A string of impairments due to the falling price of iron ore has seen Arrium post a first-half loss of $1.5 billion.
The loss was driven by huge impairments on its iron ore assets of $1.3 billion, which the company announced to the market in late January.
Not including the impairments, Arrium reported an underlying net loss after tax of $22 million for the six months to December 31 2014.
It said the decrease reflects the impact of a depressed iron ore price, which was 40 per cent lower than at the same time last year.
“External factors, including the sharp and substantial fall in iron ore prices, as well as historic low South East Asian steel margins, made the half a very challenging one,” managing director Andrew Roberts said.
Last month the company announced it was redesigning its South Australian based mining operation to provide sustainable cash flow.
As part of the plan, Arrium will focus on its lower cost Middleback Ranges operation and close the Southern Iron mine complex.
Today the miner revealed it was targeting a 27 per cent reduction in the average loaded cash cost to $37/wmt, and a 30 per cent or $200 million reduction in capex
Roberts said despite the pain, Arrium performed well operationally.
“Going forward, we are well positioned for improvement through our increased leverage to a stronger outlook for Steel, our leading market positions and continued strong demand for grinding media, particularly in North and South America, and the re-design of the mining business,” he said.
Roberts said he expected underlying earnings for FY15 to be ‘weighted’ in the second half.
“Earnings in Steel and Mining Consumables are expected to be stronger, and we expect to benefit from the timing of our cost reduction program,” Roberts said.