The flagging iron ore price has not killed Atlas Iron's expansion ambitions, says managing director Ken Brinsden.
Speaking on the sidelines of the Diggers & Dealers conference yesterday, Mr Brinsden rejected suggestions mid-tier iron ore producers such as Atlas would be squeezed out of the market by the expansion plans of BHP Billiton, Vale, Rio Tinto and Fortescue Metals Group. But he admitted the company would need to find a rail option to emerge as a lower cost producer.
Atlas' share price has been one of the hardest hit among WA iron ore producers. It has been weighed down by concerns about its costs of production in a lower iron ore price environment and the steep discounts offered by sellers of lower grade ore in the last quarter.
Uncertainty over protracted negotiations to access a rail line belonging to one of the Pilbara's major producers have also cast doubt on whether Atlas will realise its long-term ambitions of growing production to at least 30 million tonnes a year.
But Mr Brinsden said Baosteel and Aurizon's successful $1.4 billion bid for Aquila Resources pointed to strong interest in undeveloped iron ore assets.
"Baosteel has paid $500 million for undeveloped iron ore assets in the Pilbara - before they have to spend another $5 billion for the development of an independent Pilbara infrastructure," he said.
"If you look at valuation, there is implied significant unrealised value in Atlas as a result of undeveloped Pilbara assets.
"In a world where we are able to access more sophisticated infrastructure we would expect another structural shift in our cost base downwards. In which case, we think we have an enduring place as a Pilbara producer for ever and a day, and on a much larger scale."
But Mr Brinsden said Atlas was aware it had a limited time frame to seal a rail access deal and bring down its costs.