Atlas rises from the depths of the iron ore pit

Iron ore. Image: Atlas Iron.

Atlas Iron, which announced a mine mothball because the cost of digging iron ore out of the ground was greater than the market price, now says it will be cash positive after doing deals with its major contractors.

“Through the support of its key contractors, the company has been able to significantly reduce cash costs across its Wodgina and Abydos operations,” Atlas told the market.

This means mining will continue this month at Abydos and restart at Wodgina as soon as possible. The company is continuing to assess options at the Mt Webber mine.

Atlas expects these operations will be cash positive in May, helped by a rise in the price of iron ore and reduced payments to contractors. Iron ore is trading around $US56 a tonne, up from a low of $US47.

Shares in Atlas were suspended last month as the company announced it would mothball its production because iron ore prices have dropped from more than $100 a year ago.

Atlas has about 500 employees and contractors in its mines and another 75 in its Perth office. Contractors to Atlas employ hundreds more.

In its March quarter report, Atlas says its cash cost per tonne is $43 compared to $46 in the previous quarter.

“During May Atlas will continue to work on defining contractual arrangements that will support longer term operating solutions,” the company said.

Atlas says the iron ore price fall continues to reflect the impact of the rapid expansion of iron ore supply from major Australian producers and reduced confidence among Chinese customers due to credit restrictions and falling steel prices.

Major suppliers are also discounting, further dampening prices.

The company has cash in the bank of $125.5 million compared to $169.4 million at the end of December.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.