Australian Atlas’ iron ore sales slump in 2017-18, production costs rise

3-Sept-2018

Australian iron ore miner Atlas Iron saw its sales of the product slump in fiscal 2017-2018 (July-June) and production costs rise, it said in its preliminary final report Wednesday.

The miner, which is in the midst of a takeover play by Hancock Prospecting, sold 9.22 million wet mt of iron ore during the 12-month period, down 36% from 14.35 million wmt the year prior, and from 14.49 million wmt the year before that, the company said.

“The reduction was caused by the end of life mine at Wodgina (May 2017) and Abydos (October 2017),” Atlas said.

Of the 2017-2018 total, 4.8 million wmt was lump and 4.4 million wmt was fines, which compared with 4.9 million wmt lump and 7.9 million wmt fines the year before.

“During the year, the premium on lump product improved compared to historical rates and the company responded by changing its product strategy to increase the proportion of lump product in the sales mix. The company’s output for the year was 52% lump and 48% fines compared to FY 18 guidance of 40% lump and 60% fines,” it said.

Atlas operates in Western Australia’s Pilbara region. It has been struggling with the impact of discounts for lower grade iron ore and higher operating costs.

The company’s C1 cash costs in the fiscal year were A$39.30/wmt ($28.72/wmt), up from A$34.76/wmt in fiscal 2016-2017. Its full cash cost was A$59/wmt, up from A$53/wmt over the same period, Atlas said.

Meanwhile, the company’s realized price for iron ore for the year was level with the full cash cost at A$59/wmt, down from A$61/wmt the year before, it said.

Hancock’s offer for Atlas — which is being made via its wholly-owned subsidiary Redstone Corporation — will close on August 31, subject to any further extension. Redstone has advised Atlas that its voting power in the company has increased to 70.23%, Atlas said.

Atlas will formulate its fiscal 2018-2019 guidance once it has considered the outcomes of Redstone’s strategic review and in the interim will continue operating its Mount Webber mine at around 7 million mt/year, it said.

Source: S&P GLOBAL PLATTS