Mount Gibson Iron Limited shares smashed 45%: Here's what you need to know

The iron ore sector is no place for the faint-hearted. If you needed any convincing, just look at Mount Gibson Iron Limited's (ASX:MGX) performance today…

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Shares of junior iron ore miner Mount Gibson Iron Limited (ASX: MGX) have crumbled today, losing 18.5 cents per share or 45.12% to be trading at a record low 22.5 cents. Today's loss tops off a woeful 11 months which has seen the miner's shares decline a massive 84.7% since peaking at $1.21 in February.

Mount Gibson

Source: Google Finance

So What:

Having reopened from a week-long suspension today, Mount Gibson Iron announced that it was placing its Koolan mine on "effective care and maintenance", until such time when a definitive decision can be made on the mine's future. The closure, which follows on from the collapse of the Main Pit seawall last week, will see the majority of the miner's workforce made redundant. Investors should also expect writedowns in the near future.

At the same time as demand growth from China is diminishing, BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are ramping up their supplies, which is forcing the commodity's price lower. As of this morning, iron ore was changing hands for just US$71 a tonne.

Of course, Mount Gibson Iron isn't the only miner struggling under the circumstances. Atlas Iron Limited (ASX: AGO) yesterday announced it would lay off 80 workers as a result of the waning commodity price, while Fortescue Metals Group Limited (ASX: FMG) has also been forced to cut three senior executive positions recently. To top it off, BC Iron Limited (ASX: BCI) shares have fallen 9% today, with investors possibly fearing a similar announcement from the miner some time in the near future.

Now What:

The heavy falls in the iron ore industry act as a perfect reminder of just how dangerous this sector is right now. Although the low share prices might look tempting, investors wanting to spare themselves from an enormous amount of financial pain should look elsewhere for investing bargains.

Motley Fool contributor Ryan Newman (@ASXvalueinvest) does not own shares in any of the companies mentioned.

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