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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (34233)	3/16/2009 10:10:25 PM
From: LoneClone	Read Replies (1) \| Respond to of 193918

Atlas Iron Makes Friends And Influences Its Share Price By Our Man in Oz minesite.com If you can tell the character of a man by the company he keeps then Minesite’s Man in Oz reckons it’s just as easy to tell the character of a company by its ability to make friends. If that sounds somewhat obtuse take a look at how Atlas Iron has outperformed a flotilla of emerging Australian iron ore miners through a series of “relationships” which, it can be argued, are more important than the ore in the ground. Over the past two years Atlas has been able to negotiate port access in Port Hedland, and become the first of the new generation of iron ore companies in the Pilbara region to ship ore to overseas customers, strike a deal which theoretically gives it access to the port facilities of Fortescue Metals Group (FMG), and most recently, negotiate a “sharing agreement” with the owners of a mothballed tantalum treatment facility which should see it quickly start a second iron ore mine. It’s those deals, plus an A$80 million pile of cash in the bank, which set Atlas apart as a company which will manage its way through the global economic downturn and emerge as a substantial iron ore miner. The latest deal is, arguably, the best so far and an example of how Atlas chief executive, David Flanagan, has been able to turn one-time negatives into positives. Early last year, when Minesite Man in Oz was touring the Pilbara with Flanagan, we flew very carefully in a small helicopter around the Wodgina tantalum mine operated by Talison Minerals. The caution, let’s call it being polite, was because Talison was worried about plans Atlas had to explore the adjoining Wodgina iron ore prospect. Talison management also did not like low over-flights by stray helicopters. Late last year the game changed. Falling demand forced Talison to mothball its tantalum plant. Flanagan seized the day, and two months after the tantalum plant closure was announced, he revealed an infrastructure sharing agreement with Talison which could prove to be the single most important event in the short life of Atlas. In effect, a one-time opponent (of the benign variety) had become a friend. By gaining access to the rock crushing and screening facility at Talison’s tantalum processing site Atlas has deferred costs of at least A$20 million needed to start a new iron ore mine, avoided a major environmental approvals process, and got itself into a position to add a second mine to its existing Pardoo operation. In production terms, the Talison deal means Atlas is streets ahead of its rivals and set to achieve its targets of one million tonnes of ore in its first 12 months as an exporter, growing to three million tonnes in year two, and then up six million in 2010, and 12 million by 2012. At that upper target level Atlas will be one of Australia’s biggest iron ore miners. Depending on what other companies can achieve it looks highly likely to be one of the top five. “The deal with Talison is an opportunity to start our second iron ore project at significantly lower cost, to limit the environmental impact of our operations and maintain and create further employment opportunities,” Flanagan said. “This is a good deal for Atlas and Talison.” On the market, Atlas continues to recover from the big sell-off which hurt every miner in the middle of last year. Since hitting a rock-bottom price of A40.5 cents in November, a time also marked by a kafuffle which saw the dumping of the company’s chairman, David Nixon, Atlas has effectively tripled to around A$1.20. That still leaves it well short of last year’s peak price of A$4.37, but it does mean that Atlas is doing much better than its rivals in the lead-up to the annual iron ore price-setting deal between miners and steel mills. Those negotiations are expected to see a price cut of between 30-and-40 per cent, which makes Atlas’s focus on keeping costs down critical to future profits. Keeping costs low is key to Atlas. Its starter mine at Pardoo was developed at a ridiculously low capital cost of A$18 million. The capital requirement to lift it from one million tonnes a year to three million is an even more eye-catching A$14.5 million. Operating costs are around A$40 a tonne, which seasoned observers of the iron ore industry estimate is less than half the price being received in a depressed market. Pardoo will never be a big mine, and has a relatively short life expectancy of 10 years. Its real importance is that it is building inside Atlas a “production culture” which is preparing the company for its next mine which will be further south in the Abydos/Wodgina area. Flanagan’s aim is to have Abydos in production later this year at a start-up rate of three million tonnes a year, shipped across the FMG berth, after processing at the freshly-negotiated Talison infrastructure-sharing facility. One cost-saving “friend” at the processing end of the business, and another “friend” on the wharf. As production rises from its early mines Atlas can focus on a project pipeline which encompasses some of the best exploration assets in the Pilbara. Fresh drilling from the Anson prospect (which is effectively part of the Wodgina project) is pointing to the development of a very profitable series of mines. Latest results from Anson include 48 metres at 58.3% iron with ore starting at the surface, and 38 metres at 59.1% iron, with the bonus of low phosphorous levels. “These Anson extensions are only 2.6 kilometres from the Wodgina production infrastructure,” Flanagan said. “We’re very much looking forward to drilling more holes, making more discoveries and starting some good mines in a well endowed region.”