Atlas Iron have put plans in place to stay afloat with new contractor agreements for their iron ore mines in WA, with Wodgina mining expected to restart next week.
Atlas have set in place new agreements for haulage with bulk services provider McAleese Group, as well as crushing services with MACA, announced to the ASX this morning.
MACA Limited have taken a Letter of Intent from Atlas to contract for open pit services at the Wodgina DSO project, following resumption of mining and crushing at Abydos earlier this month.
Atlas have also planned a new capital raising issue to strengthen their balance sheet, inviting current shareholders, sophisticated and institutional investors, as well as contractor and Atlas Iron directors.
A shareholder meeting on 19 June will determine whether capital raising can go ahead.
McAleese Group confirmed haulage agreements would be ongoing from Abydos and Wodgina mines under revised agreements, and also confirmed they had made a $14 million commitment to a new Atlas Share issue.
McAleese will borrow to make their investment in the upcoming Atlas share issue, taking their net debt up to $174-179 million.
The new agreements are expected to deliver Atlas Iron a break-even price of US$50 per dry metric tonne (dmt) for 62 per cent Fe, compared to the current benchmark of US$60/dmt, thanks to a lower base haulage rate.
Atlas chairman Dave Flanagan expressed optimism about the future of the company, citing competitive production costs as the way forward.
“Our production costs will be very competitive against other global supply,” he said.
“”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 seen in recent times.”
Flanagan also said these new developments would “pave the way for further increases in production”.
Shipping from Mount Webber in the September quarter after the projected restart will target an additional production of approximately 6Mtpa.
Atlas has forecast total production by the year’s end to reach the previously targeted 14-15Mtpa.