Atlas Iron reported on April 10 that it was suspending production at its five direct shipping ore (DSO) mines in the Pilbara region of Western Australia due to recent falls in the iron ore price.
The company expected to suspend the mines progressively during April, with exports to cease shortly thereafter. The mines are being placed on care and maintenance pending future developments in the iron ore market.
Atlas opened its Mt. Webber mine on July 15, 2014. Previously, it had developed four mines: Pardoo (2008), Wodgina (2010), Mt. Dove (2012), and Abydos (2013). Its first commercial ore shipment was from Pardoo in December 2008.
Atlas shipped 10.9 million mt in its fiscal year to June 30, 2014 and 6.89 million mt during its fiscal first half to December 31, 2014.
The company’s announcement of suspension of operations included a statement that an extensive cost-cutting program had allowed it to reduce its production costs to below $60/mt, but that with iron ore prices below $50/mt, production was no longer viable.
Managing Director Ken Brinsden said the decision to suspend production was taken after extensive consideration of the company’s financial position and discussions with contractors and secured creditors. As of December 31, 2014, the company had drawn $338 million from debt facilities and had $169 million in cash and cash equivalents.
The Atlas announcement also stated that, “Based on the significant percentage of global iron ore production that is now cash flow negative, Atlas expects prices will ultimately increase. However, the timing of a recovery is unclear, leaving Atlas with little choice but to take decisive action to protect its balance sheet and resource position.”
Brinsden also stated, “To suspend our operations, with the impact that will have on so many committed and talented people, is an extremely difficult decision. I sincerely thank all those who have worked so hard to build Atlas’ production base and those who have worked furiously to maintain Atlas’ competitive position over the past 15 months, in the face of increasingly oppressive market conditions.”
Atlas has employed approximately 500 people across its production assets, including direct employees and those of the company’s contractors. A further 75 people have been employed in its Perth office.