Mt Gibson warns of big impairment
Mt Gibson Iron has warned of a big, non-cash impairment of $850-$950 million in its first-half profit result.
The huge hit is mainly attributable to its Koolan Island project, which ceased operations suddenly late last year after a pit wall collapse allowed seawater to flood the mine.
The company is also likely to take a knife to the value of its other assets given the tumbling iron ore price.
It said the $850-$950 million hit did not include a separate, previously flagged, non-cash writeoff of a $46 million deferred tax asset related to the repealed Mineral Resources Rent Tax.
The iron ore miner posted December quarter revenue of $72 million from iron ore sales of 1.2 million wet metric tonnes.
Mt Gibson said it had axed 20 corporate office jobs as it adjusted to new organisation requirements, as well as the 300 mine workers made redundant in December after the Koolan Island pitwall collapse.
However it issued increased full-year sales guidance in a range between 4.8-5.2 million tonnes based on the continuing strong performance of its Extension Hill mine and additional sales planned from the Acacia East satellite pit stockpile on Koolan Island.
The company also highlighted its cash reserves of $354 million at the end of December.
Chief executive Jim Beyer said the December quarter was particularly challenging for Mount Gibson, in light of the continued decline in iron ore prices to five year lows and the failure of the Koolan Island seawall.
"These factors have necessitated significant reductions in the company's workforce and will unfortunately require a substantial non-cash impairment to be recorded in our upcoming half year financial results next month," he said.
"However, the company remains in a very strong financial position with substantial cash reserves and negligible debt.
"We have responded diligently and promptly to preserve capital and further reduce costs while we assess the potential way forward at the Koolan Island operation.
"With efforts at Extension Hill continuing to focus on efficiencies and unit cost reductions to ensure the operation maintains a positive cashflow and near term expenditure significantly reduced at Koolan Island and the Perth office, Mount Gibson has significantly greater flexibility to adapt to changing circumstances."
Shares in the company were off 0.3 cents, or 1.3 per cent, to 22.7 cents at 10.15am.
