Atlas Iron on shaky ground

Atlas Iron Limited have announced a halt to trading, foreshadowing more tough times ahead linked with the plunging price of iron ore.

The junior miner (ASX:AGO) announced the request for voluntary suspension of trade this morning, pending the outcome of an “extensive review of the Company’s operations, financial outlook, asset sale opportunities and capital structure in light of the recent rapid fall in the iron ore price”.

Company secretary Yasmin Broughton said Atlas had made significant progress in reducing the company’s production costs.

“However, the extent and pace of the decline in the iron ore price, which has fallen 24 per cent to US$47.50 (Platts 62 per cent index) since Atlas released its half-year accounts on 24 February 2015, and the uncertain outlook, has prompted the company to initiate the comprehensive review,” she said.

Atlas Iron break-even production costs have been quoted at US$64 per tonne, with discount rates being paid for low grade ore from the Pardoo, Wodinga, Mt Dove and Abydos iron mines in the Pilbara, with the average grade coming in at 58 per cent Fe.

Broughton said the company would announce the outcome of the review in the next two weeks, and would not provide further commentary on the matter until then.

Atlas Iron have not ceased operations at their mines, indicated by another announcement to the ASX this morning from contractors McAleese Group stating that their bulk haulage division continues to undertake contracted road haulage and support operations for Atlas Iron.

The price of iron ore dropped to US$46.70 as of Monday morning, with further decent in line with reduced Chinese demand for the commodity predicted by economist Ross Garnaut.

"My old friends say that Chinese production should fall from a bit above 800 million tonnes today to about 600 million tonnes in 2030,” Garnaut said in an AFR report.

Atlas dropped a large number of permanent workers in September 2014, when the iron ore price was sitting around US$80 per tonne.

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