article - the australian, page-2

Interest strong in Pilbara iron ore producer Atlas
Sarah-Jane Tasker From: The Australian January 08, 2010 12:00AM

PILBARA iron ore producer Atlas Iron is fielding interest from Asian steel mills seeking a strategic stake in one of its assets and offtake agreements with another.

Managing director David Flanagan yesterday said the company had 20 groups competing for five positions in the next round of offtake from its Wodgina project.

A lot of groups were "in there, and they are all good", he said.

The company expects to settle the offtake agreements and the Ridley mine strategic partner in the first half of this year, with advice from Goldman Sachs JBWere.

Mr Flanagan said the interest in the $3 billion Ridley project, for which Atlas is seeking to sell up to a 70 per cent stake in, had come from some "big groups".

The miner had come a long way since its first production in 2008, when its offtake partner had abandoned it, leaving it unable to sell its ore in the first month, he said.

Now, the miner was fielding interest from steel mills prepared to be innovative in signing deals.

"We received some ridiculous offers back then, and now it is quite a different environment," Mr Flanagan said.

The junior's share price has increased steadily from about 42c in 2008. It closed yesterday 4.7 per cent higher at $2.23.

Australian iron ore stocks are all enjoying a strong run on expectations of an increase in contract prices this year, and local product is being sought as domestic producers in India and China struggle with costs.

An Indian industry source said the government had a habit of raising taxes and levies in line with the iron ore price, so there was a constant margin squeeze on domestic producers.

Mr Flanagan said Atlas had an informal index to log when unsolicited interest was received from potential customers wanting to buy iron ore.

It was a good indication of where things were going, he said, and the miner was getting "plenty" of that type of interest.