Mount Gibson Iron Ltd (ASX: MGX) shares are having a day to forget on Friday.
This morning, the ASX mining stock has returned from a suspension and crashed 28% to 34 cents.
Image source: Getty Images
Why is this ASX mining stock crashing?
Investors have been hitting the sell button today after the iron ore miner released an update on its Koolan Island operations.
According to the release, there was a significant rockfall on the eastern footwall (island-side) of the main pit on the night of 16 October.
Thankfully the ASX mining stock advised that no personnel were injured by the rockfall, which had been monitored in advance with continuous radar coverage of pit walls. It highlights that an exclusion zone was implemented in the main pit and all mining remains suspended.
However, following intensive assessment since the incident, which includes input from external geotechnical specialists, Mount Gibson has determined that remediating the rockfall-affected area and resuming mining is not viable.
This is due to the safety risks of potential future instability and the time and investment required to mitigate such risks, especially in the context of the operation's limited remaining mine life. It highlights that prior to the rockfall, production from Koolan Island was scheduled to conclude around September 2026.
Further monitoring will occur during the coming wet season to assess the geotechnical stability of the adjacent footwall areas for potential future access.
For now, mining will remain suspended but processing operations will continue given the availability of ore stockpiles to meet near-term scheduled shipments. There is also the potential for additional sales from lower grade stocks, which was previously retained for blending purposes.
Unsurprisingly, Mount Gibson has withdrawn its sales guidance for FY 2026.
Job losses and rehab costs
The ASX 200 stock advised that it will retain approximately 75 site personnel for the aforementioned activities, but there will be approximately 250 redundancies and the loss of 200 contractor roles.
Net costs associated with this transition are estimated at approximately $30 million to $40 million, including progressive rehabilitation work.
But with cash and investments of $473 million, it is well-positioned to deal with these costs.
Commenting on the news, the ASX mining stock's CEO, Peter Kerr, said:
It is extremely disappointing for the Company and its people that we must prematurely ramp down operations at Koolan Island, however the physical safety of our personnel is our prime consideration. We will now be working closely with our site team, the Dambimangari Traditional Owners and other relevant stakeholders to responsibly manage the transition and preserve a strong legacy in the region.
