Iron-Ore's Collapse Claims Major Australian Casualty

SYDNEY--The sharp fall in iron-ore prices claimed a major casualty in Australia when Atlas Iron Ltd. said it would shutter all its mines and halt exports to Asia.

Atlas was worth nearly 4 billion Australian dollars (US$3.1 billion) as recently as 2011 but has been losing money rapidly as iron-ore prices fell 30% since the start of this year to a decade-low. That raised concerns about its ability to repay debts if it continued digging up ore.

The Perth-based company joins a raft of small- and mid-sized iron-ore producers squeezed by the rapid decline in spot prices. Australian steelmaker Arrium Ltd. has been forced to shutter one of its two iron-ore mines here, while Cliffs Natural Resources Inc. recently suspended a mine in Canada. Cliffs has been restructuring its U.S. business to focus on domestic iron-ore sales rather than competing in the seaborne market.

Even major producers such as Rio Tinto PLC have been slashing costs and jobs as they grapple with the deepening market downturn.

Fortescue Metals Group Ltd., the world's fourth-largest iron-ore exporter, was last month forced to scrap a planned debt sale because it couldn't agree on terms with investors amid a sour outlook for the commodity.

In February, Atlas Iron reported a more-than-A$1-billion net loss for its fiscal first-half, swinging from a profit a year earlier as it wrote down the value of its mining assets.

At the time, executives vowed they were working hard to slash operating costs to safeguard earnings.

But ore prices have raced lower faster than many companies can cut costs. The price of iron ore, a key ingredient in steelmaking, slumped as low as US$46.70 a metric ton last week, weighed by ballooning supplies of the raw material as China's economy cools.

Some of the world's biggest miners, including Rio Tinto and BHP Billiton Ltd., have been aggressively expanding their operations in the Pilbara iron-ore mining hub of northwest Australia, completing major mine and infrastructure projects planned when the market was booming. Iron ore traded as high as US$190 a ton in 2011.

U.S. investment bank Jefferies said prices could fall further in coming months as those companies continue to increase production. Stan Shamu, an analyst at broker IG, said he expects the market downturn to claim "more victims."

"To suspend our operations, with the impact that will have on so many committed and talented people, is an extremely difficult decision," Atlas Iron managing director Ken Brinsden said.

Atlas Iron, which suspended its shares earlier this week saying it was conducting an urgent business review, said it would stop mining at its Mt Webber site next week and cease production at its Abydos operation within two weeks. Operations at its Wodgina mine are expected to stop in late April, it said.

They will remain suspended until iron-ore prices improve, said the company.

Nearly 600 people work in Atlas's mines and offices in Australia's west. The company is in discussions with creditors around options for restarting its mines when they able to turn a profit, which could be supported by investigations of further cost-reduction measures, it said.

Write to Rhiannon Hoyle at [e-mail]

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