11/06/2015 - 18:37

Flanagan back to run Atlas Iron

11/06/2015 - 18:37


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Flanagan back to run Atlas Iron
David Flanagan has returned as Atlas Iron managing director.

Atlas Iron founder David Flanagan has resumed as the company's managing director, as the iron ore miner announced that its ambitious $180 million capital raising would be priced at just 5 cents per share.

The pricing is at the bottom end of the range Atlas flagged in mid-May, when it announced plans to strengthen its balance sheet, and is at a big discount to its last traded price of 12 cents.

Current shareholders will own just 20.3 per cent of the company if Atlas issues the maximum possible 3.6 billion shares.

Mr Flanagan, who built Atlas into a substantial miner before moving into a part-time chairman role in 2012, has been working full-time at the company since late 2014 as it has strived to survive the collapse in iron ore prices.

His full-time role has been formalised with his appointment as managing director, with immediate effect from Thursday evening, when the change was announced.

The new role carries an annual salary of $669,790.

Mr Flanagan will focus on financial, corporate and administrative matters, while current managing director Ken Brinsden has become executive director with a focus on operations.

Director Cheryl Edwardes has been appointed chairman.

The capital raising will have three components, with Atlas aiming to raise $30 million from its contractors, including trucking group McAleese Group and mining contractor Maca.

Its prospectus disclosed that it has committed subscriptions of $23.9 million from contractors, and is seeking to fill the balance.

That is little changed from the $22 million in commitments it had secured in mid May.

In contrast to other contractors that are paying for shares, BGC Contracting will be issued with up to $17.4 million in shares as compensation for losing the Wodgina mine contract to Maca and to help cover start-up costs at Mt Webber.

The capital raising includes a placement to raise up to $50 million and a shareholder participation plan for existing shareholders to raise up to $100 million.

Each new share will carry a free option exercisable at 7.5 cents per share, and expiring on 30 June 2017.

The lodging of its prospectus follows the resumption of mining at its Abydos and Wodgina mines, with plans to resume at Mt Webber in July.

Atlas is targeting a year-end production rate of 14-15 million tonnes per year.

Mr Flanagan said that completion of the capital raising along with the company's cost cutting program, including the innovative income-sharing arrangements with contractors, meant Atlas would be positioned to be able to generate sustainable cash flows in an improving iron ore pricing environment.

"With the contractor collaboration agreements in place, Atlas is now turning its attention to strengthening its balance sheet through the capital raising," Mr Flanagan said.

"This is aimed at ensuring that Atlas has strong foundations which can withstand future iron ore price volatility. At the same time, Atlas shareholders can secure an exposure to these cash flows and any increase in the iron ore price on the attractive terms offered by the capital raising.

"With the outstanding support of our key contractors, suppliers and the WA Government, our business is in increasingly better shape."

Hartleys is lead manager to the capital raising, which is not underwritten.

The capital raising is subject to shareholder approval, with a meeting scheduled for 25 June, after being postponed from an earlier plan for 19 June.


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