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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 he's 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. Due to time constraints, only institutional participants will be invited to ask questions at that time. A recording of the call will also be available via the Mount Gibson website shortly after completion of today's teleconference. Thank you, Peter. Please go ahead.
Thanks, Bethany, and good morning all. Thanks for joining us to discuss Mount Gibson's September quarter report, which was released earlier today. As usual, I'll give a brief overview before handing back to Bethany, should there be any questions from the floor. In short, Koolan continued in line with the planned waste stripping phase, but at Shine the operations suffered from significantly adverse price penalty and shipping freight movements, and this necessitated a suspension decision, as we've already announced. As you all know, we're in a phase of substantial investment in our business this year, in particular at Koolan, where we're undertaking a major waste stripping program to lay the foundations for a much stronger operating and financial performance next year and in future years. But there's no dispute in the fact that the September quarter was challenging for junior and mid-tier iron ore producers and including some of the majors. And then obviously, on the mid-tier sector, included us. This was due to the dramatic deterioration of market conditions in which the iron ore price has halved, product discounts and penalties have also substantially increased and shipping freight charges have more than doubled, in particular from Geraldton Port in the Midwest. And while the implications for Koolan Island were limited in the context of the waste stripping program that's happening there, the change conditions did drive the need for a prompt response in relation to our Shine operation in the Midwest. And this is where we'll progressively suspend activities over the next few weeks as we make our last shipment or two. This is a sensible course of action in the circumstances and will help us to preserve the value of the asset and assess the outlook for iron ore market conditions while we maintain the potential for a restart of the site should conditions substantially improve. Total ore sales for the quarter came to 439,000 tonnes of material, which were not representative of our production going forward to generate revenue of $29 million FOB before provisional pricing adjustments. Koolan contributed 320,000 tonnes of low-grade material, which averaged 55.6% Fe, and that was extracted from the upper western fringe of the main pit and the Acacia East satellite pit, both areas in which mining has finished for the time being. The other 119,000 tonnes of sales was lump products from Shine, grading just under 59% Fe. These sales realized an average cost of USD 91 per tonne FOB after shipping freight rates from Geraldton moved up above USD 30 in the quarter and have continued to rise since. The widening gap compared with the benchmark pricing for 62% Fe demonstrates while accessing the high-grade ore at Koolan Island is a key objective for us. Financially, during the quarter, our key investments comprised net expenditure of $82 million at Koolan Island and a net cash outflow of $17 million at Shine. Cash and investments at the end of the quarter totaled $250 million, and we have no borrowings. Turning now to Koolan Island in more detail. Mining productivity generally improved, although ongoing labor shortages, and that's mostly COVID-related are continuing to impact operations. That said, high total material movement rates were maintained through the quarter with 4.9 million tonnes of western ore mine similar to the prior quarter. A unit mining, logistics and administration costs were $10.71 per tonne of material mine also similar to the prior period. Significantly, mining is now resuming in the western floor of the main pit where activity has been restricted since the upper footwall rockfall late last year. This follows the effective completion of the ground support work on the footwall in that Western most zone. Expenditure on the footwall program totaled $6 million in the quarter and the footwall ground support anchoring work is now moving to the central part of the main pit. As I mentioned, production in the quarter was confined to the lower grade material from the upper Western fringe journey Acacia East satellite pit, and this provided modest revenues. All volumes will remain limited in the December quarter, but will increasingly be sourced from higher grade zones within the main pit. This high-grade ore will be blended with the remaining stocks with the objective of targeting December quarter shipments at around 60% Fe. As the waste stripping in the footwall ground support programs are further advanced, increased ore volume and grade of circa 65% Fe are expected in the second half of the financial year. We continue to target sales of around 2 million tonnes from Koolan Island this financial year, heavily weighted in the second half, as we've commented, both in terms of volume and grade. Now this, of course, does remain subject to the progress of the ground support work on the footwall and our waste stripping program, in particular, the extent of any wet season interruptions. The other key investment program at Koolan Island is the upgrade of the crushing infrastructure, and this is designed to ensure sufficient capacity to handle increased grade ore tonnages schedule -- sorry, increased high-grade ore tonnages scheduled over the following 5 years. The crusher upgrade will be completed in the December quarter. And in the meantime, the existing client will be sufficient to meet currently scheduled shipments. Expenditure on the crusher upgrade totaled $12 million in the September quarter. And before I move on to the Midwest, I'd also note that we released our annual resource and reserve statement a week or so ago. And this confirmed the ore reserves at Koolan Island of 17.5 million tonnes, grading at 65.3% Fe are all sitting in the main pit. Koolan remains 1 of the highest grade direct shipping hematite ore reserves globally. And so combined with the deposits low level of impurities, and that particularly includes alumina, phosphorus and sulfur. The underlying value proposition is highly attractive for us. This is especially so given the increasing importance of high-grade feedstocks in reducing the carbon intensity of steel production and boosting steel mill productivity. So to put it in context, the benchmark price to 65% Fe bond is currently still around USD 150 per tonne CFR and reflecting the widening of the high-grade premium in recent months. Hence, this gives us our fate in the outlook for Koolan Island as we seek to progressively lift the grades and production volumes over this financial year. Turning now to Shine in the Midwest. It was obviously disappointing to have to announce operations will be suspended. Sales in the September quarter totaled $120,000, grading 58.8% Fe. To date, operations side have progressed in line with plan, which is a great credit to the site-based team. However, the rapid deterioration in the market conditions left us with little choice other than to suspend the operation and preserve its value. While the benchmark iron ore price has retraced its highs from earlier this year, the price for lower-grade products has fallen even faster with the great adjusted discount for 58% material now sitting around 30%. And at the same time, penalties for impurities such as silica and alumina have also risen sharply for various reasons, and the shipping freight rates have increased, as I mentioned earlier. Net cash outflow at Shine totaled $17 million in the September quarter, and that reflected the final development commissioning and initial operating costs, and the sales there are scheduled to end in the current December quarter. And accordingly, we've also -- we've drawn our prior sales guidance for the operation. On a more positive note, the work at site is running very well, and I'm pleased that the majority of Mount Gibson's employees at Shine have either accepted or are considering redeployment to the Koolan operation, which will have the effect of alleviating some skill shortages we're seeing in some areas at Koolan. We will also maintain the Shine site in a state in which it can be promptly restarted, should there be a sufficient and sustainable improvement in market prices, notably including the shipping freight rates. Just before we leave the Midwest, we've increased our exploration footprint around our former Tallering Peak mine and in competitively pegged areas to the north of that area, where we see good prospectivity for base metals. And during the quarter, we conducted initial mapping and sampling within our tenement holdings, which identified targets for drilling programs that are currently being formulated. So in summary, the September quarter was not surprisingly a challenging 1 given the significant weaker iron ore market. However, we acted promptly to preserve the value of the Shine deposit, and are now undertaking it's final shipments and have stuck to our Koolan waste stripping plan, which is continuing in order to set that mine up for significantly higher production and cash flows from next year onwards. So with that, I'll hand back to Bethany for any questions that anyone may have. Thanks, Bethany.
[Operator Instructions]We do have a question. Our first question is from Jon.
Just touching back on Shine. currently, I suppose, ramp down. What pricing do you need to get that thing back up or what headwinds do you sort of need to go away to get that back up? And how quick would the ramp-up be when the targets are hit?
Sure, Jon. Okay. So in relation to the second part of your question, I'll do with that first, it would be reasonably prompt in that commercial arrangements would need to be reestablished although we're retaining good relationships there. And so I don't have an exact period, which it will take us, but relatively short. The main piece will be the contract crushing arrangements in that how we would organize that. So we're going to put some work into that area with our existing contractor and potentially others to work out where we go from there. But given the site is established, the mine is already well underway and all would be available reasonably promptly. It wouldn't be a lengthy period of time. In terms of your -- the first part of your question, the trigger price, it's not quite as simple as just the price in that these price levels would still be viable for us if the product discounts and in particular, the shipping freight rates hadn't changed as adversely as they have. So to give you an idea, shipping freight out of Geraldton during the life of our former Midwest operation was sitting between USD 10 and USD 14 per tonne for Geraldton to China trips. That's now sitting at about USD 38 to USD 40 per tonne. It increased quite a bit since the end of the quarter as well. So that move in U.S. dollars is really the margin for us and many other Midwest projects. So we're really looking for not only the iron ore price to remain or increase, but for product discounts on the lower grade side to compress a little, but more importantly, for the shipping freight rates to come out of a hard time. Forecast for shipping rates that they will reduce, the extent of that, though, is quite unknown. There are different forecasts for it over the next 6 to 12 months. And so we will just need to monitor that question.
Perfect. And then, Just on the advanced stripping costs. When you guys started with the plan at Koolan, what was budgeted for advanced stripping versus what's been spent today -- has there been a bit of an overrun in terms of stripping costs there?
Yes. Obviously, the tonnes, John, are broadly in line with the overall plan. The ground conditions we've been counted on the footwall and elsewhere in some other places have really been the key part that has slowed us up. And with Koolan Island, given that the site has a fair component of fixed costs, volumes are important because greater volumes mean those fixed costs are spread across more units of production. So our cost of the waste strip overall is higher than what we had originally anticipated. The proportion -- it potentially is 25% or more higher than what we were originally thinking. And that's a combination of the mining issues we've had along the way, plus the skill shortages that now exist as well. So if I were to put that all in the mix, it would be in the order of that kind of level. And we're obviously working to bring down those unit costs of production. It was $10.71 per tonne moved in the quarter just gone and similar to that in the prior quarter. We really want to try and push that down under $10 and get that as low as we can. And that's not just a mining cost. That is also the administration and all the travel and logistics associated with an isolated site.
Excellent. Makes sense. And just once Koolan Island is back up into full swing. Can you just remind us what's the maximum number of [indiscernible] you can actually get through there in the quarter?
In the past, we have actually done in terms of ships per month if you're talking about. Is that what you mean?
Yes, correct.
Correct. So we have done up to about 5 at some time 6 ships per month. That would be at a stretch. The ships we now load are taking an extra 10,000 tonnes relative to what occurred previously. So I would think an acceptable run rate would be about 4 ships per month, and each ship taking about [ 80,000 ] tonnes.
[Operator Instructions] Thank you, Peter. We have no further questions. I'll hand back to you. Thank you.
Okay. Thank you, Bethany. Thanks all for listening in. The recording of this call will be on the website shortly, and have a good day. Thanks.
Thank you, everyone. As the host has closed the call, you can leave by disconnecting your phone line. Thank you for attending.