Atlas Iron is targeting further savings after revealing it sold iron ore at a loss during the December quarter, selling for an average price of $63 per tonne compared to an all-in cash cost of $66 a tonne.
Atlas Iron is targeting further savings after revealing it sold iron ore at a loss during the December quarter, selling for an average price of $63 per tonne compared to an all-in cash cost of $66 a tonne.
While delivering the mid-tier miner’s latest quarterly report today, managing director Ken Brinsden said the company’s aggressive cost cutting program had been successful during "challenging times".
“As fast as the iron ore price has been falling unfortunately, the good news is Atlas has been able to continue to strip costs out of our business to make sure that we can keep our heads above water, and it’s a credit to the team just how quickly we’ve been able to achieve that,” Mr Brinsden said.
He highlighted further savings including an expected fall in freight and diesel prices, and a 50 per cent deferment of state royalties in efforts to further reduce its cost base, but decided against setting new lower price guidance targets.
It has maintained its full-year guidance of $64-$68 all-in cash costs, targeting the lower end of that range.
Mr Brinsden said it expected to reap further savings of between $3 and $4 less per tonne freight rates as the falling oil price filtered through.
As diesel costs also fell, he said, Atlas estimated it could save an additional 50 cents per tonne in its iron ore costs for every 10 cent per litre diesel price reduction.
The miner exceeded its export guidance for the December quarter, shipping 3.8 million tonnes.
However its production fell to 3mt, down from 3.7mt in the September quarter.
Mr Brinsden said the company was now cash flow positive, despite reporting an "approximately" break-even normalised EBITDA.
He said Atlas’s current financial year capital expenditure guidance had been revised down by $25 million, to $69 million, the majority of which had already occurred following construction at the Mt Webber stage two project finishing on time and under budget by $10 million.
“Atlas’s successful focus on cost reduction has ensured the company finished the quarter with a robust cash balance of $169 million, despite the challenging market conditions, and now has minimal further capital expenditure requirements,” Mr Brinsden said.
Mr Brinsden defended Atlas’s right to take up the state government's royalty relief package, the terms of which it was currently negotiating with the Barnett government.
The package announced in December is available to smaller iron ore miners while prices remain under $US90/t.
Repayments will not accrue interest.
“It’s just simply good policy to continue to support the junior and mid tier scene in iron ore because we bring significant benefit to the table,” Mr Brinsden said.
“The royalties that we pay, the salaries that we pay supports WA business, supports the government of WA to continue to pay for police stations, hospitals, schools, nurses, you name it and we are key contributors.”
He said while all deferments would be paid back, the immediate savings were expected to be about $8 million in royalty payments per quarter, and could be backdated to the December quarter.
Atlas shares were trading down 2.6 per cent at 9.46am WST to 18.5 cents.