Struggling miner Atlas Iron says it has protected its finances against an iron ore price that has plunged below $US50 a tonne.
The fall on Tuesday to $US49.60 is below the company’s breakeven iron ore price of $US50 that managing director David Flanagan quoted in a letter to shareholders last week.
Mr Flanagan sought to reassure investors on Wednesday about the company’s profitability by outlining its hedging strategies to combat an iron ore price below its operating costs.
Atlas says it has already cut its breakeven price from $US60 since April, but there are doubts about whether costs in the sector can be further cut or how sustainable the lower costs are generally.
Mr Flanagan said Atlas had locked in 70 per cent of its planned output in the September quarter and 10 per cent in the December quarter to some sort of price protection above that $US50 breakeven level.
That includes put options on sales at $US53 to $US54 a tonne, fixed price contracts and sales locking in a floor and ceiling price.
The falls in the Australian dollar against the US currency to six-year lows of below 75 US cents, with more falls possible, also help Atlas.
However the company warned that it was not protected beyond the end of December and the ability to lock in prices and what they would be was unknown.
Atlas is in the midst of a $180 million capital raising.
It stopped production at its three Pilbara mines in April when prices dived to a decade-low $US46 and it was losing money, but struck a deal with its suppliers to cut costs and stay afloat and is mining again.
Atlas suspended trading in its shares in April at 12 cents, with a market cap of $110 million, down from $4.22 and nearly $3.9 billion four years ago.