atlas iron warns against truck tracking trial, page-4

09 July 2013

Atlas Iron is confident it can strike a deal to transport its iron ore and chairman David Flanagan said the junior producer has never been in a stronger position to exploit third-party infrastructure opportunities in the Pilbara.

Perth-based Atlas has been under pressure to secure a rail deal amid a flurry of deals between small iron ore players such as Brockman Mining, Flinders Mines and infrastructure providers including Fortescue Metals Group and Aurizon.

Atlas’s shares are down 55 per cent over a one-year period to 79.5¢ a share compared to the S&P/ASX 200 which is up 13 per cent.

Atlas is on track in the September quarter to reach annual production of 10 million tonnes from its Pardoo, ­Wodgina and Mt Dove mines using trucks. But it will need access to a rail line if it is to expand beyond 15 million tonnes a year.

“I don’t think Atlas’s position on infrastructure has ever been stronger than what it is right now,” Mr Flanagan told The Australian Financial Review. “We are in discussions with the parties that are up there [the Pilbara]; the dialogue is being maintained.”

Atlas is a key player in a complicated range of negotiations to develop Pilbara infrastructure. Fortescue is battling an application by Brockman for access to its rail and port facilities and may strike a small haulage deal with a junior miner such as Mineral Resources-operated Iron Valley. For its part, Aurizon has signed an exclusive deal with Brockman to potentially develop and operate a independent rail line in the Pilbara. Atlas has held conversations with most of the infrastructure players including Fortescue, Aurizon and Gina Rinehart’s Hancock Prospecting which hopes to build a port and rail facility for Roy Hill project.

But it is yet to strike a deal, which has led to criticism from some observers. Atlas ­management remains confident that the miner will succeed.

Critics say they should have struck a deal by now and claim there has been tensions in separate negotiations with Fortescue and Aurizon.

Earlier this month, Atlas managing director Ken Brinsden said it was ­making “strong progress” in negotiations with potential partners on an infrastructure deal.

The miner’s infrastructure needs were again highlighted on Monday when it announced that it, together with its joint venture partner Altura Mining, is pushing ahead with the Mt Webber mine development on Monday.

The Mt Webber ore will be trucked to Utah Point port as part of the first phase development. Atlas’s shares closed 5.5 per cent or 5¢ lower following the announcement.

Credit Suisse said the cost guidance for developing the Mt Webber mine was “disappointing” and implied higher than expected haulage costs and port charges.

“An estimated $39 a tonne cost of port and haulage highlights the opportunities if a rail deal can be negotiated, so a rail deal would be a catalyst for Atlas,” said Credit Suisse analyst Matthew Hope.

Mr Brinsden acknowledged the major benefits of achieving a rail solution for Mt Webber and its other mines.

“We believe Mt Webber is a good mine as a trucked operation but, in the future, it could be a great mine with a rail solution. Thinking along those lines makes perfect sense,” he said.