Mount Gibson Iron (ASX:MGX) FY09 Net Profit Down

Mount Gibson Iron Ltd (ASX:MGX) posted a net profit after tax of A$42.6 million for the year to June 30 2009, down 62 per cent on the previous year.

Mount Gibson said it was in discussions with a number of its customers in relation to requested delays to iron ore shipments. The impact of some of its customers defaulting, together with the desire of the company to recommence priority development at Koolan Island and Extension Hill required the raising of additional equity finance.

During the December quarter the company announced that a number of its customers had failed to collect iron ore cargos in accordance with binding purchase agreements. Agreements with some Chinese customers were subsequently terminated in accordance with their terms.

Arbitration proceedings are now underway between Mount Gibson and each of these former customers. Mount Gibson is seeking to recover the losses it claims arising from the termination of the agreements.

But Mount Gibson's cash position makes it well placed to take advantage of improving iron ore markets, after China's Shougang Corp. and APAC Resources Ltd. (HKG:1104) helped the company to recapitalize with a A$162.5 million funding and offtake package.


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