ATLAS Iron expects to resume operations in July at its Mount Webber mine in the Pilbara region of Western Australia. It will be the latest of the company’s operating mines to resume production following the restart of Abydos and Wodgina operations in the June quarter. The targeted annual production rate by the end of the year is 14-15 million tonnes

Atlas Pardoo
One of Atlas Iron’s projects in the Pilbara region of Western Australia.

Earlier this year Atlas announced it would halt production owing to depressed iron ore prices but a contractor collaboration agreement helped reduce the company’s costs, thereby enabling it to resume operations.

The innovative agreement executed by Atlas and its key contractors materially reduces 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 US$61.50. The restart supports in excess of 700 West Australian jobs and royalty revenue for the state government.

The agreement involved support from the Western Australian Department of Mines and Petroleum, Department of Transport, Department of State Development and Pilbara Ports Authority.

As part of the Mt Webber re-start, Atlas and BGC Contracting have agreed that production will ramp up to an annual rate of 6 million tonnes by the December quarter. Atlas will pay BGC between Aus$17.1 million and $19.6 million in shares and/or cash to cover termination costs associated with the Wodgina mining contract, suspension, remobilization and other costs for the Mt Webber mine.

Under the revised Mt Webber agreements Atlas and BGC are targeting mining cost savings of 10-12%. As a result the costs will be similar to those at Wodgina and Abydos, meaning Atlas will have a break-even price similar to the other two mines.

The agreement with BGC is not based on the contractor collaboration model at Wodgina and Abydos. Under the Mt Webber contract, rates paid to BGC will not rise in line with the iron ore price and BGC will not share in the net operating cash flow from Mt Webber.

Subsequent to the Mt Webber agreement Atlas has launched a capital raising with the funds to strengthen its balance sheet and assisting in managing periods of volatility in market conditions.

The raising comprises:

  • A placement to key contractors for up to Aus$30 million worth of new shares.
  • A placement to new and existing shareholders to raise up to $50 million; and
  • A Shareholder Participation Offer to eligible shareholders to raise up to $100 million.

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