Atlas thrashes out Mt Webber deal
Atlas Iron has thrashed out a deal with BGC Contracting to get its flagship Mt Webber project back into production.
Under the terms of the deal, BGC has agreed to resume iron ore mining at Mt Webber at a rate of 6mtpa and target costs savings of 10-12 per cent.
As a result, Mt Webber’s costs will be similar to those at Atlas’ Wodgina and Abydos mines, meaning the company will have a break-even price of about $US50 per dry metric tonne. This gives the company a margin over yesterday's spot iron ore price of $US61.85 a tonne.
In exchange, Atlas will pay BGC between $17.1-$19.6 million in shares and/or cash to cover termination costs associated with the Wodgina mining contract, suspension, remobilisation and other costs for the Mt Webber mine, with discounts applicable for the portions paid in cash.
The agreement is not based on the so-called contractor collaboration agreements Atlas has secured with its key contractors at the company’s Wodgina and Abydos mines.
Under the Mt Webber contract, the rates paid to BGC will not rise in line with the iron ore price and BGC will not share in the net operating cashflow from Mt Webber.
Atlas managing director Ken Brinsden said the resumption of production at Mt Webber was another key step in the strategy to ensure the company had a robust financial future.
“With Mt Webber operating, we will once again have a strong, diversified production base but with markedly lower costs,” he said.
“We are firmly on track to achieving our key goals of low costs, strong margins and healthy cashflows, backed by a stronger balance sheet that will enable the company to withstand periods of price volatility.”
Atlas halted production at its Mt Webber mine on April 17, after flagging the staggered shutdown of its entire Pilbara mining operation a week earlier.
Atlas will put its contractor agreements and proposed $180 million capital raising to shareholders at a meeting on Friday, June 19.
Shares in Atlas are suspended having last changed hands for 12 cents.
