On the back of further falls in the iron ore price at the weekend, junior West-Australian iron ore miner, Atlas Iron Limited (ASX: AGO), today requested a voluntary suspension of trading in its shares as it undertakes an, “extensive review of the Company’s operations“.
In a tough – but not unexpected – announcement to the market, Atlas said it’ll undertake a review into its, “operations, financial outlook, asset sale opportunities and capital structure in light of the recent rapid fall in the iron ore price.”
The iron ore price, which now sits around $US47.50 per tonne, has fallen 63% since the beginning of 2014. In that time, Altas Iron’s share price is down 91%.
Shares in fellow ASX-listed iron ore miners BC Iron Limited (ASX: BCI), Arrium Ltd (ASX: ARI), Mt Gibson Iron Limited (ASX: MGX) and Fortescue Metals Group Limited (ASX: FMG) have been hammered in the wake of falling commodity prices.
That’s because analysts’ estimates for the breakeven prices of these four miners are above the current iron ore spot price. Meaning, these miners are currently losing money.
Whilst many leading economists predict the demand-supply imbalance to get worse before it gets better, it appears Atlas Iron has already succumbed to the tough conditions.
Here at the Motley Fool Australia, we’ve been saying for a number of years that the worst is yet to come for the resources sector, particularly for those in iron ore. Lower demand from China – which accounts for two-thirds of the world’s consumption – is anticipated in the near future.
Can you still get something from your Atlas Iron shares?
Atlas says it expects to undertake the review and will make an announcement to the market in the next two weeks. “Atlas has already commenced discussions with a number of its stakeholders in relation to various initiatives intended to further reduce costs and preserve value,” this morning’s ASX release stated.
Personally, even if it did recommence trading and continue mining, I think it would take a very brave and risk tolerant investor to want to buy shares in the company.
And whilst asset sales could be an option for Altas Iron, the question has to be asked: Who would want to buy inefficient iron ore assets in the current market?
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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned in this article. You can follow Owen on Twitter @ASXinvest.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.”