Melbourne - Atlas Iron Ltd, Australia’s fourth-largest iron ore supplier, will suspend all operations this month in response to a slump in prices to their lowest in a decade.
The company is the biggest casualty in Australia of a collapse in the price of the steelmaking material, caused by a glut in supply and cooling demand in China, its largest consumer. Australia, led by Rio Tinto Group and BHP Billiton Ltd, is the world’s top exporter of iron ore.
Atlas, which shipped 6.9 million metric tons of iron ore in the six months through December, said its operations are no longer viable and would be put into care and maintenance, pending future market conditions, according to a statement. Discussions with creditors have begun, the Perth-based company said.
Output at Mt Webber will halt next week, its Abydos project is scheduled to cease within 14 days, while the Wodgina mine will be closed in late April, Atlas said.
Iron ore has plunged 59 percent in the past year as larger, lower-cost producers, including BHP Billiton and Brazil’s Vale SA, raised output just as growth slowed in China. Global iron ore demand will contract this year, according to Deutsche Bank AG.
“To suspend our operations, with the impact that will have on so many committed and talented people, is an extremely difficult decision,” Managing Director Ken Brinsden said in the statement. The producer employs about 575 staff and contractors.
Shares suspended
Atlas, the second-worst performing Australian mining company in the past year, suspended its shares from trading on Tuesday, saying it was reviewing operations in response to the price plunge. It had targeted annual savings of as much as A$120 million ($91 million) by June, according to a February filing.
Rio Tinto, the second-biggest iron ore supplier, forecasts 80 million tons of higher-cost iron ore production will exit the world market in 2015, with a further 85 million tons vulnerable to lower prices. In its statement, Atlas said the timing of a recovery remains unclear.
The company said it is now in talks with its creditors on options that would enable its mines to restart as efficiently as possible if an operating margin can be re-established.
Atlas has a loan outstanding of A$352 million due in 2017, according to data compiled by Bloomberg. Before its suspension, the company’s market value was A$110 million.
Bloomberg