Article from AFR below. Some interesting points raised. If...

Article from AFR below.  Some interesting points raised.  If contractors can reduce costs and Atlas can maintain two mines this will be most beneficial.  Reality is at the end of the day, if they do close all mines, you would think it nearly impossible to reopen. If prices recovered in 6 months, it could be too late for transport supplier McAleese.  An agreement by everyone involved to keep mining two mines even if at no profit to any party is better than the other possibilities of many companies going to the wall and job losses.

I imagine creditors are worried about their flimsy debt covenant.  By the time this is next released (for June 2015) in August 2015, a large portion of the cash could be gone. But this is the only debt covenant in place.  
Comments about Barnett interesting, with minimal GST revenue going to WA this year, Barnett has every interest in getting every royalty dollar he can get.  He isn't just going in to bat for mining companies like AGO, but also for his own budget deficit and credit rating. Interesting times....

Article by AFR 15/4/15 below.

http://www.copyright link/opinion/atlas-seven-working-on-relief-plan-20150415-1mlr9i

These remarkable times in iron are brewing truly remarkable responses.
As the Premier of Western Australia reportedly prepares a less than gentle reminder to the Pilbara majors of the responsibilities defined by their legislated state agreements, a group of seven mining contractors are working up a rescue package for their deeply troubled customer, Atlas Iron.
There is informed speculation too that Andrew Forrest is busy on much more than directing fire and brimstone at the crushing operating models of his competitors. Forrest is the founder of Fortescue Metals Group and still owns 33 per cent of what is now the world's fourth biggest iron ore miner. And we are told that Fortescue's chairman and senior owner is reviewing a raft of structural solutions for Fortescue's latest existential dilemma. Those options are said to include the potential of a control-changing equity issue to a strategic investor.
Atlas, meanwhile, continues to be the canary in this gathering Pilbara mining story. The most likely of Australian iron ore's juniors sits in voluntary suspension from the ASX as its contractors and debtors attempt to fabricate some sort of consensus onmanagement's decision to progressively mothball the company's mines.

THE ATLAS SEVEN: RELIEF PLAN

On Tuesday, the Atlas Seven – a group of Seven contractors led by transport group McAleese – gathered in Perth to draft a new business plan for the beleaguered owners of the mines they effectively operate.
The ambition is to create an option more attractive to the owners of $US275 million ($362 million) of Atlas than simply shutting the business down to wait on better times. And the starting point for everyone, apparently, is a view that the owners of Atlas's Term B debt are more interested in keeping revenue wheels turning than they are in walking away from the Pilbara with maybe 40 or 50 cents in the dollar.
Whether that sustaining belief reflects reality is not so clear. There are reports – not denied – that a group leading at least half the Atlas lenders is pushing for the company to embrace voluntary administration to speed the path to some form of debt-to-equity conversion.


There are reports too that the lenders have informed Atlas that they believe the company is technically insolvent and effectively in default of the terms of their lending.
Neither Atlas nor its contractors accept that this can be the case. Atlas is sitting on $130 million of cash and, for all that its recent cash burn has been high, it seems well able to meet its commitments over the shorter term. And the only relevant covenant supporting its secured debt is that the company's assets need to be valued at twice the total of its debt.
INTERIM MEASURE

The relevant valuation is made twice a year with boardroom sign-off of the company's accounts. At December the company's assets were valued at $1 billion, which more than meets the lending terms. Doubtless June 30 will generate a material revaluation of the assets. But sign-off is not due until maybe August. So the company appears to have a wee bit of wiggle room yet.

Certainly, that is the working belief of the contractors. Their proposition is that, by sharing around the Atlas pain and recasting the current mine plan, Atlas could continue to produce at a run-rate of maybe 9 million tonnes annually on a cash neutral basis, at worst.
So, while Atlas and its bond holders play their game of cat and mouse, the contractors have agreed amongst themselves to trim costs and provide "some temporary relief through this difficult period".
'THE LENDERS ARE LISTENING'

"The company and bond holders are aware of our initiative," one source told me on Wednesday.

"They [the lenders] are working and listening," we were told. "They are all ears because they would prefer to keep the operations alive. The fear is that once they mothball these assets they are going to find it hard to bring them back, if only because the contractors are effectively the operating part of the business. It might cost us all maybe $30 million to get it back up again," the source said.
The key listeners here are the folk at New York-based investment bank Houlihan Lokey. It represents the four biggest owners of Atlas's secured debt and they speak for about 64 per cent of the Term B package.
To understand why the contractors want to keep Atlas going, you have only to appreciate that collectively they have about $400 million of capital equipment tied up in supporting the miner and employ more than 1000 people across its operation.
Given that struggling McAleese is by country kilometres the contractor left most at risk by the potential for Atlas to stop mining, it is no surprise to hear that the transporter's battle-scarred chief executive Mark Rowsthorn is driving the recovery plan.
McAleese owns about $100 million worth of Atlas-devoted kit, and moving iron ore from mine to port generates about $20 million a month in revenue for the ex-Asicano boss's newest problem child. As things stand McAleese is owed its monthly income but there is apparently no truth to the rumour that its contract sits in arrears.
The Atlas Seven plan would see closure of the company's Mt Webber expansion hub but the continued operation of the Wodgina and Abydos mines, which sit half the distance from Port Hedland.
GRADUATED MARGINS

The relief plan under construction would see the contractors operate on graduated margins that would directly reflect the iron ore price. It seems they are prepared to accept little more than cost recovery at current prices but their margins would increase should Atlas ore start generating free cash.
Atlas and its supporters will also be looking to the state government to absorb some more short-term pain to protect the potential for long-term gain. They will be asking for a change to the terms of the "Claytons" royalty relief currently on offer, and even for some concessions on fees at the state-owned export facility at Port Hedland.
PREMIER RAISES STAKES

How open the government would be to surrendering just that little bit more of its once fabulous iron ore revenue stream, well, only time will tell. What is rather more certain, apparently, is that Premier Colin Barnett is getting ready to raise the stakes in his stare-off with Rio and BHP.
Barnett has described their individual decisions to introduce new supply to a saturated market as destructive madness. In this he walks in lock-step with every other producer including Fortescue and with one of the Third Force's potential suitors, Glencore. What makes Barnett's irritation rather more dangerous is that he is the only one of the critics that could have the power to do something about it.
There is a clause in each and every one of WA's iron ore mining agreements that says an operator must "ship from the company's wharf all iron ore mined from the minerals lease and sold and use its best endeavours to obtain therefore the best price possible having regard to market conditions from time to time prevailing".
The agreements say a lot more about the responsibilities of the miners. But it is Barnett's firm view that the miners are required to manufacture the best price they can. And there is very well-informed speculation that this is the point that Barnett intends to labour in meetings that he will schedule with the local bosses of Rio and BHP over the coming weeks, and that he will again remind them that they require further state approval of retention licences and of future development plans.