JOHANNESBURG (miningweekly.com) – Mid-sized Australian iron-ore producer Atlas Iron has remained cash-flow positive in the financial half-year ended December 2017, despite high discounts for lower grade iron-ore as a result of China cleaning up its pollution act.
The company, which mines iron-ore from operations in the northern Pilbara, delivered net cash flow from operations of $19-million in the six months, a significant fall from the net cash flow of $94-million in the first half of the previous financial year.
The result that was weighed down by reduced shipments following the end of mining at two mines, combined with significant discounts for lower grade iron-ore, Atlas reported on Tuesday, announcing a statutory half-year loss of A$21-million, compared with an interim profit a year earlier.
The miner’s shipments fell from 8.1-million wet metric tonnes in the first half of the 2017 financial year to 5.2-million wet metric tonnes in the period under review, as mining at the Wodgina and Abydos mines came to an end.
Discounts for lower grade iron-ore also resulted in the average realised price reducing to $62 a dry metric tonne (dmt), down from $66/dmt.
Sales revenue fell by 38% to A$308-million, from A$498-million a year earlier.
Despite the half-year loss, MD Cliff Lawrenson said in a statement that the underlying performance of the company was encouraging. “Our ability to remain cash-flow positive in the face of ongoing steep discounts shows the resilience which is now built into our business.”
Meanwhile, Atlas reported that it had adopted a premium product strategy, which appeared to have been well received in the market.
Trial shipments have been performed to generate an improved product with lower impurities. The company said that early evidence supported its view that the product would be priced at a premium to conventional Atlas fines.
“We are increasingly confident that this strategy will enable us to reduce the price discounts applied to our fines products, while at the same time continuing to enjoy robust margins on our lump product,” Lawrenson said.
The miner’s product strategy has led to an increased proportion of lump product, which it sells at a higher price than fines. In the period under review, Atlas’ output was 50% lump, compared with a full-year target of 40%. The company said it would lift lump production rates to more than 50% of all iron-ore shipments before the end of the 2018 financial year in June.
Atlas is targeting full-year shipments of between 9-million tonnes and 10-million tonnes at a C1 cash cost of A$37/wmt to A$39/wmt.