PERTH (miningweekly.com) – The share price of iron-ore miner Atlas Iron shot up by 19% on Friday on news of lower costs and increased cash flows.

Atlas told shareholders that cash costs during July fell to A$55/t, from the A$66/t reported in the June quarter, as the contractor collaboration agreements implemented at its Pilbara operations delivered results.

Atlas MD David Flanagan said the cost reductions reflected the success of the contractor collaboration models in place at the company’s Wodgina and Abydos projects.

“The collaboration agreements are working. Costs have fallen and our mines are generating positive cash flow.”

“The Mt Webber mine has achieved ramp up in August and we look forward to shipping more tonnes and further reducing costs,” Flanagan said.

During the month of July, Atlas’s average realised sales price reached A$57/t.

This cash margin was generated against a backdrop of an average Platts 62% iron-ore price of $52/t for the month, which compares favourably to Atlas’s forecast of a breakeven price of $54/t for July.

Based on cost estimates for August and forward pricing arrangements in place for this month, Atlas expects to generate increased cash flow for August relative to July.

Since announcing the restart of operations at Abydos and Wodgina in May, Atlas has remobilised all mobile and fixed plant, rebuilt stocks and achieved the run rates required to deliver significant savings.

Iron-ore exports have now resumed from Mt Webber. When combined with the volumes produced at Abydos and Wodgina, Atlas remains on schedule to achieve a 14-million-tonne- to 15-million-tonne-a-year export rate by December.

In addition to Atlas’s strategy to continue growing its hedging programme, the company is also executing underlying sales agreements, which would provide further certainty around shipping volumes and pricing mechanisms.

For the six months to December, some 63% of production was currently the subject of various pricing mechanisms that provide a degree of certainty around the price that Atlas would ultimately realise on its production during this period.

The price-fixing arrangements have focused on the US iron-ore price, with the majority of shipments still subject to the floating Australian exchange rate.

Consistent with the intention of the collaboration agreement with certain contractors, Atlas was hoping to lock in floor pricing for a minimum of 80% of production three months in advance for the Wodgina and Abydos projects. 

The company intended to apply a hedging programme for Mt Webber in a broadly similar manner, Flanagan said.

Atlas shares were trading at a high of 2.5c a share on Friday, up from a closing price of 2.1c a share on Thursday.