Should you buy Mount Gibson Iron Limited today?

Mount Gibson Iron Limited (ASX:MGX) is an iron ore miner with a strong balance sheet, which I think has the potential to climb higher.

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Mount Gibson Iron Limited (ASX: MGX) held its annual general meeting yesterday, showcasing a positive year, with Chairman Lee Seng Hui, addressing the highlights of the financial year, including an improvement in net profit after tax to $26.3 million on total sales revenue of $173 million for FY 2017.

It also strengthened its balance sheet and commenced the Koolan mine pit restart project, after the seawall collapsed in November 2014 flooding the main pit.

The stock was up 7% yesterday to 42 cents.

Mount Gibson Iron is an independent Australian producer of high quality, direct shipping grade iron ore products, with assets in the Kimberley and mid west regions of Western Australia.

The company recently paid out its first dividend since 2014 of 2 cents per share, fully franked, still leaving plenty of cash so this can possibly be used to finance expansion and/or diversification by acquiring existing mining businesses.

The company has cash, term deposits and liquid investments of $506 million as of 30 September 2017, up from $447 million at 30 June 2017.

Mount Gibson has already started the project to get the Koolan pit mine operational again and the first ore shipments are scheduled for early 2019 and this could be a great production opportunity with high-grade ore that could boost financial returns in early 2019.

The company currently has a P/E of 16 and a dividend yield of 5.13%.

The share price can be volatile and become depressed by negative investor sentiment, when iron ore prices dip offering an entry point for investors.

Iron ore futures in China spiked 6% on Monday, which was the largest increase in a day since July 31 and the ore price seems to be recovering slowly. This has pushed the big miners BHP Billiton Limited (ASX: BHP) up 6.35% and Rio Tinto Limited (ASX: RIO) up 6.1% this month.

I think the outlook for Mount Gibson looks positive.

It has a strong balance sheet with virtually no debt and plenty of cash for re-investment and new growth opportunities, possibly diversifying away from iron ore.

The potential of the Koolan pit mine, that could be opened as early as 2019 could provide a boost to earnings and the current operations at Iron Hill are gathering momentum with an increase in production of 40% from the last quarter.

In my opinion, Mount Gibson would be a good iron ore miner to add to your portfolio for growth and possible increases in dividends.

Motley Fool contributor Christopher Coe owns shares in Mount Gibson Iron. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.    

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