Iron ore prices still weighing on Atlas Iron
Atlas Iron has narrowed its full-year loss but low prices mean it’s not fully benefiting from higher ore production.
Atlas Iron’s beaten-down share price has jumped after it narrowed its full-year loss, despite noting a continued struggle with the soft iron ore price environment.
At 12.50pm (AEST), Atlas shares rose 15 per cent to 1.2c.
In the 12 months to June 30, Atlas (AGO) declared a loss of $159 million, an improvement from the prior year’s $1.38 billion loss, due largely to fewer writedowns.
The result came alongside a 9 per cent lift in revenue to $786 million, although lower commodity prices meant it didn’t fully capture the benefits of a 19 per cent rise in production.
Atlas said its full cash cost per tonne was cut 24 per cent, helping it marginally slide under the realised price of its product.
The group has endeavoured to reduce its leverage to ore prices over the past year, saying it is now more resilient to volatility.
“As part of the contractor collaboration deed, Atlas looks to reduce volatility on a three-month look-forward basis using hedging products, fixed price sales and shorter dated pricing periods,” the group said.
“This will reduce exposure to iron ore price risk, but may also limit Atlas’s ability to leverage any potential iron ore price appreciation.”
The iron ore miner agreed a potential company-saving debt restructure in May, although the terms have since changed on the deal.
Instead of a six-monthly asset coverage ratio the miner must now show a minimum cash balance of $35 million at the end of every month or risk breaching its covenants.
If the group has above $80m at the end of any month it is also required to pay the excess to its lenders.
Atlas ended the financial year with $80.9m cash on hand and said it is currently in compliance with its obligations.
