Atlas Iron slips backwards as iron ore price discounts steepen
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ASX-listed producer Atlas Iron slipped to a loss of $21.3 million in the last six months of 2017.
That compares to a profit of $18.9 million in the back half of 2016.
Atlas (ASX:AGO) shares fell nearly 12 per cent to 2.3c on Tuesday.
Iron ore players have struggled in the past few years, ever since late 2015, when the price bombed below $US40 per tonne and companies were forced to mothball production.
The price recovered to around $US95 per tonne in February last year, but has lost some ground since then.
Atlas said its average realised price for the half was $62 per tonne, which is about $US48.71 per tonne.
The company attributed its financial woes to a reduction in tonnes shipped following the end of mining at the Wodgina and Abydos operations and significant discounts for lower grade iron ore.
The difference in price between high and low grade iron ore has been widening due to Chinese steel mills wanting better quality and higher grade ore as the Asian powerhouse continues its crackdown on polluting operations.
Atlas exported 5.2 million tonnes in the second half of 2017 compared to 8.1 million tonnes a year earlier. This led to a $190 million drop in revenue to $308 million.
Full cash costs were also slightly higher at $57 per tonne versus $52 per tonne previously.
Atlas is trying to address the issue by improving its product so it has less impurities.
The company is “very encouraged by the initial results of our premium product strategy, with the market appetite for this product appearing to be strong,” boss Cliff Lawrenson told investors.
“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.”
Atlas expects the premium will more than offset any increased costs associated with supplying the product.