Mount Gibson Iron : Financial Report and Appendix 4D

APPENDIX 4D

MOUNT GIBSON IRON LIMITED

31 DECEMBER 2018 HALF-YEAR FINANCIAL STATEMENTS

This Half-Year Report is provided to the Australian Securities Exchange (ASX) under

ASX Listing Rule 4.2A.3

Current Reporting Period: Previous Corresponding Period:Half-Year ended 31 December 2018

Half-Year ended 31 December 2017

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Consolidated Entity	Movement	A$ million
Revenue from ordinary activities	Up 49% to	$183.3
Profit from continuing operations before tax	Down 44%* to	$45.2
Net profit after tax attributable to members of the Company	Down 44%* to	$45.1

* The prior half-year period included proceeds of $64.3 million from settlement of the business interruption component of the

Koolan Island seawall insurance claim.

DIVIDEND

An interim dividend for the half-year ended 31 December 2018 has not been declared.

NET TANGIBLE ASSET BACKING

Consolidated Entity	Unit	31 December 2018	31 December 2017
Net tangible assets	A$ mill	$523.5	$477.0
Fully paid ordinary shares on issue at balance date	#	1,128,369,730	1,096,562,516
Net tangible asset backing per issued ordinary share as at balance date	c/share	46.4	43.5

DETAILS OF ENTITIES OVER WHICH CONTROL WAS GAINED OR LOST DURING THE PERIOD

None.

STATUS OF AUDIT

This Half-Year Report is based on accounts that have been reviewed by Mount Gibson's statutory auditors.

NOTICE

It is recommended that the Half-Year Report be read in conjunction with Mount Gibson's Annual Financial Report for the year ended 30 June 2018 and any public announcements made by Mount Gibson during and after the half-year year ended 31 December 2018 in accordance with the continuous disclosure obligations under the Corporations Act 2001 and ASX Listing Rules.

MOUNT GIBSON IRON LIMITED

AND CONTROLLED ENTITIES

ABN 87 008 670 817

FINANCIAL REPORT

FOR THE HALF-YEAR ENDED

31 DECEMBER 2018

Financial Report

For the half-year ended 31 December 2018

Directors' Report........................................................................................................................................... 2

Interim Consolidated Statement of Profit or Loss ................................................................................. 9

Interim Consolidated Statement of Comprehensive Income ........................................................... 10

Interim Consolidated Statement of Financial Position ...................................................................... 11

Interim Consolidated Statement of Cash Flows .................................................................................. 12

Interim Consolidated Statement of Changes in Equity ...................................................................... 13

Notes to the Half-Year Financial Report ............................................................................................... 14

Directors' Declaration ............................................................................................................................... 31

Independent Review Report .................................................................................................................... 32

Page 1

Directors' Report

Your Directors submit their report for the half-year ended 31 December 2018 for the Group incorporating Mount Gibson Iron Limited ("Company" or "Mount Gibson") and the entities that it controlled during the half-year ("Group").

CURRENCY

Amounts in this report and the accompanying financial report are presented in Australian dollars unless otherwise stated.

DIRECTORS

The names of the Company's directors in office during the half-year and until the date of this report are as below. Directors were in office for the entire period unless otherwise stated.

Lee Seng Hui	Chairman, Non-Executive Director
Alan Jones	Independent Non-Executive Director
Li Shaofeng	Non-Executive Director
Russell Barwick	Independent Non-Executive Director
Simon Bird	Lead Independent Non-Executive Director
Paul Dougas	Independent Non-Executive Director
Andrew Ferguson	Alternate Director to Lee Seng Hui

Peter Kerr is the Chief Executive Officer. David Stokes is the Company Secretary.

CORPORATE INFORMATION

Corporate Structure

Mount Gibson is a company limited by shares that is incorporated and domiciled in Australia. It is the ultimate parent entity of the Group and has prepared a consolidated half-year financial report incorporating the entities that it controlled during the half-year.

Nature of Operations and Principal Activities

The principal activities of the entities within the Group during the period were:

•  mining of hematite iron ore in the Iron Hill deposit at the Extension Hill mine site in the Mid-West region of Western Australia, and haulage of the ore via road and rail for export from the Geraldton Port;

•  reconstruction of the Koolan Island Main Pit seawall and recommencement of operations at the Koolan Island mine site, in the Kimberley region of Western Australia, with ore sales targeted to resume in the first half of 2019;

•  treasury management; and

•  the pursuit of mineral resources acquisitions and investments.

OPERATING AND FINANCIAL REVIEW

Overview of the Half-Year Period

The Group's financial performance for the half-year ended 31 December 2018 was positive, reflecting steady sales volumes from the final stages of the Iron Hill deposit at Extension Hill, expenditure on the high grade Koolan Island Restart Project, and payment of a 3.0 cents per share fully franked dividend for the 2017/18 financial year. The net profit after tax of $45,083,000 in the half-year compares with $80,006,000 in the prior corresponding half year, which included earnings from operations of $15,719,000 and proceeds from the settlement of the Koolan Island business interruption insurance claim of $64,287,000.

At the beginning of the half-year, the Platts Index for delivery of 62% Fe iron ore fines to northern China was approximately US$64 per dry metric tonne ("dmt") and, after peaking at around US$77/dmt in November 2018, finished the period at just under US$73/dmt, with an average for the half-year of US$69/dmt. Over the same period, the A$/US$ exchange rate traded between A$1.00/US$0.70 and US$0.75, with an average of the half-year of US$0.72. Although the high grade benchmark iron ore price (for 62% Fe fines material) remained well supported, market prices for lower and medium grade iron ore continued to be impacted by variable discounts against the Platts 62% Fe benchmark index, a situation which many commentators describe as a potentially permanent structural change to global iron ore pricing, notwithstanding seasonal moderation in discounts at the end of the half-year.

Group ore sales for the half-year totalled 2.2 million wet metric tonnes ("Mwmt") with sales revenue totalling $138,586,000 Free On Board ("FOB") including realised foreign exchange hedging gains and provisional pricing adjustments. Mount Gibson achieved an average realised price for standard iron ore fines product for the half-year of US$34/dmt FOB after grade and provisional pricing adjustments and penalties for impurities, compared with an average of US$30/dmt in the 2017/18 financial year and US$29/dmt in the prior corresponding December 2017 half-year period. The weighted average realised price received (including provisional pricing adjustments and realised foreign exchange hedging losses) for all products sold was $64/wmt FOB in the half-year period compared with $54/wmt FOB in both the 2017/18 financial year and the December 2017 half-year.

Cash reserves, including term deposits and tradeable investments, decreased by $26,530,000 over the half-year to a total of $431,004,000 as at 31 December 2018.

Operating Results for the Half-Year Period

The summarised operating results for the Group for the half-year ended 31 December 2018 are tabulated below.

Consolidated Group	31 December 2018 $'000	31 December 2017 $'000
Net profit before tax from continuing and discontinued operations Taxation benefit Net profit after tax attributable to members of the Company Earnings per share	$'000 $'000	45,083 -	80,006 -
	$'000	45,083	80,006
	cents/share	4.08	7.33

Consolidated quarterly operating and sales statistics for the half-year period are tabulated below:

Consolidated Group	Unit	Sept Quarter 2018	Dec Quarter 2018	Dec Half-Year 2018	Dec Half-Year 2017
Mining and crushing Total waste mined Total ore mined# Total ore crushed	kwmt kwmt kwmt	195 1,081 1,052	2,507 810 980	2,702 1,891 2,032	934 2,216 1,562
Shipping/sales Standard DSO Lump Standard DSO Fines Low grade DSO	kwmt kwmt kwmt	607 542 -	475 537 -	1,081 1,080 -	775 665 241
Total	kwmt	1,149	1,012	2,161	1,681
Average Platts 62% Fe CFR northern China price	US$/dmt	67	72	69	68
MGX Free on Board (FOB) average realised fines price^	US$/dmt	28	40	34	29
kwmt = thousand wet metric tonnes US$/dmt = USD per dry metric tonne # Includes low-grade material at Extension Hill that is treated as waste for accounting purposes. ^ Reflects the realised fines price for standard DSO fines ore only, after adjustments for shipping freight, grade, provisional invoicing adjustments and penalties for impurities. Minor discrepancies may appear due to rounding.

Extension Hill Hematite Operations

The Extension Hill/Iron Hill operations achieved another sound operational performance in the December 2018 half-year. Shipments from Geraldton Port totalled 2,161,000 wmt, comprising 1,081,000 wmt of lump ore and 1,080,000 wmt of fines ore. No sales of low grade material from existing Extension Hill stockpiles were completed in the half year, compared with 241,000 wmt of low grade lump material in the December 2017 half-year period.

The mine generated earnings before interest and tax of $45,978,000 reflecting continued steady sales in the final stage of operations, and the ongoing focus on cost control and efficiency improvements. Mining was concluded in the Iron Hill deposit as planned in December 2018, with final shipments anticipated in the March 2019 quarter.

Extension Hill's cost of sales for the half-year averaged $43/wmt FOB compared with the 2017/18 financial year average of $44/wmt.

At the end of the half-year, approximately 87,000 wmt of crushed high grade product was stockpiled at the mine. Crushed ore stockpiles at the Perenjori rail siding totalled approximately 114,000 wmt of high grade ore.

The average grade of Iron Hill high grade lump ore sold during the half-year was 60.2% Fe, and the average grade of the Iron Hill high grade fines ore sold in the period was 60.0% Fe.