ENP Newswire - 21 February 2014
Release date- 20022014 - Mount Gibson Iron Limited is pleased to announce a net profit after tax of $78.3 million for the six months ended 31 December 2013 on record half year sales revenue and record half year ore sales.
This represents an increase of 111% over the net profit reported in the previous corresponding half year (six months ended 31 December 2012), while net operating cashflow rose almost fourfold to $170.6 million lifting the cash and term deposits to a period-end record of $483.9 million, equivalent to $0.44 per share.
Chief Executive Officer Jim Beyer said Mount Gibson's interim net profit after tax of $78.3 million was a strong result built on significant underlying business improvements. 'Our headline profit for the half year tells only part of the story,' he said. 'Our ongoing focus on business optimisation and continuous improvement delivered record sales volumes and revenue, a fourfold increase in operating cashflow and a significant boost in our total cash reserves by over $100 million to a record period-end total of $484 million.
'At the same time, we have established a strong platform for future success by maintaining a diligent focus on cost control, increasing ore reserves at our existing operations, and expanding our suite of exploration and development opportunities, most notably in the Mid West. 'This approach, together with our healthy balance sheet, positions Mount Gibson extremely well for the remainder of the 2013/14 financial year and prepares us well for any future volatility in iron ore prices and market conditions.'
Mount Gibson's strong operational and financial performance was achieved in an environment of continuing healthy demand for iron ore from Chinese buyers and robust iron ore prices, and reflected the Company's continuing focus on the optimisation and cost control of its mining operations.
The half year result also reflected a number of substantial operational achievements during the year. Six month ore sales were a record 5.1 million tonnes, an increase of 15% compared with the prior record set in the first half of the 2012/13 financial year. Half-year sales revenue was also a record at $509.5 million, an increase of 22% over the previous corresponding half year.
Mount Gibson remains on track to achieve record full year sales of 9.0 to 9.5 million tonnes in the current 2013/14 financial year, in line with guidance. This reflects the production ramp-up now underway at Koolan Island which remains on track to reach 4 million tonnes of iron ore per annum by the end of calendar 2014.
It also reflects the successful development of the T1 satellite deposit at Tallering Peak, which has extended the life of the Tallering Peak mine to mid 2014. Cash and term deposits increased over the half year by $107.9 million to a period-end record of $483.9 million at 31 December 2013. This cash balance was achieved after meeting substantial non-operating cash outlays during the half-year on income tax payments ($31.5 million), dividends ($21.8 million), the successful resolution of a historical construction works contract claim ($3.7 million) and the purchase of haul trucks and other key mobile equipment ($13 million).
The reported net profit also includes the recognition of an expected $6.7 million payout from the liquidators of a former customer, Pioneer Iron & Steel Group Company Ltd. The expected distribution arises from an historical arbitration award. More details of the settlement are contained in the Directors' Report of the half year financials.
As advised at the release of the Company's half year financial results in February 2013, Mount Gibson has moved to assess future dividend payments on only an annual, rather than interim, basis going forward. This will enable consideration of a single final dividend based on a full year's financial result.
During the half year period, the Platts CFR index price for delivery of iron ore fines grading 62% Fe to northern China averaged US$134 per dry metric tonne (dmt) compared with US$117/dmt in the previous corresponding half. The vast majority of Mount Gibson's sales contracts are structured as Free on Board (FOB) sales arrangements where the sale occurs in the loading port rather than the delivery port, and the customer incurs the shipping costs. Mount Gibson's average realised FOB price for standard fines product, net of adjustments for iron grade and impurities, was US$108/dmt in the half-year period, up from US$102/dmt previously.
The weighted average realised FOB price for all products sold was approximately $100 per wet metric tonne (wmt) in the half year, compared with approximately $94/wmt in the previous corresponding half year. The weighted average realised price reflects the broader product mix now being sold and changes in the prevailing shipping freight cost deductions. Mine-gate sales and sales of RSP and lower grade ore generated substantial cash margins similar to those for standard DSO sales at prevailing prices.
Cost performance and savings
Total Cost of Goods Sold (COGS) averaged $77.90/wmt FOB for the year, compared with $78.90/wmt in the previous corresponding half year. COGS includes cash and non-cash costs, comprising mining, depreciation of plant and equipment, amortisation of deferred waste stripping and mine development balances, crushing, transport, administration and state government royalties.
During the period, Mount Gibson further pursued cost reductions and improved operating efficiencies, particularly at Koolan Island, as production continued to ramp up to the targeted rate of 4 million tonnes of ore per annum by the end of calendar 2014.
The production ramp-up at Koolan Island remains on schedule and is delivering operational improvements in line with those anticipated when the program was announced in March 2013, with unit cash mining (and site administration) costs averaging in the lower half of the guidance range of $8-10/t moved, and significantly lower than in the prior corresponding half.
This reduction was despite the short term impact of reduced fleet availability in the December 2013 quarter. To help address this, Mount Gibson brought forward by six months the replacement of three haul trucks which were mobilised to site in late December. Mining unit costs are expected to resume their downward trend in the second half of the current financial year as equipment availability and volume movement increases.
Koolan Island ore production was also impacted late in the December quarter by heavy rain related to Cyclone Christine. This short term wet weather-related interruption, and similarly heavy rains in early February, while impacting short term shipping schedules, are not expected to have any material impact on forecast sales and Mount Gibson reaffirms its sales guidance of 9.0 to 9.5 million tonnes for the 2013/14 financial year.
Mount Gibson will host an analysts/institutions teleconference at 10:30am AEDT on 19 February 2014. Investors will be able to listen in to the teleconference by dialing 1800 857 029 immediately prior to the scheduled start time and entering the access code 61492002# at the prompts. A recording of the teleconference will also be available via the Mount Gibson website after completion of the teleconference. In case of difficulties, operator assistance can be reached by calling 1800 857 079 (Australian callers) or +613 8788 6028 (overseas callers).
Chief Executive Officer
Mount Gibson Iron Limited
Mount Gibson Iron Limited
Last Word Corporate Communications
Tel: +61 (0)427-490-992