Atlas in bid to replace two mines
Atlas Iron is on a tight schedule to produce options to replace two of its nearly exhausted Pilbara iron ore mines, but interim boss Daniel Harris says he believes the company will keep generating enough cash to meet debt covenants.
Atlas’ Abydos and Wodgina mines are due to close in the second half of next year, stripping out about nine million tonnes a year of production, or about 55 per cent of its annual output, and potentially leaving the company with only one operating mine at Mt Webber.
Atlas’ debt covenants require it to hold at least $35 million in cash at the end of each month.
Mr Harris confirmed it was important a replacement operation was developed “within a reasonable time frame” if the company was to maintain its cash position as Abydos and Wodgina wound down.
The company was in no immediate danger of breaching covenants but needed to find replacement tonnes to maintain production and cash flow.
Atlas held $95 million at the end of September after generating $24 million cash from its operations in the past quarter as the iron ore price rose. It paid out $15 million to its lenders last month.
Mr Harris told Atlas’ annual shareholder meeting yesterday the company believed it could lift Mt Webber production by almost one million tonnes a year to a 7.8mtpa run-rate by the second half of next year and have a new 4mtpa mine at nearby Corrunna Downs ready to go by the end of March 2018.
Final feasibility studies for Corrunna Downs are due by the end of next month, he said. Atlas was targeting a 4mtpa mine at a cost of between $40 million and $50 million.
Mr Harris said on the sidelines of the meeting that Corruna Downs, 240km from Port Hedland, would need a $US50-a-tonne iron ore price to be viable.
He said he was more bullish on iron ore prices than the Pilbara’s majors, which are tipping commodity prices to return to levels closer to $US40/t next year.