What happened in the first half?
During the first half, Mount Gibson delivered a net profit after tax from continuing operations of $45.2 million, down from $80.0 million in 1H18. However, this was actually nearly triple last year’s $15.4 million underlying profit once the $64.3 million proceeds from the Koolan Island business interruption insurance settlement is removed from the 1H18 reported profit.
Ore tonnes mined fell to 1.9 million wet metric tonnes (mwmt) down from 2.2 mwmt a year ago.
However, the company’s average realised price jumped 18.5% to $64 per wmt sold and this increased sales revenue by over 50% to $177.4 million.
This strong financial performance was achieved thanks in large part due to a strengthening iron ore price across all ore grades, with steelmaker margins lifting in China and curtailment of Brazil high-grade production following ongoing Vale difficulties.
Mount Gibson saw its net cash position decline slightly from $457.5 million in FY18, as the Koolan Island production restart drained $65.5 million and $18.3 million in dividends saw the closing balance reach $431.0 million.
Management expects to see its first ore sales from the Koolan Island mine in April 2019 and projected FY19 ore sales are currently 0.7-1.0 mwmt.
Sales guidance for FY19 remains unchanged at 2.7-3.3 mwmt for the company, with an all-in forecast Group cash cost of $52-$57 per wmt at the loading port (Free on Board or “FOB”).
Should you invest?
Whilst I’m not big on mining shares, and particularly not in the iron ore sector, I think this result shows that Mount Gibson Iron can mix it with the likes of Newcrest Mining Limited (ASX: NCM) and Resolute Mining Limited (ASX: RSG) in terms of growth and profitability.
But if you’re bearish on the iron ore price then I would suggest you check out these top growth shares that have been tipped as market beaters.
Forget what just happened. We think this stock could be Australia's next MONSTER IPO...
One little-known Australian IPO has doubled in value since January, and renowned Australian Moonshot stock picker Anirban Mahanti sees a potential millionaire-maker in waiting...
Because 'Doc' Mahanti believes this fast-growing company has all the hallmarks of genuine Moonshot potential, forget 'buy now pay later', this stock could be the next hot stock on the ASX.
Returns as of 6th October 2020
Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
- Is Vicinity Centres (ASX:VCX) a top ASX dividend share? – October 19, 2020 12:27pm
- How I’d position my ASX share portfolio for the next market crash – October 19, 2020 12:07pm
- How to turn $20k in ASX shares into $1 million in 30 years – October 17, 2020 12:00pm