From Bloomie,
Back in November, the prospects appeared bleak for Mount Gibson Iron. Its biggest mine, Koolan Island was engulfed by seawater after the collapse of part of the 75-metre wide wall that kept out the Indian Ocean and Eric.
Now with a Bloomberg index of 28 producers, including Vale and Rio Tinto, gaining 12 per cent this month and optimism prices for the steelmaking ingredient may rise from their five year-lows, Mount Gibson is studying whether to fix the wall, drain the pit and restart mining.
“By the time we come to make that decision, we’ll be more confident about what the outlook looks like than now,” Jim Beyer, chief executive, said by phone after surveying the site. “I’m modestly optimistic.”
“The market fundamentals suggest that the price has to be higher in the long term,” said Nicki Ivory, a Perth-based national mining leader at Deloitte Touche Tohmatsu.
And, as BCIron collapses into loss:
The first half of FY2015 was challenging for BC Iron. The 62% Fe CFR China iron ore price continued to decline and averaged US$82 per dry metric tonne (“dmt”). BC Iron also experienced clay-related production issues at its key operating asset, the NJV, which affected production and costs. During the half-year the NJV shipped 2.33M wet metric tonnes (“wmt”) (BC Iron’s share: 1.83M wmt) at C1 cash costs of A$60 per wmt on a free on board (“FOB”) basis. BC Iron’s average realised CFR price was US$64 per dmt.
BC Iron recorded revenue of $133.3M, an EBITDA loss of $8.2M and net loss after tax of $96.3M for the halfyear. After adjusting for non-cash and one-off items, the Company’s underlying net loss after tax was $18.4M.1 BC Iron’s net loss after tax includes non-cash impairments of $100.2M (pre-tax), comprising $99.7M in relation to BC Iron share of NJV mine property and $0.6M in relation to inventory. The impairments follow a review of the carrying value of assets as at 31 December 2014 and reflect the current outlook for the iron ore market. As noted above, BC Iron’s financial results for the period were materially impacted by operational challenges at the NJV, where additional clays were detected in discrete areas of certain orebodies at the NJV during the September 2014 quarter.
The occurrence of these clays necessitated the implementation of various initiatives which resulted in both reduced production and increased costs during the August to October period. During this period, the NJV shipped 0.78M wmt (3.1Mtpa run-rate) or approximately four shipments below expectations, and realised an increased waste to ore ratio of 3:1 and a processing yield of approximately 80%. These figures are not reflective of typical steady-state operational figures generally experienced at the NJV, and resulted in fixed costs being spread over lower tonnages and an increase in unit mining and processing costs. If tonnes shipped for the half-year had reflected a typical operational period, BC Iron expects that it would have generated an EBITDA of approximately $5-15M, primarily because incremental tonnes would have been more profitable and only incurred variable costs. This figure also assumes transaction costs associated with the acquisition of Iron Ore Holdings Limited (“IOH”) of $7M are added back.
The NJV successfully ramped back up to steady-state operations during November 2014 and achieved sales of 1.03M wmt during November and December (6.2Mtpa run-rate) at a C1 cash cost of A$49 per wmt (FOB). Significant improvements in the waste to ore ratio (0.9:1) and processing yield (90%) were also achieved during this period. These improvements have been reflected in BC Iron’s operating cash flow for the three months from November to January of approximately $15 million despite further falls in the iron ore price.
So, MGX can contemplate expansion and BCI make money at current iron ore prices. And we’re at the bottom?
