Fund Manager Summary on MGX Resources Ltd (ASX:MGX)
MGX Resources Ltd (ASX:MGX) currently faces a mixed outlook as highlighted by fund manager Cromwell Funds Management in its June 2025 commentary, particularly noting the operational resilience of its Koolan Island project amidst recent challenges. While the company reported steady operations with ore sales of 0.7 million wet metric tonnes and generated robust cash flows of $21 million despite severe weather disruptions, the broader market environment poses risks. The decline in iron ore prices, influenced by reduced global demand, adds pressure, with the benchmark price dropping from USD $98 to USD $94 per tonne. However, the company's cash and investments of $460 million outstrip its market capitalisation of $342 million, suggesting potential undervaluation. Fund managers caution investors to weigh these operational issues against the backdrop of structural tailwinds in iron ore while monitoring price volatility and demand trends.
Commentary From The Managers
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Updates are made available to members within 12 hours of being released. The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Cromwell Funds Management
30 June 2025
$0.27
Summary
- Mount Gibson Iron Ltd underperformed over the quarter, with its share price falling 18.2%, impacting Fund performance.
- The decline was influenced by a softening in iron ore prices, with the benchmark 62% Fe fines price dropping from USD $98 to USD $94.
- There were broader market concerns over global demand contributing to the price drop.
- The decline was more pronounced in local currency terms due to the US dollar depreciation against the Australian dollar.
- Cromwell Funds Management notes the release of the March 2025 quarterly report in April, indicating steady operations at Koolan Island.
- The report showed ore sales of 0.7 million wet metric tonnes, although production faced challenges from heavy rainfall exceeding 1,600mm and disruptions from Tropical Cyclone Dianne.
- Despite operational challenges, the company reported robust cash generation of $21 million.
- As of 31 March 2025, Mount Gibson Iron had a market capitalisation of $342 million, compared to its cash and investments balance of $460 million.
- The Koolan Island operations remain cashflow positive at current iron ore prices.
- At the end of the quarter, Mount Gibson Iron represented 2% of Fund assets.
The completeness, accuracy or current status of the investments referenced are not guaranteed.
Frequently Asked Questions
Who is investing in MGX Resources Ltd (ASX:MGX)?
Fund managers including Cromwell Funds Management have invested in MGX Resources Ltd (ASX:MGX).
Why do fund managers invest in MGX Resources Ltd?
Fund managers invest in MGX Resources Ltd due to its strong asset base and positive cash flow from its Koolan Island operations. Despite recent operational challenges, the company's balance of cash and investments significantly exceeds its market capitalization, indicating potential value. Investors appreciate MGX's exposure to the iron ore sector, which, while facing pricing pressures, still supports profitability. Its ability to generate consistent cash flow enhances its attractiveness, aligning with a balanced risk/reward profile.
What happened to MGX Resources Ltd (ASX:MGX)?
There have been no recent updates from fund managers regarding MGX Resources Ltd although fund managers including Cromwell Funds Management have previously commented.
What is the short interest in MGX Resources Ltd (ASX:MGX)?
The short interest in MGX Resources Ltd (ASX:MGX) is 0.01% which makes it the 521st most shorted stock on the ASX. Of the 1.2B shares that MGX Resources Ltd has on issue, 167.7K have been sold short.
What does MGX Resources Ltd (ASX:MGX) do?
MGX Resources Limited (MGX, formerly Mount Gibson Iron Limited), is an independent West Australian miner into project development that has been producing iron ore since 2004 and is diversifying into base metals.