CANBERRA: BC Iron’s production declined in the fourth quarter after the iron ore junior’s Nullagine joint venture was suspended due to low prices. But the company said a changeover of road haulage arrangements and slower than expected ramp-up by the new contractor was the main reason output was two shipments below expectations in the quarter.
Iron ore shipped fell 38 per cent from 1.4 million tonnes in the September quarter to 870,000 tonnes in the three months to December. Output was down 37 per cent on the prior corresponding period. Nullagine operations remain suspended.
At the 4.15pm (AEDT) official market close, BC Iron shares were down 2.53 per cent to 7.7c against a benchmark rise of 0.6 per cent. BC Iron has a 75 per cent stake in Nullagine, with Fortescue Metals owning the remainder. The duo announced on December 11 they would halt direct shipping ore (DSO) operations at the venture after the spot price fell below $US38 a tonne. The shares dropped 24 per cent that day to 14.5c.
The iron ore price has since slightly recovered to be just over $US41. BC Iron managing director Morgan Ball said the decision to halt the mine was the right one. “We will continue to assess alternative operating models for Nullagine, such as the potential low grade operation, and also ensure we are well placed to restart DSO operations if there is a sustained price recovery or if further cost savings are identified,” he said.
Meanwhile, BC Iron is trialling selling to Fortescue portion of the JV’s 11.1 million tonne stockpile of low grade iron ore. “The trial to sell an unprocessed parcel of low grade ore to Fortescue at Christmas Creek under a mine gate sale arrangement is now expected to be completed in February 2016,” the company said. BC Iron said the reduced shipments had impacted production costs in the quarter, with Nullagine cash costs at $54 per wet tonne.
In contrast, iron ore major Fortescue today posted a record low cash production cost of $US15.80 per wet tonne, down from $US16.90 in the September quarter. Elsewhere, 1.72 million tonnes was shipped by BC Iron’s partner Mineral Resources at its Iron Valley operations, delivering BC Iron $2.5 million in earnings before interest, tax, depreciation and amortisation, “with negligible adjustments relating to prior periods”.
“Mineral Resources continues to progress the beneficiation and bulk ore transport system initiatives that have the potential to improve the economics at Iron Valley for both BC Iron and MIN,” BC Iron said. BC Iron’s cash balance was $42.9m as at December 31, down from $71.8m at September 30. The company said it was reviewing the carrying value of its assets for any impairment for the half.
