JOHANNESBURG (miningweekly.com) – Despite significantly lower iron-ore prices and challenging market conditions in the 2015/16 financial year, Western Australian iron-ore miner Mount Gibson has returned to profitability.

CEO Jim Beyer attributed its positive full-year results, published on Wednesday, to disciplined cost control, positive operational cash flow and “the very welcome” $86-million received from settlement of the property damage component of the company’s Koolan Island insurance claim.

This means the company’s net profit of $86.3-million for the year to June 30 – on total sales revenue of $240-million and ore sales of 5-million wet metric tonnes (wmt) – can mostly be attributed to the insurance settlement, though it is still a significant improvement on the group’s after-tax loss of $911.4-million in 2015, which was mostly affected by the property damage at Koolan.

Mount Gibson’s reported gross profit from continuing operations, namely Extension Hill and Koolan Island, was $34.6-million, compared with a gross operating loss of $17.3-million in 2015. The underlying gross profit from continuing operations after administration and finance costs was $13.4-million.

All-in group cash costs were reduced by more than a quarter to $46/wmt on a free-on-board (FOB) basis for the year, which is at the bottom end of group guidance.

This drove a 28% reduction in the cost of goods sold to $44/wmt FOB, from $62/wmt FOB in the prior year.

Beyer highlighted that the group’s ongoing focus on business efficiency at its operations was critical to this achievement, as well as its ability to wring extra value from the now-completed Acacia East satellite pit at Koolan Island.

“Our ability to extract maximum value remains extremely important as we pursue improved returns on all of our assets while also investigating new resource development opportunities,” he said.

Beyer added that, with iron-ore prices having stabilised in recent months, the positive indications for the near-term development of the Iron Hill expansion near Extension and, in the longer term, the group’s potential to restart production at Koolan, he had high hopes for what lay ahead in the coming financial year.

Mount Gibson’s underlying gross profit of $19.4-million comprised an underlying $13.4-million gross profit from continuing operations – after administration and finance costs – and a profit of $6-million from its discontinued Tallering Peak operation.

As at June 30, the group had invested $400-million in cash, term deposits and liquid investments, including $51-million in insurance settlement proceeds received by year-end, with the balance received in July. This was compared with $334-million invested in 2015.

Mount Gibson’s sales guidance for 2017 is between 2.8-million and 3.1-million wet metric tonnes at an all-in cash cost of between $48/wmt and $52/wmt.