Atlas Iron has resumed operations at its Western Australian iron ore projects with Abydos back in full swing and Wodgina expected to resume in the week beginning May 18. The resumption follows conclusion of a contractor collaboration agreement with significant support from the Western Australian State Government.
The innovative agreement executed by Atlas and its key contractors materially reduces the company’s costs, making it break-even at a benchmark IODEX 62% iron CFR China price of approximately US$50 per dry metric tonne compared to the current benchmark price of approximately USD$60. The restart supports in excess of 700 West Australian jobs and royalty revenue for the state government.
The company was forced to suspend operations earlier this year owing to declining iron ore prices but the agreement, which involved support from the Western Australian Department of Mines and Petroleum, Department of Transport, Department of State Development and the Pilbara Ports Authority, has enabled production to resume at Abydos and Wodgina. These projects have combined annual production of about 9 million tonnes.
Atlas hopes to restart operations at Mt Webber using a similar cost base with shipping from the September quarter targeting an additional 6 million tonnes and a total Pilbara production target of 14-15 million tonnes by the end of the year.
Under the collaboration agreement, the contractors can receive an uplift in their rates as the iron ore price rises, and receive a total of 25% of applicable positive net operating cash flows.
The company is also planning a capital raising via a share placement and a shareholder participation offer. Participation is planned to include Atlas shareholders, sophisticated and institutional investors, certain Atlas contractors and Atlas directors.
Atlas chairman David Flanagan says the package underpins a strong future for the company, its shareholders, employees, contractors and the people of Western Australia. “We look forward to being able to continue our support to the Pilbara’s regional communities and in particular Aboriginal people partnering our mining operations.
“This is nothing short of an outstanding result for everyone involved directly and indirectly with Atlas. We’d also like to thank our collaborating contractors for their engagement.
“The agreements are the result of the widespread commitment shown to Atlas’ success and overwhelming desire to see the company and all its stakeholders prosper today and in the long term.
“Our production costs will be very competitive against other global supply. This will underpin our ability to generate strong cash flow which, in combination with the capital raising, will provide the company with a robust balance sheet that can withstand the sorts of iron ore price volatility we have witnessed in recent times.
“It will also pave the way for further increases in production, enabling us to deliver strong returns to all who have played a key role in ensuring the success of an important Australian company.”