PERTH (miningweekly.com) – Iron-ore miner BC Iron on Friday suspended direct shipping ore (DSO) operations at its Nullagine joint venture (JV), in Western Australia, citing the ongoing and material fall in the iron-ore price.

BC Iron said that, despite achieving material cost reductions at the JV with iron-ore major Fortescue Metals, the continued decline in the iron-ore price, particularly over the past two weeks, had resulted in an iron-ore price and outlook that made it difficult to operate the JV in its current form.

Since 2014, BC Iron had been working to reduce costs at the Nullagine JV, implementing a number of measures, including terminating a higher-cost road haulage contract and a number of consultancy contracts, as well as implementing redundancies at the Nullagine mine site and at the company’s head office.

The company also transitioned its major mining, crushing and screening contractor at the Nullagine project and recently varied the terms of the rail and port services agreement with Fortescue over the JV project.

Under the new agreement, the rail and port tariff would reduce when iron-ore prices were lower and increase when prices were higher.

BC Iron said on Friday that the suspension of the DSO operations would occur progressively over December and January, with exports expected to be completed during January.

The suspension would be managed in such a way that if the JV partners decided there was an appropriate change in the external market conditions, the DSO operations would be able to restart efficiently.

“While this has been a difficult decision for the board, we have consistently advised that our primary focus at BC Iron is to create value for our shareholders,” said MD Morgan Ball.

“BC Iron is a price taker and, unfortunately, despite the commitment and achievement of all BC Iron staff and contractors to successfully reduce our cost base, the iron-ore market is such that we have had to make this decision.”

The JV currently had a significant stockpile of mined low-grade ore and was assessing options in relation to this stockpile.

The JV had agreed to undertake a trial under which an unprocessed parcel of this low-grade ore would be sold to Fortescue’s Christmas Creek hub, under a mine gate sale agreement. Subject to the outcome of this trial, the JV could continue to operate at a reduced rate and sell part of the low-grade stockpile to Fortescue on an ongoing basis.

A decision on this alternative is expected by the end of the month.

Ball said the decision to suspend DSO operations at the JV would impact employees; however, the severity of this impact would depend on the outcome of the trial low-grade operations.

BC Iron directly employs 30 staff at the JV operations, as well as 200 contractors, with the company employing a further 30 staff at its head office.

The company’s cash balance at the end of the year was expected to be between A$42-million and A$47-million, compared with the cash balance of A$71.8-million at the end of September.

Further costs associated with the temporary suspension of the DSO operations would be incurred in 2016.