'Iron ore prices decline and rapid rise in shipping rates' - another iron ore miner halts operations
(Kitco News) - After Venture Minerals (ASX:VMS) announced on September 17 that it is temporarily halting iron ore shipments from its Riley iron ore mine in Tasmania due to the metal's recent precipitous fall, another miner followed suit.
Mount Gibson Iron Limited said today that given recent significant adverse movements in iron ore prices, product discounting and shipping freight
rates, the company will implement a staged suspension of operations at the Shine mine site, located in the Mid-West and at Koolan Island in the Kimberley region of Western Australia.
The operation will continue ore mining and processing over the next month to facilitate a shipment around the end of October, following which the site will be placed on "care and maintenance" pending an improvement in iron ore market conditions, the company said in its statement.
"This is a disappointing decision for the company given that the Shine mine is in its first year of operation," the company commented. "However, this is the commercially sensible course of action in order to reduce expenditure and preserve the value of the deposit, as well as to provide time to assess the outlook for the iron ore market."
Mount Gibson explained that the substantial recent decline in iron ore prices has been exacerbated by a significant widening of discounts and penalties for medium and lower grade iron ore products, a rapid rise in shipping freight rates from
Geraldton Port (from under US$15 per tonne shipped to China to over US$30 per tonne currently), and relatively high road transportation costs in the Mid-West given the distances involved.
Mount Gibson said it will retain a core team to keep the site secure and in good standing to enable activity to be promptly restarted should market conditions permit, and will also seek to redeploy some employees to available roles at its Koolan Island operations.
"In light of the planned suspension of operations at Shine, sales guidance for the site is withdrawn for the 2021/22 financial year," the company added.