By some estimates, Australia’s pure iron ore miners have lost $10 billion in market value this year as the spot iron ore price has tumbled 45% to just over $US75 a tonne (in fact a year ago it was over $US130 a tonne).
So normally any news that is remotely bad from a local iron ore miner, especially a small one, would be the trigger for a sell-off.
But not to Mount Gibson Iron (MGX) which saw its battered shares rise 5.6% to 46.5c yesterday after it cut its export guidance and revealed the need for extra spending on fixing mining problems at its Koolan Island mine.
In fact Mount Gibson’s export cut was the second we have seen in recent weeks months after BC Iron (BCI) revealed metallurgical problems with its Nullagine mining operations in WA.
Mount Gibson said yesterday that a seawall at the Koolan Island mine (which keeps seawater out of the mining pit), has experienced further slippage after the problem first came to light on October 24.
As a result, the company will cut exports by between 200,000 and a million tonnes – to a range now of 6 million tonnes and 6.4 million tonnes compared with the previous range of 6.6 million tonnes and 7 million tonnes.
MGX YTD – Mt Gibson cuts guidance
"Assessment of the instability has subsequently identified that additional remedial actions will be required to complete repairs and enable production to be safely resumed. Mount Gibson anticipates the planned remediation work may take approximately three months to complete, with an estimated capital cost of $5-10 million.
"Progress of this plan will be closely monitored and updates provided as appropriate.
"Mining continues to be suspended in Main Pit as a precautionary measure. Operations outside Main Pit are continuing as normal, including accelerated production in the Acacia East satellite pit.
“The remediation programme will have no impact on the Koolan Island long term life of mine plan and Mount Gibson will utilise the intervening period to undertake further optimisation and productivity improvement work,” Mount Gibson concluded.
