15/05/2015 - 09:56

Atlas Iron to raise up to $180m

15/05/2015 - 09:56

Bookmark

Upgrade your subscription to use this feature.

Atlas Iron plans to resume production at its two closed iron ore mines after striking an innovative profit sharing deal with its contractors, but it is also seeking to complete a big capital raising to ensure its longer-term viability.

Atlas Iron to raise up to $180m
Mining is set to recommence at Atlas Iron's Wodgina mine in the Pilbara next week.

Atlas Iron plans to resume production at its two closed iron ore mines after striking an innovative profit sharing deal with its contractors, but it is also seeking to complete a big capital raising to ensure its longer-term viability.

One month after announcing it would close all three of its mines because of the collapse in iron ore prices, Atlas said today it was aiming to raise up to $180 million from investors.

Some of its key contractors have agreed to participate in the raising, and Atlas is looking for others to also contribute.

The iron ore miner has contracted Maca to undertake mining services and McAleese Group to undertake trucking services at its Wodgina mine, with Maca to move to the site immediately to provide drilling, blasting, loading and hauling by as early as next week.

“The project will utilise otherwise idle plant and equipment and ensure we can maintain continued employment for our people,” Maca operations director Geoff Baker said.

Maca already operates Atlas Iron's Abydos mine but will take over the Wodgina operations from BGC Contracting.

It is not yet known which contractor will operate at the Mt Webber mine, which Atlas wants to reopen ahead of the September quarter.

The Wodgina project is expected to generate over $4.2 million in revenue each month for Maca over a 17-month duration.

Atlas also said it its capital raising would be by way of a $50 million placement, a $100 million shareholder participation offer, with the remaining $30 million to be taken up by the company’s contractors, all of which would be at a price of between 5 cents and 10 cents a share.

It has already received a firm $14 million commitment from McAleese, and said it had executed subscription deeds with various contractors for a total of $22 million.

“The company is working towards executing further subscription deeds with other contractors for up to about $8 million worth of shares,” Atlas said.

A total of 3.6 billion shares will be up for grabs in the raising.

Atlas directors will participate in the share offer up to $365,000, with chairman David Flanagan to take a bulk $200,000.

Managing director Ken Brinsden will subscribe for $125,000 worth of shares, and directors Jeff Dowling and Cheryl Edwardes will subscribe for $30,000 and $10,000 worth respectively.

If Atlas issues the maximum number of shares in the raising, its current shareholders’ ownership in the company will be dramatically bumped down to 20.3 per cent.

Atlas’s collaboration agreements with its contractors have lowered the company’s costs to a break-even benchmark of $US50 per dry metric tonne.

“Under this collaboration agreement, the contractors can receive an uplift in their rates as the iron ore price rises, and receive a total of 25 per cent of applicable positive net operating cashflows,” the company said.

Its Abydos mine, which is now back in full production, together with its Wodgina mine will produce a combined 9 million tonnes per annum of iron ore.

Atlas also plans to add a further 6mtpa to that when it restarts production at Mt Webber, with shipping targeted in the September quarter.

Atlas is planning a total Pilbara production target of 14mtpa-15mtpa by the end of the year.

It said the production restart will provide over 700 local jobs.

Mr Flanagan said the company’s production costs would be very competitive against other global supply.

“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 witnessed in recent times,” he said.

“It will also pave the way for further increases in production, enabling us to deliver strong returns to all who have played a key role in ensuring the success of an important Australian company.”

Maca shares rose 3 per cent to 92.7 cents a share, while McAleese shares jumped 3.4 per cent to 15 cents each at 10am.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options