While Atlas Iron has been a corporate hot topic in recent months, its June quarterly report shows the company’s full cash costs are higher than its iron ore’s worth.
Despite all the buzz having surrounded Atlas Iron (ASX:AGO) in recent months, the mining company’s June quarterly activities report indicates that Atlas’ full cash costs are higher than the price of its actual product.
Released on Thursday (July 12), the report shows that from the March quarter to June’s quarter, C1 costs had risen from AU$41 to AU$42 per wet metric tonne (wmt). The company attributed the rising cost to increased haulage and port operating costs, primarily driven by increased fuel prices.
Meanwhile, full cash costs remained the same as March’s quarter at AU$62 per wmt. Although it stayed steady, it experienced some pressing factors in both directions, as Atlas said increased C1 costs affected it while being offset by lower freight and royalty charges.
The net sale price of the company’s coveted iron ore, inclusive of option premiums and provisional pricing adjustments, came in at AU$59 per wmt, also remaining consistent with March’s quarter.
Atlas’ cash on hand dropped from AU$64-million in the March quarter to AU$57-million by the end of the June quarter, following what the company explained as operating loss and adverse working capital movements. According to Atlas, it saw strong impact from negative operating margins on its iron ore business and a AU$3.12-million break fee payment to Mineral Resources (ASX:MIN) after the company’s takeover plans fell through.
Also affecting those numbers was the timing of shipments late in the month, which increased working capital drawdown.
On a productive upswing, Atlas reported that it shipped 2.1 million wmt of iron ore during the June quarter, which consisted of 1.0 million wmt of fines and 1.1 million wmt of lump. This marks an increase from the March quarter’s shipment of 2.0 million wmt.
The company’s quarterly report comes the same day as news that Atlas has been granted an extension by the Australian Securities and Investments Commission on its deadline to release a target statement to shareholders regarding the potential Hancock Prospecting takeover. The deadline has now been moved from July 17, 2018 to July 19.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.