Atlas Iron eyes record production

Junior miner looks to offset falling iron ore price with increased higher grade production.

Atlas Iron (AGO) will ramp up the production of higher grade iron ore products and reduce its capital expenditure in the coming year as it looks to counteract the impact of a falling iron ore price.

The miner said today it shipped 10.9 million tonnes in fiscal 2014, but has set its full-year guidance for fiscal 2015 at between 12.2 million tonnes and 12.8 million tonnes, representing an increase of between 12 and 17% and a record for the company.

Atlas said in light of changing demands in the iron ore market it plans to increase the higher grade 'standard fines' proportion of overall production to 12 million tonnes to 12.2 million tonnes, while production of 'value fines' is being targeted at 0.2 million tonne to 0.6 million tonnes.

"Should market conditions improve for the value fines product, there is the potential for increased production opportunities," Atlas said.

Atlas Iron is one of the most exposed junior miners on the ASX, with a breakeven price of $US82 a tonne. In June the iron ore price dropped to as low as $US89 a tonne, and so far this year lost more than 30 per cent.

Overnight, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US94.50 a tonne, down from $US95.40 in the previous session.

In conjunction with higher production, Atlas said it was targeting significantly lower all-in cash costs compared to unaudited results achieved for fiscal 2014.

It also flagged a material decrease in amortisation and depreciation expense guidance to $12 per wet metric tonne to $15 per wet metric tonne.

The junior miner said it has embarked on a series of cost saving and productivity initiatives to fundamentally reduce the cost of iron ore delivered to market in fiscal 2014, with the initiatives targeting the entire cost base of the company including operational, corporate, project development and exploration spend. 

Atlas said it expects these cost savings to be won primarily over the course of fiscal 2015 and into fiscal 2016.

Related Articles