Mount Gibson Iron (ASX: MGX): The share price has some catching up to do

Marc Kennis Marc Kennis, April 6, 2022

A WA iron ore play

Mount Gibson Iron (ASX:MGX) is a Perth-based iron ore miner. The company primarily holds interests in the Extension Hill mine and Shine mine deposit in the Mid-West region of Western Australia. It is also involved in the mining and direct shipment of hematite iron ore at the Koolan Island mine site in the Kimberley region of Western Australia.


Mount Gibson Iron is coming off the bottom

What has made Mount Gibson Iron interesting to us at this point in time is its price chart. The following image shows the daily chart for MGX. The chart looks very similar to those of other iron ore players on ASX. A downtrend started after the company reported its quarterly results (point ❶ on the chart) and mentioned COVID-related costs pressures. This weakness in the share price was followed by the drop in the iron ore prices and took the share price down all the way from $1.00 to 35 cents.


Mount Gibson Iron

Mt. Gibson Iron, Daily Chart (Source: Metastock)



Lagging its iron ore peers

Since late November 2021, the iron ore prices have seen a slow but persistent recovery. This resulted in a similar recovery in the share prices of most iron ore miners, such as FMG, BHP and RIO, all the way to the smaller ones, such as GRR. These recoveries were different in magnitude, but on average they were more than 50 percent up from the latest down move in their share prices. This 50% recovery level for MGX would translate into a share price of 68 cents (the green line on the chart). However, with MGX’s current share price at 48 cents we believe the stock may have some catching up to do.


Potential upside of 40% in the near to medium term

If the iron ore prices hold up at the current levels or possibly go slightly higher, from a technical analysis perspective we should expect MGX’s share price to catch up with its peers, i.e., we see share price upside of approximately 40%.  Additionally, Mount Gibson Iron has strong financials and a dividend yield of more than 4%. In other words, the stocks fundamentals look interesting as well.


For a better fundamental understanding of Mount Gibson Iron, check out our article in Resources Stocks Down Under here!



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