By Gillian Tan
NEW YORK--Australian mining company Atlas Iron Ltd. (AGO.AU) is
in talks to sell its share of a uranium prospect but remains
committed to investing in its iron ore expansion plans, shrugging
off concerns that softening demand from China could spell the end
of the country's mining boom.
"We're not a distressed seller in any possible sales but we have
discussions underway with potential parties who are predominantly
end user or trading groups," said Atlas Iron Executive Director
Mark Hancock in reference to the company's Lake Frome uranium
project in South Australia.
Atlas acquired its share in the uranium project--which is one of
its only mine ventures outside Western Australia's Pilbara--when it
took over Giralia Resources in 2011. The project isn't identified
by the company on its website as part of its expansion plans, which
focus on its Mt. Dove, Abydos and Mt. Webber mines, and five others
in the Pilbara, in addition to its existing Wodinga and Pardoo
operations.
Mining companies in Australia are retrenching as iron ore and
coal prices hit multi-year lows. Fortescue Metals Group Ltd.
(FMG.AU), the world's fourth-largest iron-ore miner, said earlier
this week it will cut several hundred jobs and aggressively cut
back on spending to expand capacity. That followed BHP Billiton's
decision to delay indefinitely a $30 billion plan to expand its
Olympic Dam copper and uranium mine site in South Australia.
"It's still business as usual, we're aiming to produce 12
million tons by the end of calendar 2013," said Mr. Hancock in an
interview on the sidelines of the Bank of America Merrill Lynch
Australian Investment Conference in New York. The company's Mt.
Dove and Abydos mines in Australia will collectively account for 10
million tons of annual production and Mt. Webber is expected to
contribute the rest.
"We'll keep an eye on trends and won't ignore what's going on
around us, but we think the current projects we're putting in place
still make sense to push on with," said Mr. Hancock, adding that
Atlas's smaller-scale investments can be sped up or slowed down on
a case-by-case basis if required.
The price of iron ore has fallen sharply in recent months as
Chinese steel mills have run down inventories of the raw material.
The commodity's price fell to its lowest price since October 2009
Wednesday, at US$86.70 a dry metric ton. It trades down almost 40%
year-to-date.
"Any price below $100 feels difficult to me and I expect to see
it back above that in the fairly near term," said Mr. Hancock.
"There hasn't been a Fukushima-type event that makes you think it's
going to make it hard for the sector," Mr. Hancock said, adding
that certainty over the Chinese political situation and early views
from leaders would be a catalyst for a lift in the iron ore price.
China is due to change its leadership in October.
But Mr. Hancock concedes that if demand from Chinese steel mills
doesn't rebound near-term then Atlas will be forced to tap debt
markets if it's to maintain current spending plans. Beijing has
accelerated plans for new infrastructure projects by local
governments, a move that could boost steel demand, part of a range
of measure to jump-start growth, which slowed to a
more-than-three-year-low of 7.6% in the second quarter. China is
Australia's largest customer for iron ore.
"We'd certainly look to supplement cash flows with debt
facilities, it's a prudent back up to have if pricing stays low,"
Mr. Hancock said. He added lenders weren't using the current iron
ore price to assess a company's creditworthiness. "It's slightly
more challenging but we believe that over time, we will be able to
establish facilities that will give us additional flexibility," he
said, adding that Atlas is not planning a capital raising in the
near-term, describing the action as unattractive at current share
price levels.
At 0154 GMT, shares in Atlas traded on Sydney ASX were up 3.2%
at 1.31 Australian dollars (US$1.34).
Write to Gillian Tan at gillian.tan@wsj.com