By Rhiannon Hoyle
SYDNEY--The sharp fall in iron-ore prices claimed a major
casualty in Australia when Atlas Iron Ltd. said it would shutter
all its mines and halt exports to Asia.
Atlas was worth nearly 4 billion Australian dollars (US$3.1
billion) as recently as 2011 but has been losing money rapidly as
iron-ore prices fell 30% since the start of this year to a
decade-low. That raised concerns about its ability to repay debts
if it continued digging up ore.
The Perth-based company joins a raft of small- and mid-sized
iron-ore producers squeezed by the rapid decline in spot prices.
Australian steelmaker Arrium Ltd. has been forced to shutter one of
its two iron-ore mines here, while Cliffs Natural Resources Inc.
recently suspended a mine in Canada. Cliffs has been restructuring
its U.S. business to focus on domestic iron-ore sales rather than
competing in the seaborne market.
Even major producers such as Rio Tinto PLC have been slashing
costs and jobs as they grapple with the deepening market
downturn.
Fortescue Metals Group Ltd., the world's fourth-largest iron-ore
exporter, was last month forced to scrap a planned debt sale
because it couldn't agree on terms with investors amid a sour
outlook for the commodity.
In February, Atlas Iron reported a more-than-A$1-billion net
loss for its fiscal first-half, swinging from a profit a year
earlier as it wrote down the value of its mining assets.
At the time, executives vowed they were working hard to slash
operating costs to safeguard earnings.
But ore prices have raced lower faster than many companies can
cut costs. The price of iron ore, a key ingredient in steelmaking,
slumped as low as US$46.70 a metric ton last week, weighed by
ballooning supplies of the raw material as China's economy
cools.
Some of the world's biggest miners, including Rio Tinto and BHP
Billiton Ltd., have been aggressively expanding their operations in
the Pilbara iron-ore mining hub of northwest Australia, completing
major mine and infrastructure projects planned when the market was
booming. Iron ore traded as high as US$190 a ton in 2011.
U.S. investment bank Jefferies said prices could fall further in
coming months as those companies continue to increase production.
Stan Shamu, an analyst at broker IG, said he expects the market
downturn to claim "more victims."
"To suspend our operations, with the impact that will have on so
many committed and talented people, is an extremely difficult
decision," Atlas Iron managing director Ken Brinsden said.
Atlas Iron, which suspended its shares earlier this week saying
it was conducting an urgent business review, said it would stop
mining at its Mt Webber site next week and cease production at its
Abydos operation within two weeks. Operations at its Wodgina mine
are expected to stop in late April, it said.
They will remain suspended until iron-ore prices improve, said
the company.
Nearly 600 people work in Atlas's mines and offices in
Australia's west. The company is in discussions with creditors
around options for restarting its mines when they able to turn a
profit, which could be supported by investigations of further
cost-reduction measures, it said.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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