Arrium announces further write-downs

After a horror start to the year which saw the closure of its Southern Mining operation, Arrium has announced further write-downs.

The company said it expects to record a further asset impairment of $320 million on top of the $1.3 billion impairment it announced in January.

Arrium also announced it was expecting earnings before interest, tax, depreciation and amortisation for the current financial year of between $335m and $350m.

It said lower group earnings for the second half reflects the substantial deterioration in average iron ore prices.

In response, Arrium is looking to lower the cash breakeven price of its Middleback Ranges iron ore operation to $US50/dmt for FY16.

Arrium is also targeting further reductions in capital expenditure by $70m, which will work to lower sales volumes of ore to 6-8 million tonnes per annum between fiscal 2017 and 2019.

The company said it will continue to undertake a strategic review of its business, but said the substantial deterioration in iron ore prices has had an adverse impact on the company’s cash flows and level of debt.

The review could lead to the divestment of assets, Arrium said.

Managing director, Andrew Roberts, said the review will consider a range of options to deliver the best outcome for shareholders.

The rapid fall in the price of iron ore this year has taken a heavy toll on Arrium.

In January, the company said it was re-designing its mining business in response to the low iron ore price environment.

This led to the miner mothballing its Southern Iron mine complex.

At the same time the company announced it would be recording an asset impairment charge of $1.3 billion. 

The company sold iron ore at close to a $9 loss per tonne during the first quarter.

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