In a market update today, the miner said 2.06 million wet metric tonnes for the September quarter and 0.4 million wmt for the December quarter were subject to some form of price insulation, equating to roughly 70% and 10% of respective targeted production for each period.
Atlas purchased iron ore put options to provide a floor price on 400,000 dry metric tonnes of 62% iron. If exercised, these options will realise prices of between $53-54/dmt for 300,000t in July, and $54/dmt for a further 100,000t in August.
The price will remain unchanged even if the iron ore price falls below that level – current 62% iron ore fines spot price is way below at $49.60/t after slumping by a further 5.1% overnight – but will rise if market conditions improve.
Atlas has also forwarded sold 900,000wmt (300,000wmt of lump and 600,000wmt of fines) to be filed between July and October at $59/dmt based on revenue assumptions to those underlying Atlas’ June estimation of a breakeven price.
Finally, Atlas has about 1.1 million wmt worth of sales covered by zero cost cap/collar transactions, which assure Atlas will make no less than $50-52/dmt sold but not more than $55-60/dmt.
Atlas managing director David Flanagan said the pricing strategies provided greater certainty until the company completed its $A180 million capital raising and production ramp-up.
“This approach provides Atlas and investors with greater certainty in respect of the prices we will receive and therefore the extent of our margins and cash flows in the near-term,” he said.
“At the same time, we have retained some exposure to iron ore price upside.” But the miner said pricing outcomes beyond this period could not be guaranteed and were uncertain.
“Atlas’ ability to continue to extend the current forward sales and pricing strategy will be dependent on iron ore physicals and derivatives market conditions; accordingly, no representation is made as to the company's ability to do so,” it said in its market update.
Capital raising is underway and has already received significant support from Atlas' contractors, including BGC Contracting who purchased $17.4 million in shares last month.
Shareholders have a priority right to subscribe for new shares but all investors are invited to participate in the capital raising, which is being undertaken at an issue price of 5cper share.
Applications will close Monday.