FY2014 Financial Results MGX Built on quality 20 August 2014
Disclaimer This Document is Confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person, or published, in whole or in part, for any purpose without prior written approval from Mount Gibson Iron Limited. This Document is not a Prospectus nor an Offer to Subscribe for Shares. Mount Gibson Iron Limited and its subsidiaries (ASX:MGX, “ MGX ”) makes no representations or warranty (express or implied) as to the accuracy, reliability or completeness of this document. MGX and its respective directors, employees, agents and consultants shall have no liability (including liability to any person by reason of negligence or negligent misstatement) for any statements, opinions, information or matters (expressed or implied) arising out of, or contained in or derived from, or for any omissions from this document, except liability under statute that cannot be excluded. This document contains reference to certain forecasts, projections, intentions, expectations and plans of MGX, which may or may not be achieved. They are based on certain assumptions which may not be met or on which views may differ. The performance and operations of MGX may be influenced by a number of factors, uncertainties and contingencies many of which are outside the control of MGX and its directors. No representation or warranty (expressed or implied) is made by MGX or any of its respective directors, officers, employees, advisers or agents that any forecasts, projections, intentions, expectations or plans set out in this document will be achieved, either totally or partially, or that any particular rate of return will be achieved. Investments in shares in MGX are considered highly speculative. JORC COMPLIANCE STATEMENT – Iron Hill Exploration Target, Extension Hill South Project The Iron Hill Prospect at the Extension Hill South Project has an Exploration Target of 5 - 7 million tonnes grading 58-61% Fe (refer ASX release 13 February 2014 for full details). The potential quantity and grade of this Exploration Target is conceptual in nature and there has been insufficient exploration to estimate a Mineral Resource. It is uncertain if further exploration will result in a Mineral Resource. The information in this report that relates to Exploration Targets and Exploration Results is based on information compiled by Gregory Hudson, who is a member of the Australian Institute of Geoscientists. Gregory Hudson is an employee of Mount Gibson Iron Limited group, and has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration and to the activity he is undertaking, to qualify as a Competent Person as defined in the December 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Gregory Hudson has consented to the inclusion of the matters in this report based on hi s information in the form and context in which it appears. 2
Company snapshot – strong fundamentals A leading mid-tier iron ore exporter • Issued capital 1090.8 million shares • Index S&P/ASX 200 • Market cap 1 A$818 million • Cash and term deposits 2 A$520 million • Debt 3 A$9.5m equipment leases Financials (year ended 30 June) 2009 2010 2011 2012 2013 2014 Sales volumes Mwmt 5.4 6.5 5.2 5.2 8.8 9.7 Sales A$m 425 536 672 648 853 898 NPAT A$m 42.6 132.4 239.5 172.5 157.3 96.4 Underlying NPAT* A$m 42.6 132.4 239.5 172.5 92.9 117.7 EPS cps 4.6 12.3 22.1 15.0 14.5 8.8 Underlying EPS* cps 4.6 12.3 22.1 15.0 8.5 10.8 DPS cps 0 0 4.0 4.0 4.0 4.0 Payout ratio % 0 0 18 27 28 45 Shareholders • Notes: APAC Resources ~26.6% 1. Share price of $0.75/share as at 19 August 2014. • Shougang Fushan ~15% 2. At 30 June 2014. 3. At 30 June 2014, excluding performance bond contingent facility drawn to $57.2m. • Institutional investors ~36% *Underlying NPAT excludes non-cash accounting adjustments related to MRRT. The underlying basis is a non-IFRS measure that in the opinion of the Directors provides useful information to assess the Company’s financial performance. This non-IFRS measure is audited. 3
Business overview Koolan Island • Premium DSO lump and fines • Ramping up to 4 Mtpa run rate by end 2014 • Long life asset with extension potential • Simple logistics, remaining LOM strip ratio ~4.5:1 Mid West Region Tallering Peak, Extension Hill, Shine & Geraldton Port facilities Tallering Peak • Achieved 3 Mt ore sales in final year, closure underway Extension Hill • 3 Mtpa, remaining LOM strip ratio 0.6:1 • Excellent life extension potential – Iron Hill, Gibson Hill Shine Project • Potential ~1.6Mtpa DSO project, option for rapid low- capex development Geraldton Port • MGX Mid West export capacity of 6 Mtpa 4
FY2014 Another strong financial performance delivered • Record sales revenue of $898m , up 5% yoy • Net profit after tax of $96.4m • Underlying net profit after tax of $117.7m* excluding MRRT non-cash accounting charge • Net operating cash flow of $238m , up 32% • Cash up $144m to $519.8m at 30 June 2014 • Fully franked final dividend of 4.0 cps , consistent with 4.0 cps in prior year. Future dividends to be considered on a six monthly basis. • Nil bank debt, equipment leases of $9.5m * The underlying basis is a non-IFRS measure that in the opinion of the Directors provides useful information to assess the Company’s financial performance. This non -IFRS measure is audited. 5
FY2014 Another strong financial performance delivered 12 months ended: 30-Jun-14 30-Jun-13 Tonnes mined Mwmt 7.9 5.8 Tonnes sold Mwmt 9.7 8.8 Sales revenue $ mill 852.9 898.0 Interest income $ mill 15.5 11.9 Cost of goods sold $ mill (724.2) (698.3) Gross profit $ mill 189.3 166.5 (30.8) 2 Admin and other expenses/income $ mill (19.9) Finance costs $ mill (5.7) (7.3) Profit before tax $ mill 163.7 128.4 $ mill Tax (expense)/benefit – income tax (45.9) (35.6) Underlying net profit after tax 1 $ mill 92.9 117.7 Tax (expense)/benefit – non-cash MRRT $ mill (21.3) 64.5 Net profit after tax $ mill 96.4 157.3 1. Underlying NPAT excludes non-cash accounting adjustments related to MRRT. The underlying basis is a non-IFRS measure that in the opinion of the Directors provides useful information to assess the Company’s financial performance. This non -IFRS measure is audited. 2. Includes one-off items relating to dispute settlements. 6
FY2014 Cash operating costs continue to be driven lower 12 months ended 30 June: 2014 2013 Sales Volume (Mwmt) 9.7 8.8 Sales Revenue (A$m) 898.0 852.9 Realised Price (A$/wmt sold) 92.55 97.24 Cost breakdown A$m A$/wmt sold A$m A$/wmt sold Total Cost of Goods Sold 724.2 74.64 698.3 79.61 Less: depreciation and amortisation (196.8) (20.28) (194.4) (22.16) Add: deferred waste mining costs 152.1 15.68 100.9 11.50 Less: ore stockpiles inventory drawdown (83.0) (8.55) (53.4) (6.09) Less: other non-cash expenses (4.1) (0.42) (4.6) (0.53) Cash operating expenditure including 592.4 61.07 546.8 62.34 deferred waste mining and royalties Less royalties (74.0) (7.63) (64.8) (7.39) Cash operating expenditure excluding 518.4 53.44 481.9 54.95 royalties Note: All costs reported on a Free On Board (FOB) basis. 7
FY2014 Significantly increased operating cashflow 8
FY2014 Cash levels continue to build 9
Maximising value – a simple strategy • Cost reduction and elimination of waste Leverage off • Operational optimisation and business improvement • Extension of production profile: existing asset – Optimise resources and reserves inventory base to extract – Brownfields exploration – Expand footprint within operational halo maximum value – Leverage off existing operations, logistics footprint, and customer relationships • Capitalise on balance sheet strength to secure value creation opportunities 10
Optimising the sales profile Ore sales history and indicative outlook* 12 Forecast Actual 10 First 8 priority goal Ore Sales 6 (Mwmt) 4 2 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Year to 30 June FY'15 guidance 6.6 -7.0 Mt Shine (potential) # Extension Hill Koolan Island Tallering Peak Projected ore sales shown are indicative only, and include all iron ore products. Actual future sales remain subject to future mine performance, continuous optimisation, exploration success and general market factors. FY2015 sales guidance is 6.6 to 7.0 Mt as indicated # Shine development deferred and potential future sales subject to decision to proceed. Indicative Shine sales reflect current Ore Reserves and in-pit Inferred Resources. Refer ASX release dated 7 March and slides at the end of this presentation for Mineral Resources and Ore Reserves information. 11
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