It has been a day to forget for Venture Minerals shareholders…
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The Venture Minerals Limited (ASX: VMS) share price is deep in the red in early afternoon on Friday. This comes after the mineral exploration company provided an update in regards to the Riley Iron Ore Mine in Tasmania.
At the time of writing, Venture Minerals shares are down a massive 33.77% to 5.1 cents. This means that its shares are now trading at a 6-month low.
What did Venture Minerals announce?
According to its release, Venture Minerals advised it has completed its first ever commercial shipment of iron ore from its Riley Iron Ore Mine.
The shipment comprised 45,632 tonnes of iron ore with an average grade of 57.3% Fe. A discharge port in China as designated by the company’s off-take partner, Prosperity Steel will receive the shipment. It’s expected that Venture Minerals will collect around $5.1 million in the next fortnight under its offtake agreement.
While this is good news, the company provided a concerning operational update, which has caused its shares to fall.
As such, Venture Minerals stated that 62% of Fe iron ore prices have declined significantly in the past few months. Once reaching highs of US$230 per tonne, the current market rate is hovering just above US$100 per tonne.
Furthermore, the company’s 57% Fe grade ore has been heavily discounted to a market rate of 30%. This is a stark contrast to when its iron ore was trading at just a 10% market rate discount.
Venture Minerals’ woes have been amplified with the volatile shipping market caused by congestion at Chinese ports, COVID-19, and political impacts. The shipping rates for iron ore have tripled since 2019 from US$18 per tonne to the current rate of US$54 per tonne.
In response to the above conditions, the company is conducting a full review of its Riley Iron Ore Mine operations. Management hopes to identify cost efficiency measures to offset some of the external market volatility.
While some of the external pressures are expected to be temporary, Venture Minerals has decided to suspend mining operations. It aims to preserve existing capital while it works through its review and assesses the situation.
About the Venture Minerals share price
Over the past 12 months, Venture Minerals has gained almost 50% despite today’s significant drop. However, when looking at year-to-date, its shares are down around 7% for the period.
Venture Minerals presides a market capitalisation of roughly $68 million and has 1.3 billion shares on issue.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.