BC Iron shares plummeted today after the company announced production at the Nullagine joint venture would be suspended as a result of the weak iron ore price, with more than 200 jobs at risk.
BC Iron shares plummeted today after the company announced production at the Nullagine joint venture would be suspended as a result of the weak iron ore price, with more than 200 jobs at risk.
In a statement, BC Iron said operations at Nullagine would wind down throughout December and January.
Shares in BC Iron were 23.6 per cent lower to 14.5 cents each at the close of trade.
The company is also exploring the possibility of a mine gate sale agreement with joint venture partner Fortescue Metals Group, whereby selling unprocessed low-grade ore from Nullagine, of which there is about 11 million wet metric tonnes stockpiled, to Fortescue at the iron ore giant’s Christmas Creek mine.
The joint venture is on a 75:25 basis with BC Iron holding the majority interest.
“Subject to the outcome of this trial, the NJV could operate at a reduced rate and sell part of the low-grade stockpile to Fortescue on an ongoing basis,” BC Iron said.
“Regrettably, the decision to suspend operations will impact the company’s employees; however this will be considered based on the outcome of the trial low-grade operation.”
There are about 30 BC Iron employees at Nullagine, 30 at its head office, and it also employs 200 contractors at the mine.
BC Iron’s Iron Valley mine, operated by Mineral Resources, and its Buckland project remain unaffected.
BC Iron also flagged an estimated reduction in its cash at bank from $71.8 million at September 30 to between $42 million and $47 million by December 31, resulting from low iron ore sales prices, reduced shipments, payments to creditors and debt facility repayments.
Managing director Morgan Ball said the company’s primary focus remained to create value for shareholders.
“BC Iron is a price taker and unfortunately, despite the commitment and achievements of all BC Iron staff and contractors to successfully reduce our cost base, the iron ore market is such that we have had to make this decision,” he said.
“Importantly, in making the temporary suspension decision now, BC Iron will have options going forward.
“With no material debt on the balance sheet and ongoing cash flow from our Iron Valley operation, we will assess the potential to run a low-grade operation at the NJV and continue to appropriately progress the potential for the Buckland/Cape Preston East port project in the Pilbara.”
