Atlas Iron went into voluntary suspension on the ASX today as the iron ore price slump hit the miner’s operations harder than expected.
The company has made significant progress in cutting production costs but the pace of the decline in the iron ore price has prompted an urgent and deep review of operations.
“The uncertain outlook, has prompted the company to initiate the comprehensive review,” Atlas Iron said.
The latest slide in iron ore prices could strip strip a further $3 billion in revenue from the federal budget.
With the cost of producing a tonne of iron ore around the same price paid on the international market, the board of Atlas is understood to be looking at whether Pilbara operations should be mothballed.
Iron ore prices have fallen 24% to $US47.50 since Atlas released its half-year results on February 24.
For the six months to December, the company got an average price per tonne of $AU66.24 or about $US50 on current exchange rates. This compared to the $A116.6 average the company was getting the year before.
However, the best forecast Atlas has made for this year is that it can get costs down to $AU60 a tonne, which is just $1.50 in US dollar terms below the current price per tonne.
At the end of December, Atlas had net debt of $169 million
“The voluntary suspension is requested pending the outcome of an extensive review of the company’s operations, financial outlook, asset sale opportunities and capital structure in light of the recent rapid fall in the iron ore price,” the company said.
Atlas announced a 23% half year drop in revenue to $450.8 million and a statutory loss of $1.086 billion on the back of asset write downs. The underlying loss was $139 million compared to a $61 million profit in the same period the year before.
The share price has fallen by one third to 12 cents since the beginning of March.
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