Australian iron ore producer Mount Gibson Iron has cut its production guidance for this year, while extending the closure of the main pit of its 4mn t/yr Koolan Island iron ore mine to three months.
Mount Gibson revised down its production guidance for the 2014-15 fiscal year ending 30 June to 6mn-6.4mn t from 6.6mn-7mn t, after reporting further instability in the sea wall at its Koolan Island mine in offshore Western Australia.
The sea wall first slumped on 24 October, prompting Mount Gibson to move all workers to other operations outside of the main pit, including accelerating production at the Acacia East pit. The company initially said the repair work on the main pit would take four weeks but today extended it to three months. Repairs to the main pit will cost A$5mn-A$10mn ($4.3mn-$8.6mn).
Koolan Island mine produces direct shipping ore with Fe around 60pc and low-grade Rizhao Special Product (RSP) with Fe around 53pc. The RSP is sold through an offtake agreement with Chinese long product steelmaker Rizhao Steel.
Mount Gibson is struggling to make a profit in the current weak price environment for iron ore, with it planning to reassess the book value of its iron ore assets to ensure their value reflects market conditions.
The Argus ICX iron ore price assessment is at 74.05/t cfr China for Fe 62pc ore, down from $132.70/t at the start of the year. Many of Australia's smaller iron ore mining firms are making a loss at current prices, while large-scale producers BHP Billiton and Rio Tinto are still making around $30/t.
joc/rjd
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