Mount Gibson Iron (ASX:MGX) used its December quarter teleconference to outline how a significant rockfall event at its Koolan Island iron ore operation has reshaped near-term plans, while the company progresses a proposed move into gold through its pending Central Tanami Gold Project acquisition.
Koolan Island rockfall prompts mining suspension and shift to stockpile sales
Chief Executive Officer Peter Kerr said the company’s plans for fiscal 2025/2026 were interrupted in October by a “substantial rockfall” on the eastern footwall of the Koolan Island main pit. He said safety concerns led the company to suspend mining and withdraw production guidance.
In response, Mount Gibson adjusted operations to prioritize monetizing existing iron ore stocks—initially higher-grade material, followed by processing and shipping lower-grade stockpiles that had previously been retained for blending. Kerr said processing and shipping of low-grade stockpile material is now expected to continue into the June 2026 quarter.
Sales volumes, grades, pricing, and cash flow
During the December quarter, total sales were 0.8 million wet metric tons. Kerr said this included four shipments of high-grade material averaging 62.6% Fe and six shipments of lower-grade material averaging just under 50% Fe.
For the half-year, shipments totaled 1.35 million tons, comprising 870,000 tons of high-grade material at 63.7% Fe and just under 500,000 tons of low-grade material (all of which occurred in the December quarter) at just under 50% Fe.
On realized pricing, Kerr said the 62% fines index averaged $106 per ton in the quarter, up from $102 per ton in the prior quarter, while the 65% index averaged $118 per ton. He also said the Australian dollar averaged $0.656 and freight rates from Koolan Island to China increased by about $1 per ton to average $13 per ton.
Mount Gibson reported the four high-grade fines shipments (averaging 62.6% Fe) realized an average price of $85 per ton on an FOB basis, while the six low-grade shipments (averaging 49.6% Fe) realized around $42 per ton FOB.
Kerr said the Koolan Island operation generated positive operating cash flow of AUD 15 million for the quarter, comprising AUD 71 million of FOB sales revenue less AUD 45 million of cash operating costs. Within costs, he cited:
- AUD 5 million of redundancy costs
- AUD 4 million of rehabilitation work
- AUD 7 million in WA government and third-party mineral royalties
He said reduced mining volumes contributed to lower unit cash operating costs, which fell to AUD 57 per ton sold FOB (equivalent to $37 per ton), compared with the prior quarter. For the half-year, he said the average unit cost was around AUD 79 per ton FOB.
At the group level, Kerr said free cash flow was also AUD 15 million, reflecting Koolan operating cash flow plus AUD 4 million of interest and other income, which he said slightly more than covered corporate administration and exploration costs.
After working capital movements and an AUD 12 million increase in the value of the company’s equity investment portfolio, total cash and investments increased to AUD 497 million as of 31 December, compared with AUD 473 million at the end of the prior quarter. Kerr said this equated to roughly AUD 0.42 per share and noted the company has no bank borrowings.
Workforce reductions, rehabilitation, and potential insurance claim
Kerr said the operational shift required substantial workforce reductions, resulting in approximately 140 employee redundancies and the loss of 130 contractor roles.
He said Mount Gibson accelerated progressive rehabilitation activities during the quarter using available equipment and personnel, describing this as the most cost-effective approach. He also noted that Koolan Island iron ore mining and processing has “benign characteristics,” including no tailings, and said rehabilitation earthworks were progressing rapidly, with completion targeted for later in the current June half.
Regarding the financial outlook for site activities following the rockfall, Kerr reiterated a previously estimated net cost of AUD 30 million to AUD 40 million for fiscal 2026 post-rockfall activities. However, he said low-grade sales are anticipated to “substantially reduce” that net cost, depending on pricing and volumes sold.
He also said preliminary discussions are underway with insurers regarding a potential claim related to the rockfall incident, with updates to be provided when available.
Central Tanami Gold Project acquisition progresses
Kerr highlighted progress on Mount Gibson’s proposed AUD 50 million acquisition of a 50% interest in the Central Tanami Gold Project from Northern Star, describing it as a diversification into precious metals.
He said the joint venture updated its mineral resource estimate to incorporate new drilling and align historical estimates with current JORC requirements. The updated total resource was reported at 31 million tons at an average grade of 2.8 grams per ton gold for 2.8 million ounces of contained gold.
Kerr said the main Groundrush deposit comprises 11 million tons at 3.3 grams per ton gold for 1.2 million ounces and is expected to be the core of the project. He added that the new estimates were based on an assumed gold price of AUD 3,500 per ounce, compared with what he described as a current spot price of around AUD 7,000 per ounce.
He said the joint venture has since reported further positive drilling results, particularly at the Jims deposit.
On transaction approvals and timing, Kerr said Foreign Investment Review Board approval was received in December, following the joint venture partner’s waiver of its pre-emptive right in August. He said the main remaining condition involves an extension by traditional owners of infrastructure arrangements on one tenement. Kerr said Mount Gibson was encouraged by relationships being built with the Central Land Council and expects to complete the transaction well before the contractual due date of 31 March.
Once the acquisition settles, Kerr said Mount Gibson intends to work closely with Tanami Gold to move toward a development decision “as quickly as possible,” anticipating news flow over the next six to 12 months.
Investments, exploration expansion, and upcoming impairment
Kerr said positive commodity prices helped lift the company’s investment portfolio to AUD 42 million at quarter end, with roughly half related to an approximately 5% interest in AIC Mines and a further AUD 5 million tied to a 5% interest in Maronan Metals. He also referenced Mount Gibson’s 9.7% shareholding and option holding in FEX Resources, valued at approximately AUD 38 million at quarter end.
In exploration, he said the company expanded its portfolio and now holds more than 1,600 square kilometers of tenements in the Edmund Basin in Western Australia’s Gascoyne region. The next planned work program is an airborne gravity survey expected over the next couple of months.
Kerr also noted shareholders approved a change of name to MGX Resources at the November AGM, which took effect before Christmas, reflecting a pivot away from iron ore to precious and base metals.
Looking ahead to reporting, Kerr said the company will release its half-year financial results for the December 2025 period on 19 February. He said the results will include a review and write-down of non-current asset carrying values for Koolan Island, and the company expects a non-cash accounting impairment of AUD 55 million to AUD 65 million before tax.
About Mount Gibson Iron (ASX:MGX)
Mount Gibson Iron Limited, together with its subsidiaries, engages in the mining, crushing, processing, transportation, and sale of hematite iron ore in Australia. The company primarily holds interests in the Extension Hill mine and Shine mine deposit in the Mid-West region of Western Australia, as well as operates haulage of the ore through road and rail for export from the Geraldton Port. It is also involved in the mining and direct shipment of hematite iron ore at the Koolan Island mine site in the Kimberley region of Western Australia; and the treasury management activities.
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