PERTH (miningweekly.com) – ASX-listed Arrium Mining and Materials on Monday announced a significant reduction in capital expenditure (capex), as well as the potential divestment of assets to combat the falling iron-ore prices.

The company said that despite the redesign of its South Australian hematite operations, which included the mothballing of the Southern Iron mining operation, and subsequent work to decrease operating costs, it had to do more to make the operations viable.

The redesign of the mining business left Arrium with about nine-million tonnes a year to export from its Middleback Ranges operation, at a targeted cash cost of A$57/t delivered into China.

Arrium would reduce planned capex by A$70-million from its previous 2016 financial year targets, with further reductions of about A$140-million planned between 2016 and 2019.

While the miner was targeting sales of between nine-million and ten-million tonnes in the 2016 financial year, the capex reduction was expected to result in sales volumes of between six-million and eight-million tonnes between 2017 and 2019.

However, Arrium pointed out that the business would retain the flexibility to increase capex  and sales volumes, should the iron-ore market indicate a value return.

Meanwhile, Arrium has warned of a potential impairment charge of some A$320-million for the year ended June, primarily relating to the impact of the lower iron-ore prices.

Arrium MD and CEO Andrew Roberts said that the company was also undertaking a strategic review of its entire business, in the low iron-ore price environment, following a detailed assessment of the company’s balance sheet and its portfolio.

The review included an assessment of options to achieve an appropriate structure and level of debt, and would include the potential divestment of “significant assets or businesses”, Roberts said.

“Our mining consumables business is continuing to perform strongly and we are seeing significant improvements in steel. However, despite the benefits from restructuring mining and stronger earnings in our mining consumables and steel businesses, the extent of the deterioration in iron-ore prices means we have had to adjust our expectations around the timing and rate of debt reduction.”

Roberts said that the review would consider a range of options to deliver the best outcome for shareholders.

In February this year, Arrium sold its wire rope business to a Belgium-based firm for A$90-million.