Atlas ready to roar as Flanagan moves back into the big chair
David Flanagan, the man who drove Atlas Iron from a junior explorer to an ASX Top-100
Company, is back at the helm of the resurgent iron ore producer.
With the managing director’s hat back on, Flanagan is leading the march to strengthen both Atlas’ balance sheet and cashflow with a capital raising and the implementation of the mining contracts that will slash its costs.
Atlas has crafted the raising to offer investors, including existing shareholders, the maximum upside. Rather than being priced at a conventional 10 per cent discount to its last trading price of 12c, Atlas has pitched the offering at just 5c.
As well as this discount, the key attraction for investors lies in the remarkable turnaround in Atlas’ fortunes since both the stock and its mining operations were suspended in April.
The benchmark iron ore price has soared from ~US46 a tonne to today’s price of more than US$65 a tonne. At the same time, Atlas has slashed its costs by about $10 a tonne thanks largely to the innovative contractor collaboration agreements now in place.
The upshot of this is that Atlas is banking about $10 a tonne. With mining back up and running at its Abydos and Wodgina projects and about to resume shortly at Mount Webber, production is set to ramp up to 14-15 million tonnes a year.
These numbers point to annualised net cashflow in the order of $150 million, highlighting not only the dramatic turnaround in Atlas’ financial position since April but also the potential share price upside for those taking up the 5c stock.
Atlas says the proceeds of the capital raising will strengthen its ability to withstand any future volatility in the iron ore price.
The company’s contractors have already committed to take up about $24 million worth of stock out of the $30 million total earmarked for them. Another $150 million has been set aside for Atlas and shareholders.
Mr Flanagan said that with the contractor collaboration agreements in place, Atlas was now turning its attention to strengthening its balance sheet through the capital raising.
“This is aimed at ensuring that Atlas has strong foundations which can withstand future iron ore price volatility,” he said.
“At the same time, Atlas shareholders can secure an exposure to these cash flows and any increase in the iron ore price on the attractive terms offered by the capital raising.
“With the outstanding support of our key contractors, suppliers and the WA Government, our business is in increasingly better shape.
“The capital raising, which has been structured to allow for maximum shareholder participation, combined with these cost saving initiatives, will significantly improve Atlas’ operating position for the benefit of all shareholders.”
Flanagan, who was Atlas managing director from 2004 until 2012, when he became chairman, will drive Atlas’ financial affairs. Ken Brinsden, who will move from managing director to executive director, will be dedicated to ensuring the success of contractor collaboration model.
AGO Price at posting:
12.0¢ Sentiment: Buy Disclosure: Held
