Steel and mining group Arrium (ARI) reported record iron ore shipments for the September quarter, but as expected the 40% collapse in iron ore prices has slashed the group’s margin per tonne of ore exported.
Arrium said yesterday that it shipped 3.45 million tonnes of iron ore from its Whyalla port in South Australia where its steel making operations are located, up almost 300,000 tonnes on the prior quarter.
But total sales were down slightly at 3.29 million tonnes and Arrium’s average realised price plunged $US12 a tonne to $US73 a tonne ($A78).
That’s a cut of more than $US39 million in revenues. The fall in the value of the Aussie dollar has softened much of the fall, but not by much.
“Market sentiment during the quarter was impacted by changes in the balance between iron ore supply and demand, which significantly raised the level of uncertainty over the outlook for iron ore prices, including the extent and timing of recovery,” the company said in its September production report.
Arrium is on the nose in the market after it launched a shock $754 million equity raising last month to pay down debt as iron prices crashed to five-year lows and sentiment deteriorated.
The offer wasn’t strongly supported by the company’s retail investor base and the underwriters and sub underwriters were left with an estimated 20% of the issue.
That overhang will depress the share price (the issue was made at 48c a share) until it is absorbed by investors.
That overhang can be seen in the Arrium share price – it traded up 1.5% yesterday to 34c, leaving those who stumped the money in the issue, looking at a nasty loss.
ARI YTD – Arrium on the nose
Arrium said yesterday it cut its average total cash cost per tonne of iron ore produced to $A68.40 dollars for the three months to 30 September, down from $A73 dollars a tonne.
In Australian dollar terms, the total cost per tonne is $A68.40 and total realised price of $A78 a tonne ($US73) and that doesn’t leave much leeway if the price turns down again.
