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Thank you for joining today's teleconference for the release of Mount Gibson Iron September quarter activities report. Mount Gibson Chief Executive Officer Peter Kerr will be leading the discussion and is joined by Chief Financial Officer, Gill Dobson; and External Relations Manager, John Phaceas. Mr. Kerr will provide a brief overview, after which there will be an opportunity to ask questions. [Operator Instructions] A recording of the call will also be available via the Mount Gibson website shortly after completion of today's teleconference. Please go ahead, Peter.
Thanks, Eli, and good morning, all, and thanks for joining us to discuss Mount Gibson's September quarter report. Look, I appreciate that some of our investors and the analysts who follow us will be at the Diggers & Dealers Conference in Kalgoorlie. However, we've sought to release our quarterly report earlier than usual so that our presentation tomorrow can cover the latest information. So regarding the September quarter, we started the new financial year on a positive note with continued improvement at Koolan Island in terms of material movement, production and sales, and we've also taken the key step to further extend the life of our Mid-West business through our Shine project. Total ore sales for the quarter were 1.4 million wet metric tons, which was 19% higher than in the June quarter, and we generated ore sales revenue of AUD 129 million FOB. So that's Free on Board is the way we report. Sales were split roughly half-half between Koolan and the Mid-West, with sales of the high-grade Koolan Island fines increasing 30% quarter-on-quarter to 672,000 tonnes, and that was a good start to the year given current pricing, of course. We also continued the low-grade sales program from Extension Hill in the Mid-West, with the sales there totaling 701,000 tonnes at continued low cost.Significantly, last week, we also announced a planned extension of the Mid-West business by declaring an ore reserve estimate for the first stage called Stage 1 of the Shine DSO project. We're aiming to commence sales from Shine in the middle of next year at a rate of around 1.5 million tonnes per year for an initial life of 2 years, and we have the potential based on the resource base to extend for an additional 2 years after that, depending on the market conditions at that time. At Koolan Island, our new airstrip is also ready to receive the first jet carrying our personnel later this week, and that represents a major benefit for both our operational efficiency and the well-being of the site workforce. During the quarter, the group unit cash costs averaged AUD 56 per tonne FOB sold, and that was before the capital investment in advanced waste stripping of $24 million at Koolan Island. So overall, on a group basis, the cash flow totaled $32 million for the quarter, comprising operating cash flow from Koolan after the waste investment of $26 million; operating cash flow from the Mid-West of $8 million, and that included the $2 million from the historic rail refund which is continuing; interest income of $2 million; and corporate admin and foreign exchange costs totaling $4 million. Then following the payment of $16 million for the cash component of last year's final dividend and positive working capital movements of $6 million, the net increase in our cash and investments balance over the quarter was $22 million, and that took our total cash and investment reserves at 30 September to AUD 445 million.So turning to Koolan now in a little more detail. Our mining performance at Koolan continues to improve, and that's been aided by dry season conditions, ongoing optimization work and some recruitment gains. Total material movement increased 35% on the prior quarter to 5.2 million tonnes, and our unit mining costs per tonne moved reduced to our targeted levels. From a geotechnical perspective, the mine continues to perform to plan. The seawall is working to design a normal operational geotechnical activities on the footwall, which comprise depressurization drilling, cable bolting, shotcreting and meshing continue to progress well. So aided by the strong iron ore prices in the quarter, Koolan generated operating cash flow of $50 million before the capitalized waste stripping investment of $24 million to generate the net cash flow of $26 million that we stated earlier. The site cash costs were consistent with achieving our full year guidance at AUD 66 per tonne sold FOB, and that was before the advanced waste stripping investment.So the new airstrip, as I mentioned, is now effectively operational, and the first jet flight, which will bring our personnel directly from Perth, is scheduled to occur in a few days' time. This follows a successful proving flight by Fokker 100 jet just over a week ago. It's a significant positive development for us because it will deliver some productivity benefits as well as improvements for the well-being of our people, particularly in fatigue risks and reduced traveling times. It will also play an important role in our ongoing COVID-19 management plans. Looking forward, as everyone knows, I think the operational focus at Koolan over the next 12 to 18 months is on completing the elevated waste stripping phase in the Main Pit, and this will see us move about 50% more waste this year than we did last year. And given that required advanced waste stripping investment, which will total around $100 million this year, overall expenditure will be at its highest at this time and production most variable, in line with the waste cycle. But this waste movement represents a critical investment, which will enable us to significantly increase ore sales and cash flow at much reduced unit costs to occur from next financial year onwards. It's always been part of the life-of-mine plan, and we're very fortunate that we have high iron ore prices at this point, which will see us perform well this year on it. As we indicated in guidance release with our financial results, sales from Koolan Island this financial year are anticipated to be between 1.8 million and 2.1 million tonnes weighted towards the latter part of the year. Ore production and sales will be substantially lower between November and March, and that's in line with our plan, where we have the peak of the waste mining cycle and also the height of the Northern Australian wet season. And then our sales will increase after that time. We'll also look to bring forward cargoes as and when our mining cycle allows, and we've successfully done that in the past. As noted in August, we'll also be investing a further $20 million on capital improvement projects at Koolan, primarily on an upgrade of the crushing circuit to handle the greater volumes of ore we are scheduled to produce from next financial year onwards. In relation to the Mid-West, the operation continues to generate steady sales and cash flow. We shipped 701,000 tonnes of low-grade material in the quarter, and the cash cost was AUD 40 per wet metric ton FOB sold, and that was in line with our guidance. Consequently, the Mid-West operation generated cash flow of $8 million, as I mentioned, and that included the $2 million of the ongoing rail credit refund. As indicated in August, we now expect low-grade sales to extend well into the December quarter and for this financial year to total somewhere in the range of 1 million to 1.2 million tonnes. Also in the Mid-West, in relation to the Shine project, which is located 85 kilometers north of Extension Hill, last week, we declared an initial Stage 1 ore reserve of 2.8 million tonnes at an average grade of 59.4% iron, and we aim here to commence sales in mid next year. As with our low-grade program, we've adopted a stage development plan for the Shine project so that we can stay aligned with market conditions. Stage 1 is expected to cost between $17 million and $20 million to bring online, and predominantly, that represents road works costs and site establishment costs. And we'll produce around 1.5 million tonnes per year of lump and fines products over the initial 2-year period, with an average cash operating cost, excluding royalties, of between AUD 65 and AUD 70 per tonne. Our pit optimization work has assumed an average 62% Fe iron ore price of USD 70 per tonne CFR and an exchange rate of $0.67. Obviously, it's moved up a little since then. But even at those levels, our project looks very robust at current and anticipated prices. The Stage 1 ore reserve represents only a portion of the total measured and indicated mineral resource. And subject to market conditions remaining supportive, we'll see the potential to add another couple of years of production by proceeding with Stage 2 at that time in the future. Stage 1 costs are based on trucking the ore by road, about 300 kilometers from the Shine site to our port facilities in Geraldton, although, importantly, we're also in discussions with a number of groups about potentially more cost-effective alternative transport options. Our state environmental approvals for Shine are already in place, and we're now in the process of finalizing the remaining permitting and commercial arrangements with a view to commencing physical works on the site early next year. The project requires a 3-month time frame for pre stripping, so we'd expect to commence ore sales in the middle of 2021. We're pleased to be able to get Shine moving as -- for those who might remember, we originally deferred it when the market was very soft back in 2015. And so this project will provide a meaningful extension of our existing operating presence in the Mid-West, which actually commenced way back in 2004. In terms of prices during the quarter, we continue to benefit from good prices due to strong underlying demand from China and ongoing supply issues in various countries in the world, in particular, Brazil. The average Platts 62% Fe CFR price was USD 118 in the quarter, and that was up from $93 in the prior quarter. And more relevant for us, the 65 Index also improved and averaged USD 129 CFR. So that's for delivery in China in the quarter. However, as is consistent with historic periods of higher pricing, we did see the high-grade premium reduce slightly from an average of 11% in the June quarter to 4% in the September quarter. And as a result, our blending strategy was adjusted to maximize tonnage with some minor reductions in grade, meaning that we sold an average grade in the September quarter of 63.8%. The Koolan DSO fines realized an average price of USD 104 per tonne FOB in the quarter after penalties, and that was compared with $97 in the June quarter. Also shipping freight rates did increase a little in the September quarter, with the rates of Panamax vessels going from Koolan Island to China averaging approximately $10 a tonne, up from the range of $7 to $8 per tonne in the June quarter. In relation to low-grade material from the Mid-West, which is sold on a fixed price basis, we realized an average price of USD 30 per tonne FOB for fines and $41 for lump, slightly above the prices we achieved in the prior quarter. So before closing, I also just wanted to note that we continue to incorporate COVID-19 management practices in our business, although we were fortunate to be able to return to normal FIFO rosters at the start of the quarter in July. This was a significant positive at that time, especially from a health and fatigue perspective for our people. We have retained key protocols to reduce the risk of virus entry and transmission, and we do remain alert and ready to respond promptly in the event of any required reinstatement of government or other restrictions. So in summary, the company had a robust September quarter, good start to this financial year, with production and sales at good levels from each site and cash flows correspondingly strong. We're well underway with the focused waste stripping investment required at Koolan Island to set that mine up for strong operating cash flows from next year onwards. And we're also working to commence the Shine project in the Mid-West with, as I mentioned, initial sales targeted for around the middle of next year. So on that note, I hand back now to you, Eli, and -- for any questions that we may have. Thanks.
[Operator Instructions] [ It would ] seem there are no questions at this stage, Peter.
Okay, Eli, no problem. Unsurprising, given that Diggers & Dealers is on at the moment in any case, and we look forward to our presentation tomorrow morning at that conference. So thanks all for listening and speak to you soon.
Thank you, guests. As your host has now said the conference has finished, you may simply hang up your lines.