14/09/2007 - 10:55

Midwest records half year loss of $1m

14/09/2007 - 10:55

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West Perth-based Midwest Corporation Ltd posted a net loss of $1 million for the six months to June 30, due to difficulties caused by a strong Australian dollar and port congestion, the company has announced.

Midwest records half year loss of $1m

West Perth-based Midwest Corporation Ltd posted a net loss of $1 million for the six months to June 30, due to difficulties caused by a strong Australian dollar and port congestion, the company has announced.

 

 

The full text of a company announcement is pasted below

A strong Australian dollar, accelerated depreciation of road receival assets at Geraldton Port, port congestion, operational compliance issues and tax treatment of employee share options have had an adverse affect on the profitability of Midwest Corporation in the six months to June 30, 2007.

Midwest posted a net loss of $1.00 million for the half year to June 30, 2007.

However, earnings before interest, income tax, depreciation and amortisation ('EBITDA') of $2.91 million was slightly (3%) lower than the corresponding period last year.

Revenue increased in the six months to June 30, 2007 by 41% to $18.55 million. The increased revenue for the half year reflected production and sales of hematite iron ore fines from the existing stockpiles at Koolanooka with 417,242 wet metric tonnes transported to June 30, 2007.

The strong Australian dollar and the congestion at Geraldton Port continued to have a negative impact on revenue. It is expected that the congestion at Geraldton Port will be alleviated with the commissioning of a dedicated iron ore shiploader in December 2007.

Gross profit for the half year to June 30, 2007 was down 51% to $2.63 million reflecting the requirement to depreciate the company's road receival assets at Geraldton Port significantly quicker that their effective life.

This is due to the State Government requiring the company to transfer its haulage operations from road to rail by September 30, 2007.

The company is unable to meet this deadline primarily due to EPA approval processes for the necessary railway siding at Morawa. Midwest has requested an extension to the September 30 deadline on the basis that the delay is substantially outside of the company's control.

No formal response has been received to date from the State Government, however constructive discussions are being held with the State Government regarding the delays and alternative approaches.

EBITDA for the six months to June 30, 2007 was also affected by a significant non cash expense for accounting purposes to recognise the 'valuation' of employee share options issued or approved during the period.

Commenting on the results the company's CEO, Bryan Oliver said, "There have been major operational and compliance challenges during 2007 which have impacted on profitability. Notwithstanding these challenges, the company continues to make pleasing progress towards becoming a world class exporter and developer of iron ore."

Half year in review

During the reporting period the company's activities were focused on:

  • Completion of exploration drilling and upgrading of Resource and Reserve estimations for the Koolanooka, Mungada East and Mungada West hematite deposits to support a proposed expansion of the existing operation to 2 million tonnes per annum (mtpa);
  • Commencement of the transition of the existing Koolanooka hematite operations to open pit mining;
  • Completion of Scoping Studies in conjunction with Sinosteel Corporation (Sinosteel) for the Weld Range hematite project;
  • Appointment of Worley Parsons as lead engineer and commencement of pre-feasibility studies in conjunction with Sinosteel for the Weld Range hematite project;
  • Entering into exclusive arrangements with Yilgarn Infrastructure Ltd (Yilgarn) to develop the Oakajee Port and associated railway to Weld Range and Jack Hills under a State Agreement to which the Company is a party;
  • Continuation of exploration activities for the tenements at Jack Hills;
  • Raising $29.2 million of capital through a share placement to fund project evaluation and development requirements.

Subsequent Events

  • On 4 September 2007, the Company announced an update to the mineral resources at the Weld Range project, being conducted in joint venture with Sinosteel Corporation. The estimated total JORC compliant mineral resource is now 114.4 million tonnes at an average grade of 57.7% Fe, using a cut off grade of 50% Fe.
  • In August 2007, the Company successfully completed a 1:7 rights issue at $1.46 per share raising $38.3 million before costs. The $0.6 million extra funds raised over that announced arose from the exercise of options prior to the record date.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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