29/09/2021 - 15:35

Mount Gibson mine in doubt

29/09/2021 - 15:35

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Mount Gibson Iron’s Shine project in the Mid West could become the fourth iron ore mine to halt operations this month after the company called a trading halt.

Mount Gibson exported first ore from Shine last month. Photo: Mount Gibson Iron

Mt Gibson Iron’s Shine project in the Mid West could become the fourth iron ore mine to halt operations this month after the company called a trading halt.

The Perth-based company today requested a trading halt pending an update on mining operations at Shine following what it called recent iron ore price volatility.

That is code for the halving in the benchmark iron ore price over the past two months to about $US112 per tonne.

Mount Gibson’s announcement comes only one month after exporting its first shipment from Shine, which was expected to produce a modest 1.5 million tonnes per annum.

The company has previously disclosed that cash operating costs at Shine would average $75 to $80 per tonne, once shipments had ramped up.

This was before waste stripping costs of about $20 million and before government and vendor royalties.

The company has also previously acknowledged it anticipated cost pressures during the early phase of the mine, when all the ore would be trucked 300 kilometres to port.

Mount Gibson had planned to recommission an old railway siding to reduce transport costs.

Another factor squeezing Mount Gibson and other junior miners is the sharp increase in shipping costs on Panamax vessels.

Shipping rates between the Mid West and China are believed to have doubled to about $30 per tonne in recent months.

Yet another negative has been the increased pricing discount applied to lower-grade ore.

The Shine project had an initial reserve grading 59.4 per cent Fe (iron), whereas the benchmark price is based on ore grading 62 per cent Fe.

If Mount Gibson does suspend operations at Shine, as expected, the company will focus on its much larger and higher-grade Koolan Island project.

Its trading halt comes after three other companies suspended their iron ore mining operations.

Perth-based GWR Group has suspended mining for a month at its C4 mine in the Mid West.

Another Perth company, Venture Minerals, has suspended operations at its Riley mine in Tasmania after just one shipment.

And one week ago, the East Kimberley iron joint venture (EKIJV) suspended operations at its Ridges mine, which exported through Wyndham.

The Ridges project was operated by Welshpool-based Indus Mining on behalf of private owner Habrok Mining.

The joint venture had been operating Ridges since July last year whilst progressing development of the Matsu mine, a nearby deposit with a higher grade of ore and an expected life of 4 to 5 years.

It said the decision to suspend operations was made after completing an exhaustive review of every currently available scenario.

“The recent dramatic drop in the iron ore price to a level of below US$100/tonne on a 62% Fe basis equates to a sales price for the EKIJV which, after adjusting for grade and other qualities, results in significant losses on every tonne of ore sold,” the joint venture said in a statement.

In addition to GWR, Venture and EKIJV, it has been rumoured that Sinosteel Midwest Corporation has halted its small-scale mining operation at Blue Hills in the Mid West.

Other Perth companies looking to enter the iron ore market, including Strike Resources and CZR Resources, have been reviewing their plans.

Strike announced earlier this month it had modified its plans at the Paulsens East iron ore project in the Pilbara.

The company is planning to cut costs by focusing its initial mining on 400,000 tonnes of surface ore and low strip ratio material.

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