Arrium got paid less in the March quarter for its iron ore than it cost to dig it up

Iron ore. Image: Atlas Iron.

Arrium is taking another hard look at its costs after it got paid less for its iron ore than it cost to produce during the March quarter.

The miner’s total cash cost for the three months was $AU66.90 per tonne but its average realised price came in at $AU58, a drop of about $16 a tonne and a loss of about $8.90 a tonne.

The result follows from Atlas Iron which this month is mothballing its operations because current prices just don’t make it worthwhile to dig iron ore up.

Contractors and mining services companies are already starting to feel the pain, as resources companies cut costs to the bone.

“Bearish sentiment to Chinese steel production and concerns regarding increased supply from the majors has weighed heavily on iron ore markets,” Arrium told the market today.

“Average prices again declined in the quarter, particularly in March, after having stabilised somewhat in February. The sustained decline in pricing has forced producers to rapidly reduce costs with many high cost producers being displaced from the market.”

The company says further work is being done to identify cost savings to meet the sharp decline in prices.

Arrium posted a $1.493 billion loss for the half year to December, a period when iron ore prices fell 40%.

Most of the loss was on write downs. The underlying net loss was $22 million compared to a profit of $201 million for the same period the year before.

It’s shares fell more than 7% in early trade to $0.157.

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