Why Atlas Iron owes Twiggy Forrest a beer

Twiggy Forrest.

Atlas Iron is back in business after management was able to strike a deal to get its mines back into production.

That is genuinely great news for the employees of the company and their families. It’s good news for the workers and management of Atlas’ suppliers as well as the owners and the workers. They’ll all be able to get back to work. Shareholders will benefit too, reaping the rewards of the company being back in business after Atlas went into a trading halt in early April.

It’s also good news for Western Australia which released its budget yesterday, showing just how hard the downturn in mining and the price of iron ore had affected it.

But, it also is a win for Fortescue metals boss Andrew “Twiggy” Forrest. Indeed even though Atlas chairman David Flanagan and his senior management have done a great job of getting Atlas back to work, Flanagan probably owes Twiggy a beer or two.

That’s because Forrest has changed the conversation about iron ore.

Last Sunday Forrest called on all Australians to bombard their MPs with questions about Rio Tinto and BHP. It is a continuation of a campaign launched by Forrest as a way to persuade lawmakers and the public that the two big miners are not acting in Australia’s national interest.

While Forrest himself is not responsible for the bounce in iron ore over the past month it is fair to say that he is responsible for the subtle change in language we’ve seen from Rio Tinto boss Sam Walsh, who has gone from being “unapologetic” about his rivals going out of business to the much more benign, “we take no comfort in what is happening to some of the smaller, higher-cost iron ore producers that are finding it hard to compete,” which Walsh used in his address to the Rio Tinto AGM this month.

But what Forrest’s intervention has done is change the narrative around crashing iron ore prices. Production cuts and slowed pace of mine expansions has helped as well. But since the lows and the changed rhetoric from the big three iron ore miners buyers have regained their resolve to start buying again, lifting the price 15% from the lows. That’s all combined to give the Directors of Atlas Iron room to reopen production.

Atlas may effectively be a competitor of Forrest’s Fortescue Metal Group but its decision to re-commence operations is Twiggy’s first major victory.

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