GWR Group (ASX:GWR) share price plunges 21% on iron ore update

GWR’s shares continue to swim in a sea of red today. Here’s a closer look.

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The GWR Group Ltd (ASX: GWR) share price has plummeted 21% during early trade on Wednesday and now trades at 11 cents each.

GWR shares are trending down after the company announced a key update regarding the future of its mining operations.

Let’s take a closer look.

What did GWR announce?

GWR advised that it had “shipped approximately 660,000 tonnes of ore since February 2021” upon completion of its September consignment.

However, it also added it had “halted mining operations at the C4 Iron Ore Mine for 30 days” whilst it “monitors” volatility in iron ore markets.

The decision was made due to a rapid downturn in iron ore prices since July.

For reference, the spot price of iron ore has come off a record high of US$230/tonne in May.

It settled around US$226/tonne from June to July and now trades at US$104.50/tonne. That’s a 54% decrease in a matter of weeks.

Given GWR’s position as an ASX resource share that produces commodities – in this case, iron ore – it is considered a price taker. As such, its share price fluctuates alongside volatility in the broader commodity markets.

This fact appears to be weighing in on GWR Group’s share price as investors sell off shares in the metals’ exploration and mining company to avoid “catching the falling knife” if iron ore continues to plummet.

GWR also holds a “significant inventory of mined iron ore stockpiles”. As such, it is “considering its position in regard to recommencing operations” and “may resume mining or pivot its focus as required”.

What did management say?

Commenting on the announcement, GWR’s chairperson Gary Lyons said:

Whilst it is disappointing that mining operations have temporarily ceased at the C4 Iron Ore Mine, it is important to note GWR remains in a strong positon to resume operations as the mine will be left in a production ready state in order to take advantage of a recovery in iron ore prices.

Lyons added:

GWR is currently engaged with other iron ore producers who have expressed interest in accessing via minegate sale the mined high grade ore in order to blend it with their product.

GWR Resources share price snapshot

The GWR Resources share price has struggled this year and has posted a loss of 74% this year to date. This extends its loss over the past 12 months to 41%.

Its price now sits well off its single-year high of 45 cents. Indeed, today sets a new 52-week low for the mining exploration company.

Both of GWR’s results are well behind the benchmark S&P/ASX 200 Index (ASX: XJO)’s return of around 25% over the past year.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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