Atlas hit by iron ore drop

The damage wreaked by the falling iron ore price on Atlas Iron's margins has been laid bare, with the company declaring thin operating margins despite slashing operational costs and capital spending.

Atlas cash balance fell $60 million for the quarter as it continued spending on its expansion projects.

Atlas' quarterly production report shows its cash margins for the September quarter were wafer thin, falling to less than $2 a tonne.

According to the company its all-in sustaining cash costs for the quarter fell to $68.90 in the period, down from $75/t in the June quarter.

But that figure does not include interest payments on debt or capital spending for the quarter, meaning Atlas' cash position went backwards $60 million during the period.

Atlas finished September with $205 million at bank, it said, despite the return of environmental bonds worth $18 million through the State Government's mining rehabilitation fund scheme.

Atlas spent $67 million on development projects during the quarter. It owes $US270 million through a syndicated a term loan and $14 million through other financing facilities.

With few commentators picking a strong recovery in iron ore prices in the short to medium term, investor focus is likely to remain on Atlas' cost cutting initiatives.

Atlas said this morning it expected to make further reductions to its operating costs over the rest of the financial year.

It also found ways to cut more than $30 million from its capital expenditure budget, dropping planned capex spending to $94 million for the year.

The company also reduced its "all in" production cost guidance to the range of $65 to $70/t delivered to China, down from $68 to $73/t it had previously projected and said it expected to ship 12.4 to 13Mt of product this financial year, up 200,000t from earlier guidance.

Atlas shares, which have dropped from above $1 a share in April, were up 0.5 cents to 36.5 cents this morning.