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ASX-listed resource companies are aggressively turning their attention towards the impact on their business of the coronavirus outbreak, which has dampened the global economic activities, leading to a slowdown in business cycles.
The resource sector, which is considered as the spine of the continent is in duress, and stakeholders are losing the calm, as the situation, which no one broke a sweat about, turned into a pandemic, leading to force majeure on many deals and contracts.
The ongoing market turmoil due to the COVID-19 outbreak is now demanding some stringent actions, and many resource companies are trying to trim the operating cost to keep the shareholders’ confidence intact.
Woodside Petroleum Limited (ASX:WPL), Senex Energy Limited (ASX:SXY), and many other resource companies are targeting security over future revenue and cutting cost and implementing many such measures as deemed fit by the board to overcome the market challenges.
To Know More, Do Read: Cost-Cutting, Cash Preservation, Revenue Hedge- New Drilling Tools of Woodside and Senex
The ASX-listed iron ore mining companies such as Fortescue Metals Group Limited (ASX:FMG) and Mount Gibson Limited (ASX:MGX) and many other resource companies are joining the list of businesses adopting needful measures to prevent quick deterioration.
- Fortescue Metals Group Limited (ASX:FMG)
Mining, processing and shipping activity remains in line with guidance for FY20
Since the outbreak, FMG has implemented and expanded a range of measures, such as below:
The Company has changed the site operational roster to a four week on /two week off roster from a two week on/one week off roster, which aims to reduce the travel to and from site by ~ 40 per cent, leading to an increase in time spent on-site to maintain operations at planned levels.
FMG has relocated non-critical site-based employees from the site work to work from home, and all preparations are undertaken for all employees in higher risk health groups to vacate site-based tasks.
The Company is offering 14-day payment terms to all small businesses and working collaboratively with suppliers to address any cashflow challenges, apart from that, FMG has introduced many such measures to promote social distancing between the employees and is practising certain hygiene and monitoring methods.
Over the shipping counter, the Company has executed deferred berthing on any vessel calling at the terminal in Port Hedland, which would further ensure that any vessel would not berth till fourteen days has passed since leaving the previous discharge port, as well as any time spent at anchorage.
The Company would also review each vessel making bunker calls at ports after leaving their final discharge port on individual basis to evaluate if necessary risk alleviation measures were employed.
Over the exploration counter, FMG has suspended the exploration activity at the Patterson, Rudall and Goldfield regions in Western Australia, along with exploration activities in New South Wales and South Australia.
However, drilling at Pilbara is on for resource definition and mine planning, and further the Company has halted all exploration and field activities in Colombia, Argentina, Ecuador, and Portugal.
The stock of the Company last traded at $10.10, up by 05.2 per cent against its previous close on ASX (as on 30 March 2020).
- Mount Gibson Limited (ASX:MGX)
Koolan Island, Extension Hill, and the Geraldton Port continues
The Company announced that it has already implemented a range of protocols to contain the spread that is in line with the advice of Federal health authorities. The iron ore operations of the Company at Koolan Island in Kimberley region, Extension Hill, and at Geraldton Port continues albeit with several constraints.
The development decision related to a sealed airstrip on Koolan Island is now a plan of the Company’s long-term COVID-19 management, which once constructed would enable the Koolan operations to take direct jet flights from Perth. MGX anticipates the initial flights in October 2020.
MGX also notified that customers have all continued to perform their obligations under its various offtake agreements related to the Koolan Island and Geraldton Port in the Mid-West operations; however, the Company anticipates the ongoing disruptions to cause some problem in operation and increase the cost.
- In the middle of the prevailing environment, which has posed some operational challenges, the Company assesses that it would be difficult to present reliable sales and cost predictions for the medium term, and thus it withdraws the sales and cost guidance for the FY2019-20.
- MGX anticipates the Group sales for March 2020 quarter to stand at ~ 1.0 million wet metric tonnes, including 0.6 million wet metric tonnes of low-grade material from the Mid-West and 0.4 6 million wet metric tonnes of high-grade fines ore from Koolan Island; and,
- While Mount Gibson currently expects improved ore production and sales from Koolan Island in the June 2020 quarter, it is likely that Koolan Island’s sales for the 2019/20 financial year will be below the previous annual guidance for the operation.
The stock of the Company last traded at $0.695, down by 6.7 per cent against its previous close on ASX.
Measures and actions adopted by the ASX iron ore mining companies seem to be working in gaining the attention of the investing community with the stock price of FMG rising from its recent low of $8.20 (intraday low on 13 March 2020) to the present level of $10.10 (as on 30 March 2020), to mark a price appreciation of ~ 23.17 per cent.
Likewise, Mount Gibson rose from the recent low of $0.540 (intraday low on 13 March 2020) to the present high of $0.795 (intraday high on 20 March 2020), marking a price appreciation of ~ 47.22 per cent; however, post the rise, the stock fell to the low of $0.635 (as on 30 March 2020), but recovered to close at $0.695.
