Due to recent significant falls in the iron ore price, Atlas Iron is progressively suspending its Australian mining operations over the month of April, with exports ceasing shortly thereafter. 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 US$60/tonne at an EBITDA level. However, despite these substantial reductions, Atlas’ break-even price remains well above the current spot price. In light of this, Atlas will cease mining and crushing at its Mt Webber project this 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.
Atlas’ managing director Ken Brinsden said the decision to stop production was taken after extensive consideration of the company’s financial position, discussions with contractors and secured creditors. “To suspend our operations, with the impact that will have on so many committed and talented people, is an extremely difficult decision.
“I sincerely thank all those who have worked so hard to build Atlas’ production base and those who have worked furiously to maintain Atlas’ competitive position over the past 15 months, in the face of increasingly oppressive market conditions.”
Approximately 500 people are employed across Atlas’ production assets, including direct employees and those of the company’s contractors. Atlas employs a further 75 people in its Perth office.
Based on the significant percentage of global iron ore production which is now cash flow negative, Atlas expects prices will ultimately increase. However, the timing of a recovery is unclear, leaving Atlas with little choice but to take decisive action to protect its balance sheet and resource position.
Atlas is now in discussions with its creditors concerning options which would enable the company’s mines to re-start as efficiently as possible in a circumstance where an operating margin can be re-established, whether through further cost reduction where possible and/or improvements in the iron ore price.