Qube to roll with Pilbara volumes punches


Ports and bulk division seals Atlas deal but throughput will fall

Qube to roll with Pilbara volumes punches
Utah Point volumes will be down. Picture: Qube

 

Amidst the satisfaction of seeing its majority-owned consortium taking another step towards Moorebank’s realisation, Qube has flagged financial hits to its ports and bulk division in the Pilbara.

While its exposure to Atlas Iron’s difficulties will be less problematic than it first seemed when the miner initially faced ore price dramas, Qube notes volumes are expected to remain below previous levels until at least the December 2015 quarter, when the Mt Webber mine is expected to be producing at its target volumes.   

It has finalised the extension and amendment of its contract with Atlas Iron, with the contract now extended a further seven years.

"The new contract provides for interim arrangements for up to 24 months during which Qube has reduced its base charges to Atlas but with an upside sharing arrangement whereby Qube may earn additional revenue depending on the iron ore price received by Atlas and the free cash flow generated by Atlas," Qube says.

"At the end of the interim arrangements, the contract pricing will revert to a rate structure with a set rate per tonne linked to volume."

Due to Atlas temporarily suspending operations, throughput at Utah Point was lower in May and will be below previous levels in June.

Meanwhile, trading conditions in key markets "continue to be challenging with lower volumes and rate pressures in a number of areas of the business".

This was not helped by severe weather in New South Wales in April that impacted rail operations.

Despite all that, Qube expects earnings to improve on last year.

The division also faces the completion of several contracts including the Yara contract at Dampier and project work at Roy Hill, and the previously announced cessation of the Arrium contract.

New contracts will mitigate some of these along with and the full year impact of acquisitions and growth capital expenditure completed this financial year but the division’s earnings will be lower than the year before.

"Qube is continuing to pursue a number of strategic growth opportunities across its core markets and will continue to invest in acquisitions, facilities, equipment and technology to build scale and efficiencies, and deliver innovative, reliable logistics solutions," the company says.

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