22/10/2015 - 11:39

Atlas costs down, production up

22/10/2015 - 11:39

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Atlas Iron says it achieved its annual production rate target four months early while reducing costs during the September quarter, and has started working towards a new iron ore mine in the Pilbara.

Atlas Iron managing director David Flanagan.

Atlas Iron says it achieved its annual production rate target four months early while reducing costs during the September quarter, and has started working towards a new iron ore mine in the Pilbara.

Atlas’s average realised sale price was $61 per wet metric tonne in the September quarter, up from $55/wmt in the previous quarter, as the company returned to full production.

That’s against full cash costs of $58/wmt, which fell from $66/wmt in the prior quarter largely due to Atlas’s collaboration agreements with its contractors, and improved port charges.

The miner shipped 3.3 million wmt of iron ore in the three months to September, a 72 per cent improvement on the June quarter.

It had $107 million cash in hand at the end of the quarter, largely assisted by its recently completed $87 million capital raising.

Atlas managing director David Flanagan said the September quarter marked the turning point for the company after the impact of the sharp fall in iron ore price earlier this year.

“These results demonstrate that Atlas is back up and running at full speed, but this time with lower costs, a stronger balance sheet and innovative arrangements with our key contractors,” Mr Flanagan said.

“We can now begin to eye growth opportunities, though these will have to meet our key investment criteria of having both low capital and operating costs while also generating strong cash flow.”

The company has also begun modifications to its Mt Webber operation, with the aim of delivering a higher value lump product at lower operating costs from December onwards.

“The start of lump production at Mt Webber later this year also meets this investment criteria in respect to generating strong cashflow for little capital outlay,” Mr Flanagan said.

Atlas also announced today that it had begun a $2.2 million pre-feasibility study into the development of an iron ore mine at its Corunna Downs project, which is located 40 kilometres from its Mt Webber project in the Pilbara.

Atlas said it is targeting production of up to 4 million tonnes per annum at Corunna Downs, using a low capex model (which it employed at its Pardoo and Mt Dove projects) of $10 million to $15 million in mine infrastructure to deliver 1mtpa.

That implies a $40 million to $60 million cost to bring the mine into production.

The miner has engaged other parties who may be interested in contributing to the cost of developing the project.

Yesterday, iron ore miner BC Iron reported $7.7 million in positive operating cash flow at its Nullagine joint venture project, with 1.4 million wmt shipped during the September quarter.

The company continued to reduce costs, with an all-in sustaining cash costs down $6/wmt to $52/wmt, against a realised price of $65/wmt before adjustments.

BC Iron managing director Morgan Ball said it was a pleasing result during what was another challenging quarter for iron ore companies.

“This result was underpinned by positive cash flow from the Nullagine operation, where costs reduced materially following the successful transition to a new mining services contractor and an ongoing company-wide cost focus,” Mr Ball said.

Atlas shares fell 3.1 per cent to 3.1 cents each, while BC Iron shares were 6.3 per cent lower to 29.5 cents each at the close of trade.

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