Shares of iron ore business Atlas Iron Limited (ASX: AGO) slumped 16% on Monday following the release of its quarterly report and a trading update.
Atlas Iron is a $290 million iron ore mining company based in Perth, Western Australia.
On Monday, Atlas made a series of ASX filings disclosing its most recent operating performance.
In one ASX announcement, Atlas said it repaid $20 million of debt and its lenders had agreed to ease covenants on its existing debt. For example, Atlas no longer needs to maintain $35 million of cash in the bank each month but can instead hold just $15 million.
“Following this A$20 million repayment, we will have reduced our debt from more than A$180 million in June 2016 to less than A$85 million – cutting our interest cost by about A$8 million a year,” Managing Director, Cliff Lawrenson said. “The decision reflects our commitment to re-position the business by reducing debt, growing our existing iron ore business through Utah Point and diversification beyond iron ore.”
Atlas said it had $71 million of cash on hand plus $34 million in a reserve account.
In a separate announcement, Atlas said it shipped 2.2 million wet tonnes of iron ore during the quarter ending 31 December, which was down on the previous quarter’s production levels. Further, the average sales price of its ore was $58 per tonne but the full cost to get its product to market was $59 per tonne. That means it was underwater by $1 per tonne.
The company said:
“…the operating results reflected the impact of the significant ongoing discounts being applied to lower grade iron ore. Despite this, Atlas has restricted its operating cash deficit to $1.2 million for the Quarter, retaining a cash surplus over its Term Loan balance.”
Consistent with its strategy to diversify away from iron ore, a steelmaking ingredient, Atlas pressed ahead with its push into copper and lithium. During the quarter Atlas entered into a deal with buy 1.5 million tonnes of lithium DSO for export.
Mr Lawenson also updated investors on Atlas’ exploration initiatives. “Our exploration program targeting lithium and copper, as well as progress on our DSO lithium deal demonstrates our ongoing efforts to diversify,” he added.
On Monday, Atlas Iron shares were trading 16% lower at 2.6 cents.
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