Logistics contractors to make up savings as long as ore prices stay reasonable
In news sure to cheer its transport and logistics contractors, Atlas Iron has returned its Mt Webber mine to production as hoped.
Processing is planned to restart mid-month with Mt Webber ore tonnes “contributing to shipping shortly thereafter”, Atlas says.
Aiding this is a breakeven iron ore cost of production having been reduced to US$50 (A$65) a tonne, with the present price sitting at around the US$62.70 mark.
In a message similar to that when its other mines returned to service, Atlas managing director David Flanagan says in a statement his firm is on track to grow production over the remainder of 2015 “with significantly improved margins compared to operations pre-suspension, thanks in large part to the support of our key contractors and suppliers”.
“The Company’s sales program is progressing well, with a largely fully sold position now established for the September quarter and sales progressing into the December quarter, locking in the US dollar iron ore price in respect of these sales,” Flanagan adds.
“Demand for both Atlas’ Standard Fines and Lump products has been strong, as evidenced by reduced product discounts from recent sales.”
The cost reduction involves contractor collaboration agreements which see road haulage firm McAleese and ports handler Qube gain a share in iron ore price upside through contractor rate uplift and 25 per cent profit share.
It is understood McAleese is looking to restart haulage next month.
Other support comes from the Western Australian government giving road haulage concession charges and loading relief, along with postponing royalty payments, and Pilbara Ports Authority lowering port charges.
WA Transport Minister Dean Nalder and Finance Minister Bill Marmion announced support worth $40 million on May 15 and it kicked in yesterday.
The relief package also includes a 12-month deferral of $12 million in haulage fees for the trucking of ore to the port.
The $2.50 port charge discount is conditional on the iron ore price staying below A$80 a tonne.
As the price rises above A$80 a tonne the discount will reduce, phasing out at A$90 a tonne.
The government invited applications for interim iron ore royalty relief for junior miners in December.
The port charge discount applies to ore shipped between July 1 and June 30.
The ministers noted that their moves “would help companies such as Atlas Iron and Mineral Resources Limited preserve employment for their workers, contractors and suppliers”.
Mineral Resources is a McAleese customer too.
Last month, Atlas announced a placement to subscribing Atlas contractors for up to A$30 million worth of new shares along with options as part of a broader share offering, while and $23.9 million of them has been executed.
In its prospectus, the company says entered into the contractor collaboration deed with them on May 15, “under which (among other things and subject to certain conditions) those contractors agree to a lower rate structure for a period of at least two years, but can receive an uplift in their rates if the iron ore price rises, and receive the contractor collaboration margin”.
McAleese’s deed is capped at 19.9 per cent of the shares.
The deed allows for a conditional premium of 50 cents per tonne for each tonne sold at more than A$48 in a given month from the Wodinga and Abydos mines along with an equal margin proceeds above the cost of total production, processing, transportation, shipping and costs of sale for production from the applicable mine.
The prospectus reveals that in the six months to December 31, haulage cost it $112.2 million, while in the four months to April 30, the figure was $73,536.
Comparable figures for the next financial year may have to wait for the half-yearly results.