It’s amusing in a horrible sort of way watching the death throes of Atlas Iron, from The Australian under the misleading title of “Do or die”:
David Flanagan is gearing up for the sales pitch of a lifetime.
Over the next few weeks, having moved from chairmanship of embattled miner Atlas Iron back into the managing director’s role, he will embark on a global roadshow in an attempt to get investors to pump more cash into a company that until recently looked dead in the water.
…There are, however, some difficult questions he will face.
…The steep improvements in Atlas’s operating costs also suggest the miner was insufficiently frugal in the lead-up to the price fall. That point is reinforced by the fact the interview takes place inside Atlas’s office in Perth’s flashy new Raine Square tower. (Atlas is in the process of subletting three of the four floors it holds, and hopes to leave the building soon for cheaper premises).
…Then there are questions about Atlas’s ability to maintain its production target of 15 million tonnes a year.
At current projections it can only maintain that level for a couple of years before it falls back, allowing Atlas to pay off its remaining debt but not necessarily do much else.
Flanagan says there are additional resources in the Atlas portfolio that could be brought into production down the track at little cost.
Then there’s the risk around Atlas servicing its remaining debt obligations in the wake of the raising.
The real title of this article should be “Do and die”. The questions investors need answered are:
- is Atlas prepared for ongoing falling Chinese iron ore demand?
- how will Atlas make money with iron ore at $30?
- how does Atlas make sense of the conundrum that returning to its own full production will contribute to that price outcome?
Unless those three questions can be answered convincingly then the other technical questions posed in the article are irrelevant.
