Close to 600 people are set to lose their jobs after Atlas Iron announced it will close its mining operations.
The company said it will suspend mining over the month of April, with exports to cease a short time later.
The move comes in light of the iron ore price dive which has seen the commodity lose 25 per cent of its value since the start of the year to trade at 10-year lows.
Atlas Iron’s break-even price is $US60 a tonne, well above the current spot price of $US47 a tonne.
All Atlas’ projects will be put on care and maintenance, pending future iron ore market conditions.
The company will cease mining and crushing at its Mt Webber project t this week, while operations at the Abydos project are scheduled to come to a halt within 14 days.
Atlas Managing Director Ken Brinsden said the decision to suspend production was taken after extensive consideration of the company’s financial position, discussions with contractors and secured creditors.
“To suspend our operations, with the impact that will have on so many committed and talented people, is an extremely difficult decision,” Brinsden said.
“I sincerely thank all those who have worked so hard to build Atlas’ production base and those who have worked furiously to maintain Atlas’ competitive position over the past 15 months, in the face of increasingly oppressive market conditions.”
Western Australia Premier Colin Barnett said the move by Atlas was of “immense concern” and again hit out at the strategies of BHP Billiton, Rio Tinto and Fortescue Metals Group.
The big miners have been blamed for the falling price of iron ore as they pump record volumes into the market despite reduced demand.
In comments reminiscent of those made just months ago, Barnett warned the miners that they did not own the iron ore reserves.
"The State Government owns the iron ore and we are not willing to simply allow the iron ore continue to be sold at throwaway prices – and that's a pretty clear message to the iron ore industry,” he said.
"Don't forget who owns the iron ore, who controls the projects, who controls the ports, who controls tonnages and the like."
Barnett said he wants companies to understand that he is not “some dopey Premier” who will sit back and do nothing while the resource value falls.
"I cannot understand the business strategy of the three big major iron ore producers of flooding the market when the market is weak," he said.
"That is just a flawed strategy and not only has it hurt a company like Atlas Iron – dramatically – I think the companies are hurting their own shareholders and indeed the market.”
Atlas said it believes the price of iron ore will eventually increase based on the significant percentage of global iron ore production which is now cash flow negative.
However it said the timing of this recovery is unclear and the company is now in discussions with its creditors concerning options which would enable its mines to re-start as efficiently as possible in a circumstance where an operating margin can be re-established.
The flow-on effect the mine closures will have were highlighted this morning with mining contractor MACA announcing its revenue guidance would be impacted by the lost contract.
The contract at Abydos for both mining and crushing services generated between $4 million to $5 million per month for MACA.
In an ASX statement this morning, the company said as a consequence of the contract suspension its full-year revenue guidance for the 2015 financial year will be $600 million.