Atlas Iron closing down

 
  bingley hall Minister for Railways

Location: Last train to Skaville
Just to clarify a few things re Arrium's operations.

Comparison between Arrium's Southern Iron operation and Atlas is largely futile.

Arrium's SI benefited from the proximity of third party rail infrastructure, the costs of which were shared with other users.
The SI operation only yields approx 3mtpa. If they had had to provide their own rail infrastructure it would never have gone ahead.

The Middleback Ranges mines producing approx 9mtpa benefit from access to short haul, long established, sunk cost narrow gauge rail infrastructure - which is owned by the company.

With the ever decreasing prices for iron ore, there are now rumours that even some of these operations are under threat.

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  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
In the Financial Review today, an article suggesting that Atlas's creditors want the company wound up before the end of the month.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
ON the topic of iron ore, the shake-out continues today with Fortescue being re-rated to 'junk' by Standard and Poors. Surely they'd still have to be worth something - don't they own their own railway lines?
  LancedDendrite Chief Commissioner

Location: Gheringhap Loop Autonomous Zone
FMG's railway is worth bugger-all when the only traffic it could possibly carry is uneconomical in the current climate. Any company related to iron ore mining that isn't BHP or Rio is on shaky ground. Same could be argued of coal, to a lesser extent.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
It's also interesting to note that Origin suffered a downgrade in credit today too due to their exposure to LNG; Wesfarmers coal-mining businesses also looking gloomy. It isn't often you see a wave of bad sentiment over so many commodities at once; particularly unfortunate that they're all commodities that have been the spine of our export economy for several years.
  donttellmywife Chief Commissioner

Location: Antofagasta
Could the same be said about road haulage.  Am I right in assuming the road hauling contract (given the very large capital investment) would also be take or pay?
bevans
There likely will have been some take-or-pay style commitment required for such a contract, but I'd expect the capital investment required to be less than for rail, and there's more depth and liquidity to the market for road haulage (it is generally easier for the operator to find additional contracts, or to sell their equipment to other contractors) - the scale of the commitment will reflect both of those aspects.

(As an example of the difference that I am talking about above - every so often operations using bulk road haulage change their haulage contractor.  Operations using rail rarely change their rail access provider (vs their above rail operator, which in some situations they do change).)
  bevans Site Admin

Location: Melbourne, Australia
There likely will have been some take-or-pay style commitment required for such a contract, but I'd expect the capital investment required to be less than for rail, and there's more depth and liquidity to the market for road haulage (it is generally easier for the operator to find additional contracts, or to sell their equipment to other contractors) - the scale of the commitment will reflect both of those aspects.

(As an example of the difference that I am talking about above - every so often operations using bulk road haulage change their haulage contractor.  Operations using rail rarely change their rail access provider (vs their above rail operator, which in some situations they do change).)
donttellmywife

Looking into the contract further.  The company who has the contract for haulage is looking shaky.  Initially it looks like capital was in excess of $170m for the contract with Atlas.
  Draffa Chief Commissioner

FMG is in a bad way unless it comes up with something quick - they're a pure iron ore play, so they'll go under completely if they stop.
LancedDendrite
I'm gathering the ingredients for a Schadenfreude Pie as we speak. Forrest is a massive tool.

When you do look at the stock market in Australia it's dominated by oligopolies like Telstra, Woolies, Coles and the banking cartel.
don_dunstan
And Woolworths (Woolies) and WesFarmers (Coles) at least are trying to cut (slash) costs as fast as possible.  Despite the shiny-happy-people faces presented on TV, it's shockingly low morale at store level.  Woolwoths alone has 'lost' (pushed) two top executive in the last three months). And then add into that Aldi making inroads, as well as rumours of another German company planning to set up shop here.

Unlike the USA anti trust laws would have protected us from the companies above becoming so big and having such market power.
bevans
Woolies and Coles got so dominant so fast in large part because Franklins collapsed.

Surely they'd still have to be worth something - don't they own their own railway lines?
don_dunstan
It costs money to 'reclaim' (rip up) all that steel.
  LancedDendrite Chief Commissioner

Location: Gheringhap Loop Autonomous Zone
An interesting update from last week on Atlas Iron: http://www.theage.com.au/business/mining-and-resources/atlas-iron-boss-david-flanagan-says-the-miners-raising-is-bloody-cheap-20150612-ghmnlt.html

Looks like the contractors are fully co-operating - they need Atlas Iron just as much as Atlas Iron needs them:
Atlas Iron chairman David Flanagan said he was "absolutely stoked" with the innovative outcome led by the miner's three key contractors, McAleese Group, MACA and Qube.

"I can't think of any example where anything like this has ever happened before," Mr Flanagan said. "If the price goes back to the worst it has been in the past 10 years we wouldn't miss a heartbeat with this price model."

...

Atlas' three key contractors have signed a two year "collaboration" agreement, under which they will receive a 50¢ boost to their minimal rates for every dollar that the price Atlas receives for its ore rises from between $48 and $60 a tonne. This equates to a benchmark price window of between $US58 and $US70 a tonne. They will also receive 25 per cent of any net operating cash flow generated, after allowing for the revenue share.
The Age

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