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Suitors circle beleaguered Pilbara miner Atlas Iron Takeover talk around Atlas Ironis hotting up following a string of tentative overtures for the struggling Pilbara miner. No formal approach is thought to have been made. But Goldman Sachs and Perth-based Euroz are known to be close to the junior, and would likely be first in line for a defence mandate. Atlas’ share price has been hammered in the past 18 months, closing out August at 57¢. The pure play iron ore miner has seen its market cap shrink to $520 million, from $1.5 billion early last year. The lack of share price support leaves it more vulnerable than most in the sector. Atlas is treading a precarious profitability line, making a cash profit of $5 to $10 a tonne. Atlas produces about 10 million tonnes a year but is gunning to hit 15mtpa within 18 months, and racing to cut costs. Atlas’ expansion potential will remain limited without a port and rail deal, which it is looking for partners to help it secure. Its Horizon 2 project, which hinges on an infrastructure deal, would push it beyond 30mpta a year. The market has ascribed no value to the untapped Horizon 2. BC Iron’s $250 million bid for Iron Ore Holdingsthis month put consolidation in the iron ore sector back in the spotlight. Atlas’ peer Mount Gibson would have to at least be running the numbers, given short mine life is one of its limitations. Mt Gibson’s market cap is at $750 million and it’s sitting on a pile of cash. Atlas swung to net debt of $24 million in the year to June, from a net cash position of $89 million in December. Baosteel and Aurizon’s $1.42 billion bid for AquilaResources in May suggests Chinese parties keen for offtake could be casting an eye Atlas’ way. Atlas’ capacity at Port Hedland could also see Fortescue Metals Group sniffing around.
AGO Price at posting:
57.0¢ Sentiment: Hold Disclosure: Held
