Feasibility study and exploration expenditures have weighed on Murchison Metals, which today booked a $20.3 million loss for the first half of the 2010 financial year.
Feasibility study and exploration expenditures have weighed on Murchison Metals, which today booked a $20.3 million loss for the first half of the 2010 financial year.
The major expenditure item for the period was $32.4 million to finance feasibility studies and exploration costs for Crosslands Resources Ltd (Crosslands) and Oakajee Port & Rail (OPR). The feasibility studies are due for completion later this year.
Murchison owns 50 per cent of Crosslands and OPR, the respective developers of the Jack Hills iron ore project and the Oakajee port and rail infrastructure project serving the burgeoning iron ore industry in the Mid West region of Western Australia. The remaining 50 per cent of both Crosslands and OPR is owned by Mitsubishi Development Pty Ltd.
The December period saw record iron ore shipments by Crosslands to a range of customers across Asia. Customer shipments from the Stage 1 project rose 21 per cent to 920,000 tonnes and costs per unit fell due to a number of efficiency measures put in place at the mining and transportation stages.
However, lower iron ore prices and the higher Australia/US dollar exchange rate in the December half impacted significantly on the operating result, though the spot price for iron ore has rebounded strongly in the current half.
While most of Crosslands' sales are at benchmark prices, analysts are also expecting a significant increase in the 2010 benchmark iron ore price. Crosslands' contribution to the Murchison consolidated interim result was ($10.1 million).
OPR also made significant progress during the December half towards completion of a feasibility study which it is required to undertake in accordance with OPR's obligations under the State Development Agreement that was executed in March 2009.
OPR is on track to deliver this study to the state later this month.
OPR is also progressing Implementation Agreements with the WA government setting out more detailed arrangements for the design and construction of the new Oakajee port and associated rail infrastructure.
OPR met all of its key milestones in 2009, including executing confidentiality agreements with key mine customers, EPA approval for a Public Environmental Review level of assessment for the port terrestrial and rail projects, and commencement of environmental and Aboriginal heritage surveys.
Murchison executive chairman Paul Kopejtka said that "both Crosslands and OPR were making great progress with the feasibility studies for their respective projects".
"Demand for iron ore remains robust based on strong market fundamentals and it is our expectation that this will continue in the medium to long term underpinning the development of the mid-west region of Western Australia. Based on this, the mid-west miners have demonstrated their keenness to start exporting their products through Oakajee," he said.
Shares in Murchison closed up two cents to $2.67 today.
