Shares in junior iron ore miner Atlas are soaring after a rating upgrade by Moody’s.
A short time ago, they were up more than 14% to $0.016.
Moody’s Investors Service upgraded Atlas Iron’s corporate family rating to Caa3 from Ca on the back of the company’s recent debt restructure. The outlook is stable.
The Pilbara miner issued new shares and options, giving its lenders a combined stake of about 70% in the company.
The debt-to-equity deal cut what Atlas owes to lenders to $US135 million ($176 million) from $US267 million ($348 million) and extended the maturity date to April 2021 from December 2017.
“The upgrade reflects Atlas’ improved capital structure following the completion of its debt restructuring,” says Saranga Ranasinghe, a Moody’s analyst.
“The upgrade also reflects the approximate $A20 million interest saving resulting from the lower debt and interest rates, which should further help lower the cost per tonne produced.”
Moody’s says Atlas, as a single commodity producer, remains extremely sensitive to the volatile iron ore price and foreign exchange rates.
The miner started mothballing its mines in April last year because the cost of digging the ore was greater than the price on the global market.
It then restarted after doing deals with contractors and cutting costs hard. It also raised $87 million from shareholders to give the company a cushion against price fluctuations.
Costs have been slashed to just $A49 a tonne from $A66 18 months ago.