Impairments Pressure Atlas Iron Deal
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The news didn’t get any better yesterday for some small shareholders in Atlas Iron who are resisting the takeover offer from Mineral Resources.
Atlas, in updating the market on its performance, revealing a widening discount for its iron ore exports from the index price, cost pressures and said a $75 million to $100 million non-cash impairment charge in its full-year accounts was likely.
Atlas said Thursday morning the lingering price discounts for its lower grade ore (from the 62% standard Pilbara blend in northern China) along with a rise in sea freight costs and fuel prices had increased the likelihood of an impairment at June 30, but that it would not affect cashflow or compliance with its debt obligations.
While full-year production guidance remained unchanged at between 9 million tonnes and 10 million tonnes, annual cost guidance would rise from $54 a wet metric tonne(wmt) to $58/wmt including freight costs to China, to $58wmt to $59/wmt.
Last month the company revealed an operating loss for the March quarter, after securing an average sale price of $59 a tonne for the 700,000t of ore it produced in the period versus full cash costs of $62wmt.
The latest news will put further pressure on Atlas shareholders to accept the all-scrip offer for its shares from Mineral Resources, which values the company at about $300 million (or around 3.2 cents). Atlas shares rose 3% to 3.3 cents yesterday after Mineral Resources shares rose 2.8% to $20.
A group of mainly small, retail shareholders have vowed to vote against the scheme, arguing it undervalues the company. A vote on the deal is due in July.
Atlas also revealed in yesterday’s update that it expected to ship 45,000 tonnes of manganese lump by June 30 and said it expected to make its first shipment of raw lithium ore next month, with crushing under way at the Mt Dove project.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.