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Atlas Iron still bleeding cash

Takeover target Atlas Iron continued to haemorrhage cash in the June quarter, again losing $3 on each of the 2.1 million tonnes of iron ore it shipped.

The loss-making junior iron ore miner revealed yesterday it had realised an average price of $59/t for its low-grade ore against $62/t in costs.

The cash position of the Cliff Lawrenson-led company also slumped alarmingly from $78 million at the end of March to $57 million at the end of last month. The figure was affected by the $6 million in net cash it bled during that time from its operations, as well as the payment of a $3.12 million break fee to Mineral Resources, after the board switched its recommendation to shareholders from an all-scrip takeover deal with the Chris Ellison-led company to Hancock Prospecting’s $390 million cash offer.

Atlas also noted the timing of some iron ore shipments from Utah Point late in the quarter meant it did not receive payment until after June 30.

The company still owes $85 million under a term loan, having paid just $2.6 million in interest and principal repayments in the period.

Atlas has been at the mercy of lower iron ore prices combined with steep discounts for its low grade product in recent months as well as increased haulage and port operating costs driven mainly by higher fuel prices.

The company said last month it would suspend iron ore crushing at Mt Dove and reduce its mining rate at Mt Webber from 9Mtpa to 7Mtpa in response.

It also flagged a $75 to $100 million non-cash impairment charge in its full-year accounts if the challenging market conditions persisted.

The grim quarterly comes after the Australian Securities and Investments Commission agreed to Atlas’ request for an extension to send its target’s statement addressing the Hancock offer to shareholders.

The company said it needed the extension because of longer than expected time frames involved in the preparation of an independent expert’s report, which accompanies the statement.

ASIC has given Atlas until Thursday next week to send its target statement to shareholders.

The company’s latest operational update is likely to put further pressure on shareholders to accept Hancock’s 4.2¢ offer for their shares, as recommended by the board.

However Fortescue Metals Group, which emerged with a 19.9 per cent stake in Atlas last month, is yet to reveal its intentions.

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