Atlas Iron shuts down production on low iron ore price
Atlas Iron is shutting down its operations due to low iron ore prices, the company announced on Friday. As the fourth largest iron ore producer in Australia, the closure is the biggest casualty so far of depressed iron ore prices, which are trading at their lowest levels in a decade.
"Atlas Iron (ASX: AGO) advises that due to recent significant falls in the iron ore price, it will progressively suspend its mining operations over the month of April, with exports to cease shortly thereafter," the company said in a statement.
"Despite an extensive cost-cutting program, to which staff and contractors have made significant contributions, the global supply-demand imbalance for iron ore has driven prices down to the point where it is no longer viable for Atlas to continue production. Atlas has continued to reduce costs significantly and its break-even price on a benchmark 62Fe basis is currently below USD$60/t at an EBITDA level. However, despite these substantial reductions, Atlas’ breakeven price remains well above the current spot price. In light of this, Atlas will cease mining and crushing at its Mt Webber project next week. Mining and crushing at the Abydos project is scheduled to cease within 14 days and operations at the Wodgina mine are expected to be completed in late April. All Atlas’ projects will be put on care and maintenance, pending future iron ore market conditions."
The move comes as no surprise to the market, after Atlas Iron shares were suspended last Tuesday.
US-based bondholders of the Perth-based company could also push the miner into receivership and administration until the iron ore price recovers to levels of around $65 – $70 a tonne which Atlas needs to stay cash positive.
Founded by respected WA mining veteran David Flanagan, Atlas listed in 2004 and grew quickly to be one of the biggest second-tier producers, pumping out about 13 million tonnes a year.
But its decline, like that of the iron ore price, has been swift. Atlas' market capitalisation has shrunk to $110 million – a third of the size of its debt pile – from $1 billion a year ago and more than $3 billion in 2011.
The price slump has also affected the Iron Ore Company of Canada, majority-owned by Rio Tinto, which announced last Thursday it is sending out 150 layoff notices.
IOC employs roughly 2,500 people in Labrador West and Quebec in eastern Canada and produced 15 million tonnes in 2013.