MINER Mount Gibson Iron has emerged from a difficult December quarter to post a healthy start to 2009 despite the ongoing uncertainty in the iron ore market.
MINER Mount Gibson Iron has emerged from a difficult December quarter to post a healthy start to 2009 despite the ongoing uncertainty in the iron ore market.
In its March quarterly report released this week, the company reported a 39 per cent lift in overall sales and resumed mining activities at its Tallering Peak operation in the Mid West.
It also signed a term sheet and mandate letter with its banking syndicate to amend its banking facilities, with the first $25 million repayment due in September next year.
Earlier this month, the company settled a dispute with an unnamed off-take customer after it failed to collect iron ore cargoes allocated to it under its long-term contract.
The good news comes nearly seven months after Mount Gibson stunned the market with news that a number of its customers had requested iron ore shipment delays.
The announcement cemented suspicions of a slowdown in demand for iron ore in China, a turnaround from earlier in the year when the world's largest iron ore miners negotiated record price deals.
The slowdown forced Mount Gibson to slash 190 jobs, raise extra capital and sell a portion of its iron ore at a discount to the benchmark prices to two Chinese entities, in what has been described as a carpe diem moment for the foreign entities.
While the water has settled somewhat, the miner will be waiting on the outcome of the benchmark iron ore price negotiations, which has continued beyond its April 1 deadline.
"The iron ore market is sort of in limbo at the moment; there's a very wide range of expectations for the commodity," ANZ commodities analyst Mark Pervan said.
Estimates of the price discount has put some analysts and market observers at odds, with some tipping a 20 to 30 per cent drop while others have forecast a fall of up to 40 per cent.
"We need to see a narrowing in expectations to get an idea of where its iron ore price negotiations are going to land," Mr Pervan said.
"At the moment Rio has given an expectation of a 20 per cent cut by offering a temporary 20 per cent cut in contract sales, in the hope that that's where the new price will lie."
Steel mills are asking for a 40 to 50 per cent price reduction as stockpiles at Chinese ports sit at 68 million tonnes, nearly double from the usual 30 to 40 million tonnes.
