, the low grade
sales program is expected to continue to late 2020, and planning work is
already underway for development of the wholly-owned Shine iron ore
project, with a development decision scheduled for the current September
quarter.
Production and cost guidance for
the 2020/21 financial year will be provided when Mount Gibson releases
its 2019/20 full year financial results.
Full Year 2019/20 Financial
Results
The Company plans to release its
full year financial results on 19 August 2020.
Quarterly
Operating Statistics
|
Jun-19 |
Sep-19 |
Dec-19 |
Mar-20 |
Jun-20 |
2019/20 |
Quarter |
Quarter |
Quarter |
Quarter |
Quarter |
Year |
KOOLAN ISLAND |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
Mining & Crushing |
|
|
|
|
|
|
Waste
mined |
3,588 |
2,985 |
3,276 |
3,113 |
3,053 |
12,426 |
Ore
mined |
544 |
651 |
763 |
545 |
805 |
2,765 |
Ore
crushed |
425 |
661 |
722 |
432 |
556 |
2,371 |
Shipping/Sales* |
|
|
|
|
|
|
Standard DSO Lump |
- |
- |
- |
|
|
|
Standard DSO Fines |
370 |
664 |
733 |
439 |
516 |
2,352 |
Total |
370 |
664 |
733 |
439 |
516 |
2,352 |
MID-WEST |
|
|
|
|
|
|
Mining & Crushing |
|
|
|
|
|
|
Waste
mined |
- |
- |
- |
- |
|
- |
Ore
mined |
- |
- |
- |
- |
|
- |
Ore
crushed |
385 |
882 |
694 |
484 |
265 |
2,325 |
Shipping/Sales* |
|
|
|
|
|
|
Standard DSO Lump |
- |
- |
- |
|
|
|
Standard DSO Fines |
- |
- |
- |
|
|
|
Low-grade Lump |
120 |
473 |
478 |
233 |
232 |
1,417 |
Low-grade Fines |
118 |
238 |
172 |
354 |
410 |
1,174 |
Total |
237 |
711 |
649 |
587 |
643 |
2,590 |
CONSOLIDATED DATA |
|
|
|
|
|
|
Shipping/Sales* |
|
|
|
|
|
|
Standard DSO Lump |
- |
- |
- |
- |
|
- |
Standard DSO Fines |
370 |
664 |
733 |
439 |
516 |
2,352 |
Low-grade Lump |
120 |
473 |
478 |
233 |
232 |
1,417 |
Low-grade Fines |
118 |
238 |
172 |
354 |
410 |
1,174 |
Total |
607 |
1,375 |
1,382 |
1,026 |
1,158 |
4,942 |
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
72,000-79,000 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) |