Mount Gibson reports huge loss

Junior iron ore miner Mount Gibson Iron Limited (ASX: MGX) reported a huge loss for the 12 months ended 30 June 2015 as a result of the plummeting iron ore price and massive impairment charges.

Meanwhile, Mount Gibson’s net loss for 2014/15 was sparked by $945 million in non-cash impairment charges while sales more than halved to $316 million.

That was compared to a profit of $96.4 million in the previous corresponding period.

In the past six months Arrium Steel became profitable for the first time since the GFC, although it still recorded a $33.2 million loss for the full year.

The iron ore division’s earnings (before interest, tax, depreciation and amortisation) were hit even harder, declining from $600 million to just $90 million past year.

Domestic steel demand improved on the back of increased residential construction, particularly in high rise apartments and large commercial projects in New South Wales, pushing up sales volumes by 4 per cent. However, it said its efforts are beginning to bear fruit.

“We are targeting further additional, annualised cost reductions of at least $60m in financial year 2016”, it said, adding iron ore prices and other external factors would influence earnings.

The company did not declare a final dividend after declaring 9 cents a share a year ago. It said interest in its mining consumables business, which supplies steel balls used in mining machines that grind ore, has been especially strong.

Mount Gibson forecasts all-in cash costs of between $50 and $54 a wet metric tonne, including exploration.

Managing director Andrew Roberts said the year had been very challenging and prices remained under pressure amid “continuing negative sentiment, uncertainty and price volatility”.

The West Australian miner was forced to take impairments after iron ore prices plunged and the main pit seawall at its Koolan Island operations failed in November.

Mount Gibson says it will not pay a dividend due to the company’s results and its desire to preserve future growth options.