Atlas Iron has launched an extensive review of its operations, finances and possible asset sale opportunities in response to steep falls in the iron ore price.
Atlas Iron has launched an extensive review of its operations, finances and possible asset sale opportunities in response to steep falls in the iron ore price.
The iron ore producer said the review was prompted by an uncertain outlook as the price of steel-making commodity fell below $US47 per tonne over the weekend, and despite making progress towards reducing production costs.
The review is expected to take two weeks.
“Atlas has already commenced discussions with a number of its stakeholders in relation to various initiatives intended to further reduce costs and preserve value,” the company said in a statement.
Stockbroking firm Hartleys, which in recent years has managed a number of capital raisings for Atlas, downgraded its investment recommendation for the iron ore miner.
“We have had a 'speculative buy' recommendation for Atlas, on the basis that it was cheap exposure to iron ore prices. We did emphasise the high risk nature of an investment in the company,” Hartleys said.
“We feel we must downgrade to 'reduce'.”
It estimated that at $US51 benchmark prices, Atlas would only be receiving $A52 per wet metric tonne.
“Consequently, the cash burn rate is meaningful, and the ability to repay debt requires a significant rally in Australian dollar iron ore prices,” the company said.
It said the all-in cash cost guidance was $60 to $63 per wet metric tonne for the second-half of the 2015 financial year, compared with $67.29 for the first half.
Hartleys said it would look to upgrade its recommendation on Atlas if iron ore prices improved.
It also estimated Atlas would be making a loss in FY15 and FY16.
Atlas requested voluntary suspension from trade on the ASX while it carries out the review.
Lazard is assisting Atlas with the review.
Meanwhile, the bulk haulage division of McAleese Group confirmed it would continue to undertake contracted road haulage and support operations for Atlas but said it would keep the market informed of any material developments.
Last week, Pilbara miner BC Iron cut short a five-year mining contract with Watpac Civil & Mining as it slashes costs in response to a plunging iron ore price.
Atlas Iron has recently slashed jobs and reported a half year net loss of $1.09 billion.