Key Points (all currency in
Australian dollars unless stated otherwise):
• Quarterly iron ore sales
of 0.9 million wet metric tonnes (Mwmt), comprising 0.4 Mwmt of Koolan
Island fines and 0.5 Mwmt of low-grade material from the Mid-West
operations. Sales for the half year ended 31 December 2020 totalled 2.3
Mwmt, consistent with guidance.
• Group cashflow for the
quarter totalled $62 million before investment at Koolan Island of $40
million in scheduled advanced overburden stripping and $2 million in
capital projects, for group net cashflow of $20 million. Group net
cashflow for the half year totalled $52 million.
• Group unit cash costs of
$56/wmt Free on Board (FOB) for the quarter, before Koolan advanced
overburden stripping and capital projects. Koolan site cash costs were
$65/wmt FOB and Mid-West cash costs were $40/wmt FOB.
• Cash and liquid
investments at 31 December 2020 of $436 million, with no borrowings.
• Strong iron ore prices
enabled the Koolan Island operation to produce significantly higher than
planned cashflows despite the constraints of the scheduled overburden
stripping program, a rockfall on the Main Pit footwall reported in
November which will require additional ground support measures, and
heavy wet season rains in December.
• The successful Mid-West
low-grade sales program concluded at the end of the quarter when
available material was fully depleted. The program has yielded sales of
4.1 Mwmt and cashflow of $30 million since June 2019. Rehabilitation and
closure activities are now underway at Extension Hill.
• Development activities on
the Shine Iron Ore Project in the Mid-West have accelerated with initial
site works now commenced and shipments targeted for early in the
September quarter. The Shine Project is an attractive development
proposition in the current iron ore pricing environment.
• Mount Gibson is targeting
to substantially complete the Koolan Island overburden stripping phase
and Shine development in the next six months. As previously disclosed,
total ore sales during this period will be lower than for the first half
but are expected to be within annual guidance, before increasing
significantly thereafter, subject to successful implementation of the
Koolan Main Pit footwall support measures. Cost guidance will be updated
with the Company’s half-year financials.
Comment
Mount Gibson Chief Executive
Officer, Peter Kerr, said: “Mount Gibson delivered a steady performance
in the December quarter and half year, with iron ore sales in line with
plan amid challenging weather and mining conditions at Koolan Island
late in the year. In the Mid-West, our low-grade sales program was
successfully completed in December and progress at the Shine Iron Ore
Project has accelerated with site works underway in order to meet our
target of first ore sales early in the September quarter.
As scheduled, ore shipments will
be lower during the next six months as we progress the peak overburden
stripping phase at Koolan Island and develop Shine. However, strong iron
ore prices continue to reduce the net investment required at Koolan
Island compared with our original expectations during this period, and
pricing outlooks remain very solid. Ore sales and cashflows are set to
rise sharply from mid-2021 as the overburden stripping phase is
substantially completed at Koolan Island and Shine enters production.”
PERFORMANCE AT A GLANCE
|
Unit |
Dec-19 |
Mar-20 |
Jun-20 |
Sep-20 |
Dec-20 |
Quarter |
Quarter |
Quarter |
Quarter |
Quarter |
Standard DSO product sales |
kwmt |
733 |
439 |
516 |
672 |
396 |
Low-grade sales |
kwmt |
649 |
587 |
643 |
701 |
534 |
Total
Ore Sales |
kwmt |
1,382 |
1,026 |
1,158 |
1,373 |
930 |
Platts
62% Fe CFR price, average |
US$/dmt |
89 |
89 |
93 |
118 |
134 |
Platts
65% Fe CFR price, average |
US$/dmt |
98 |
104 |
108 |
129 |
146 |
Realised Koolan fines FOB price* |
US$/dmt |
73 |
86 |
97 |
104 |
149 |
Realised Mid-West fines FOB price# |
US$/dmt |
26 |
27 |
28 |
30 |
34 |
Realised Mid-West lump FOB price# |
US$/dmt |
35 |
37 |
40 |
41 |
45 |
OPERATIONS
Sales of high-grade fines ore
from Koolan Island totalled 0.4 Mwmt in the December quarter. In
addition, 0.5 Mwmt of low-grade material from the Mid-West was shipped
from Geraldton Port in the quarter representing the successful
completion of the low-grade sales program from the Extension Hill mine
site.
Shine Project
Development planning for the
Shine Iron Ore Project, located approximately 85km north of Extension
Hill, was reactivated in 2020 having been deferred amid deteriorating
market conditions in 2014/15.
Early in the December quarter
Mount Gibson declared initial Ore Reserves1 of 2.8Mt grading 59.4% Fe in
the proposed “Stage 1” pit at Shine. Capital development costs are
estimated at $17-20 million, with forecast production of approximately
1.5 Mwmt/year over an initial two-year period at an average cash
operating cost of $65-70/wmt FOB before royalties.
The sustained increase in iron
ore prices and demand in recent months has significantly enhanced the
economics and outlook for the Shine Project. Should market conditions
remain supportive, there is potential to extend the mine life by a
further two years by proceeding with a “Stage 2” pit, based on Measured
and Indicated Mineral Resources within the modelled pit shells. The
Shine project has total Measured, Indicated and Inferred Hematite
Resources1 of 10.8Mt grading 58.2% Fe.
Activity in the December quarter
focused on site preparation, progressing remaining permitting
requirements, and advancing key commercial arrangements. The base
development case assumes ore is hauled approximately 300km by road from
the mine site to the Company’s established export facilities at
Geraldton Port. Alternative transport options are under advanced
negotiation with third parties.
Equipment mobilisation occurred
in the December quarter and site works commenced at the start of
January, including laydown area clearings and establishment of the site
water supply. The mobile mining fleet has been secured and recruitment
of key senior site personnel is also largely completed.
The project remains on schedule
to commence mining in April 2021 to achieve first ore sales early in the
September quarter.
Expenditure on the project
totalled $1 million in the December quarter, and Mount Gibson expects to
incur most of the budgeted capital development expenditure in the June
2021 half year. In addition, approximately $15 million is expected to be
incurred in the current half year period on overburden stripping
assuming mining activity commences in April as planned.
Sales and Cost Guidance for
2020/21
As previously reported, the
focus in 2020/21 is on increased mining movements at Koolan Island to
substantially complete the planned open pit overburden stripping phase
ahead of ore shipment levels rising significantly from next financial
year onwards. In the Mid-West, the focus is on bringing the Shine
project into production as quickly as possible now that low-grade
sources from Extension Hill have been depleted.
In August 2020, Mount Gibson
provided ore sales guidance of 2.8-3.3 Mwmt for the 2020/21 year,
comprising 1.8-2.1 Mwmt of high-grade fines from Koolan Island and
1.0-1.2 Mwmt of low-grade material from the Mid-West.
Sales from the Mid-West were at
the upper end of guidance while mining at Koolan Island has been more
challenging and was interrupted by heavy wet season rains in the
December quarter. Sales from Koolan Island are therefore expected to be
at the lower end of the Company’s guidance range for the 2020/21 year.
With the overburden stripping phase and increased investment in
geotechnical support activities in the Main Pit, ore sales in the March
and June 2021 quarters are expected to be broadly similar to volumes in
the December quarter before increasing significantly in the September
quarter, subject to the implementation of necessary additional footwall
support measures mentioned in the Koolan Island section above.
Reflecting the impact of the
December quarter interruptions on total material movement and on the
increased geotechnical support activities required in the Main Pit,
Mount Gibson expects group unit cash costs in the second half of the
2020/21 financial year to increase from levels achieved in the first
half. Cost guidance will be updated with the release of the Company’s
half year financial results in February.
Mount Gibson Iron Limited
Quarterly Operating Statistics
|
Dec-19 |
Mar-20 |
Jun-20 |
Sep-20 |
Dec-20 |
Quarter |
Quarter |
Quarter |
Quarter |
Quarter |
KOOLAN ISLAND |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
(kwmt) |
Mining & Crushing |
|
|
|
|
|
Waste
mined |
3,276 |
3,113 |
3,053 |
4,544 |
5,259 |
Ore
mined |
763 |
545 |
805 |
672 |
184 |
Ore
crushed |
722 |
432 |
556 |
683 |
285 |
Shipping/Sales* |
|
|
|
|
|
Standard DSO Lump |
- |
- |
- |
- |
|
Standard DSO Fines |
733 |
439 |
516 |
672 |
396 |
Total |
733 |
439 |
516 |
672 |
396 |
MID-WEST |
|
|
|
|
|
Mining & Crushing |
|
|
|
|
|
Waste
mined |
- |
- |
- |
- |
- |
Ore
mined^ |
- |
- |
- |
155 |
423 |
Low-grade material crushed |
694 |
484 |
265 |
680 |
324 |
Shipping/Sales* |
|
|
|
|
|
Standard DSO Lump |
- |
- |
- |
- |
- |
Standard DSO Fines |
- |
- |
- |
- |
- |
Low-grade Lump |
478 |
233 |
232 |
416 |
472 |
Low-grade Fines |
172 |
354 |
410 |
285 |
61 |
Total |
649 |
587 |
643 |
701 |
534 |
CONSOLIDATED DATA |
|
|
|
|
|
Shipping/Sales* |
|
|
|
|
|
Standard DSO Lump |
- |
- |
- |
- |
- |
Standard DSO Fines |
733 |
439 |
516 |
672 |
396 |
Low-grade Lump |
478 |
233 |
232 |
416 |
472 |
Low-grade Fines |
172 |
354 |
410 |
285 |
61 |
Total |
1,382 |
1,026 |
1,158 |
1,373 |
930 |
More Info:
4Q2020 Report |