Mount Gibson pulls guidance

WHILE Mount Gibson Iron has successfully convinced the Western Australian government its workers should not be locked out of the Kimberley after new regional travel restrictions come in, the company has been forced to walk back its production outlook and cost guidance.
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Koolan Island was always going to have a difficult second year.

Haydn Black

Reporter

 
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While sales of low-grade stockpiles from Extension Hill in the Mid West region, and mining on Koolan Island, have continued despite the increasing travel and operating constraints announced in response to the COVID-19 pandemic, the coronavirus is yet another complication in a difficult environment.
 
Production at Koolan Island for the March quarter was lower due to difficult mining conditions arising from several cyclones.
 
The miner already expected variable production and higher waste stripping requirements in the second year following the restart, until scheduled waste stripping ratio significantly reduces from the third year.
 
With so many issues, Mount Gibson said it was no longer able to provide reliable sales and cost predictions.
 
In January, the company bumped up its full-year sales guidance by 30% to between 4.8-5.3 million tonnes as it was able to extend its sales from the Mid West until April.
 
While Mount Gibson expects improved ore production and sales from Koolan Island in the June quarter, sales in the immediate future will likely fall short of expectations while costs will be higher.
 
Sales this quarter are expected to be 1Mt, with 400,000t of high grade fines ore from Koolan Island and 600,000t from the Mid West stockpiles.
 
There was some good news. 
 
Its offtake partners are meeting their obligations, and mining rates increased this month, and are expected to improve in the next quarter.
 
Mount Gibson expects the new travel restrictions set to begin on April 1 could have some impact. 
 
But, fortunately, 90% of its workers live in WA and will not be impacted by interstate travel bans, and it has secured biosecurity authority from the state government and police to travel to the Kimberley region, where strict  restrictions will be imposed to protect small communities.
 
Last quarter the miner decided to construct a sealed airstrip on Koolan Island capable of taking direct jet flights from Perth. It expected to begin flights in October, but given the COVID-19 pandemic it is looking to speed up the development. 
 
With cash and investments of A$397.9 million at December 31, the miner said it was well-placed to ride out the current turmoil. 
 
Shares in Mount Gibson dropped 10% after the announcement, falling to 67c, valuing the company at $775 million.