JOHANNESBURG (miningweekly.com) –ASX-listed Atlas Iron announced on Tuesday that it would proceed with development of the Mt Webber Stage 2 project, doubling production at the North Pilbara operation to six-million tons a year.

First export of Stage 1 product remained on track for the June quarter, with the expanded production rate of six-million tons a year expected to be achieved by the end of December.

Life-of-mine operating costs were now expected to be between A$49/t and A$51/t, representing a significant reduction from the A$56/t originally estimated for the Stage 1 project.

The “competitive” operating costs were driven by a strip ratio of 0.3:1, with the potential to reduce these costs further through rail access.

Describing Mt Webber as a “highly capital-efficient mine”, Atlas MD Ken Brinsden said in a statement that a completed feasibility study had estimated the combined cost of Stages 1 and 2 expansion at A$212-million, or $35/t.

“This is clearly well below industry norms and is inclusive of a substantial contribution towards regional road upgrades, which will benefit Pilbara road users for years to come.

“Atlas has a track record of delivering new mines in a cost-effective, timely manner and the completion of the second stage of Mt Webber will fulfil the company’s original Horizon 1 vision, with further material opportunities in the pipeline,” he commented.

EXPANSION PROGRAMME

Atlas’s Horizon 1 growth programme aimed to expand its North Pilbara development model to produce at a rate of 12-million tons a year by the 2014 financial year, targeting 15-million tons a year by late 2015, which would be achieved through several mine and infrastructure developments.

Atlas was now on the final leg of its Horizon 1 programme and expected to outlay some A$180-million on capital expenditure (capex) in the first half of the year, with construction of the current suite of Horizon 1 mines expected to be complete by the end of the calendar year.

“After a period of significant investment in the business, Atlas will have built its currently proposed Horizon 1 mine profile by the end of this calendar year.

“With the Horizon 1 capex nearing an end and the first-half results demonstrating the cash flow capacity of the business, Atlas now has the flexibility to consider the various capital management initiatives at its disposal,” Brinsden noted.

RECORD SHOWING

Atlas’ expansion announcement came as the group released its financial results for the half-year ended December 31, which reported strong profits on the back of growing production and tightened costs as the company eased its Horizon 1 programme.

A strong first-half profit of A$73.7-million reflected higher production, a tight focus on cost control and robust prices, with record production of 5.1-million tons putting Atlas on track to achieve its upgraded guidance of between 10.2-million tons and 10.7-million tons for the current financial year.

The record production, combined with a rise in the average realised iron-ore price from $98.50/t in the previous corresponding half to $115.60/t in the latest six months, generated record revenue of A$588-million.

Indicative of its “cash-generative capacity”, the company finished the half year with gross cash of A$389-million after investing A$201-million in growth activities.

“These funds were invested in expanding mine and infrastructure capacity, and in additional exploration drilling, which contributed to significant new discoveries at the North Pilbara-based Corunna Downs and Miralga Creek projects,” said Brinsden.

In the six months under review, Atlas achieved net cash from operations of A$206-million, up from a A$5-million deficit in the previous corresponding period, and underlying earnings before interest, taxes, depreciation and amortisation of A$200-million.

“These are outstanding results which reflect the significant investment we have made in growing our business while maintaining a conservative balance sheet, and returning dividends to shareholders,” commented Brinsden.

“We are now producing at over 10-million tons a year and heading towards 12-millon tons a year and have a significant resource base in the Pilbara and port entitlements, giving us attractive options for value accretive growth.”

He added that the generation of low-cost sophisticated infrastructure solutions for Atlas’ Horizon 2 assets remained a key priority for the company.

“We are encouraged by the interest being expressed by parties seeking opportunities to cofund infrastructure and mine developments in the Pilbara, and will progress these opportunities further as infrastructure solutions are crystallised,” he concluded.

The company announced a dividend of A$0.03 per ordinary share for the six months.