Atlas Iron Ltd. will resume production after the steelmaking ingredient rallied into a bull market and Australia’s fourth-largest iron ore supplier struck a deal with contractors to cut costs.
Mines shuttered last month as iron ore touched a decade-low are either back in production or scheduled to resume, Perth-based Atlas said today in a statement. Iron ore has climbed 32 percent from its April 2 low of $47.08 on re-stocking by Chinese mills and signals from the largest producers that they will slow the pace of supply expansion.
Under an agreement with contractors MACA Ltd., McAleese Ltd. and QUBE Holdings Ltd., Atlas will reduce its break-even price to about $50 a metric ton, according to the statement. In return, Atlas will pay 25 percent of positive cash flow from two of its mines to the contractors for an initial period of two years.
Atlas will seek shareholder approval next month to raise new capital in a share sale, though hasn’t yet established the size of the planned raising, it said in the statement.
Selling shares “will provide the company with a robust balance sheet that can withstand the sorts of iron ore price volatility we have witnessed in recent times,” Chairman David Flanagan said in the statement. “It will also pave the way for further increases in production.”
The agreement will lift annual production to between 14 million and 15 million tons by year end, Atlas said. Before closing its mines last month, Atlas had forecast output in the year through June of about 13 million tons.
Ore with 62 percent content at Qingdao, China, fell 0.5 percent to $62.30 a dry ton on Thursday, according to Metal Bulletin Ltd.
Source: Bloomberg
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