Why the Mount Gibson (ASX:MGX) share price is moving higher today

The Mount Gibson Iron Limited (ASX: MGX) share price has jumped higher today following the release of its first quarter results for FY21.

At the time of writing, the Mount Gibson share price is swapping hands for 74 cents, up 2.76% in early morning trade. This compares to the All Ordinaries Index (ASX: XAO) which is down 0.1% at 6,308 points.

How did Mount Gibson perform in Q1?

Mount Gibson reported a solid Q1 FY21 result for the period ending September 30. The iron ore producer reached sales of 1.4 million wet metric tonnes (mwmt). This comprised of 0.7 mwmt of high-grade ore at its Koolan Island, and 0.7 mwmt of low-grade material from Mid-West.

Total ore sales revenue equated to $129 million free on board (FOB), reflected upon a stronger Australian dollar against the greenback.

Mount Gibson recorded cash on hand for the ending period at $445 million, compared to $423 million from the prior period.

Group cash flow for the quarter came in at $32 million, mostly operating expenses from Koolan Island’s advanced waste stripping investment.

Unit cash costs stood at $56/wmt FOB, an improvement from the $66/wmt recorded prior its waste stripping project.

The company also completed a new airstrip in Koolan Island, with first flights schedule this month. The new infrastructure is expected to deliver significant efficiency and cost reduction benefits to its Koolan Island operations.

What did management say?

Mount Gibson CEO Peter Kerr welcomed the results, saying:

Mount Gibson has made a positive start to the new financial year with improved quarterly ore production and sales, completion of the new Koolan Island airstrip, ongoing low-grade ore sales in the Mid-West and, recently, declaration of Ore Reserves for the initial stage of the Shine Project.

We are also tracking to achieve first ore sales from the Shine Project in mid-2021, subject to finalising the last commercial and permitting requirements, which will extend our Mid-West business by at least two years and potentially longer should market conditions remain supportive.

Outlook

Mount Gibson advised it would focus on increased mining movements at Koolan Island to complete its planned open pit waste stripping phase. In the Mid-West, the company will look to finalise its low-grade sales from Extension Hill.

Mount Gibson expects ore sales guidance for 2020/21 of 2.8-3.3 mwmt at a group cash cost between $60-$65/wmt FOB.

In addition, the company is pushing ahead for stage 1 of the Shine Iron Ore project, targeting first sales in mid-2021.

About the Mount Gibson share price

It has been a bumpy road for Mount Gibson shareholders, with its share price swinging in the past 6 months. The company reached a 52-week high of $1.03 at the start of the year and fell to a year low of 54 cents.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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