Net loss for mid-tier iron ore miners

Atlas Iron and BC Iron have both reported big losses following impairments and a race to cut costs as iron ore prices remain depressed.

For the first half of this financial year, Atlas made an underlying loss of $139 million and a statutory loss of just more than $1 billion after tax due primarily to a previously flagged $834 million write-down.

BC Iron reported an underlying loss of $18.4 million and a net loss after tax of $96.3 million.

Atlas managing director Ken Brinsden said the mid-tier miner had narrowed the $3 per tonne loss gap it revealed in the December quarter and highlighted further aggressive cost savings.

It realised an average price per wet metric tonne for its iron ore of $66.24 for the first half of the 2015 financial year and had an all-in delivered cash cost of $67.29.

Its revenue fell 23 per cent compared with the corresponding period, to $450.8 million.

Mr Brinsden said Atlas was expecting a continuing material step-down in costs, and had lowered its all in cash guidance to $60-63 per wet metric tonne for the second half of this financial year.

Compared with expenditure in the previous financial year, it expects to book annualised production savings of $90 million to $120 million by June this year through cost reductions, productivity improvements and a solid relationship with contractors.

“A lot of these cost savings are not being derived from the other external tail winds that are working in our favour, this is in the majority about the good work that’s been done inside Atlas to structurally change our costs,” Mr Brinsden said.

He said that, like many Pilbara iron ore miners, Atlas was chasing further production growth and cost savings, without any major capital expenditure.

“From an operating cash flow point of view I think we actually surprised most people, because in both operating cash flow and on a gross cash flow basis we are generating positive cash flow and again the rumours of Atlas’ demise have been greatly exaggerated,” Mr Brinsden said.

“I think that would surprise most people when you consider the carnage that’s going on in iron ore markets.”

Mr Brinsden said Atlas was interested in sharing access to Mineral Resources’ proposed low cost elevated rail project from its Iron valley project, 330 kilometres north to Port Hedland, and had been in discussions with MinRes.

“Anything that opens up additional options for infrastructure access for the junior and mid tier scene for the Pilbara in our view has to be a good outcome,” he said.

Mr Brinsden said Atlas was also in discussions with unnamed parties for a possible joint venture at its Mount Webber mine and would consider a number of shared asset options, including a merger.

“We wouldn’t rule anything in or out, Atlas in many respects is an open book, we’re always looking for opportunities,” he said.

“Whether it’s in the form of a sophisticated rail solution that opens up future project opportunities for Atlas or if there’s another means by which someone can bring value to the table.”

BC Iron managing director Morgan Ball said in a statement the low iron ore price and clay-related production issues at its Nullagine Joint Venture with Fortescue Metals Group had made it a challenging half-year period.

Its net loss after tax of 96.3 million (compared with a profit of $69.6 million in the corresponding period) included a $100 million impairment and accounting adjustments related to it acquiring Iron Ore Holdings.

Its financial results showed the mid-tier miner realised an average $US64 per dry metric tonne and had a C1 cash cost of $60 per wet metric tonne.

However, it did not reveal its all-in cost per tonne, except to note for the second half of the year its all in costs were expected to be between $54 and $61 per wet metric tonne.

BC Iron has reaffirmed its sales guidance of 5.2 million tonnes to 5.6mt for the full 2015 financial year, after exporting 2.3mt over the past six months.

Atlas Iron has provided an upgraded production guidance for the second half of the year of 6.8mt-7.2mt on top of its 6.9mt shipped in the first half.

At 11am WST Atlas shares were trading down 2.4 per cent at 20 cents.

BC Iron shares were trading down 3.7 per cent at 51 cents.