Arrium to further restructure mining business amid weaker iron ore prices

14 June 2015 (Last Updated June 14th, 2015 18:30)

Australia's Arrium has announced plans to further restructure its mining business in a bid to minimise the cash breakeven price of its Middleback Ranges (MBR) hematite export iron ore operation to $50 per dry metric tonne (dmt) for the fiscal year 2016 (FY16).

Australia's Arrium has announced plans to further restructure its mining business in a bid to minimise the cash breakeven price of its Middleback Ranges (MBR) hematite export iron ore operation to $50 per dry metric tonne (dmt) for the fiscal year 2016 (FY16).

The company announced in January 2015 regarding the re-structuring of the business due to lower prices of iron ore prevailing at that time.

In April, Arrium started work to identify volume/grade/cost options to further optimise its MBR operation due to subsequent deterioration in actual and forecast iron ore prices.

As part of the work, the company's focus was on lowering the FY16 cash breakeven iron ore price for the MBR hematite export business.

"The review will consider a range of options to deliver the best outcome for shareholders, a resilient business with a stronger and more robust balance sheet going forward."

For the quarter ending 30 June 2015, the company expects to record a further asset impairment charge of A$320m ($247m) in its financial statements relating to the impact of forecast lower iron ore prices on its future cash flows mainly.

According to the company, impairment is expected to add around three percentage points to its gearing ratio.

As part of its targeted annualised cost savings of $60-$90m announced in September 2014, the company hopes to achieve $40-$50m of these savings in FY15 and the balance in FY16.

Arrium is also set to perform a detailed assessment of its balance sheet and portfolio in order to review its business in a low iron ore price environment.

Arrium managing director and CEO Andrew Roberts said: "We have made significant progress across the company to reduce costs, including work in Mining to reduce our targeted FY16 cash breakeven iron ore price to ~$50/t for the export business, with ongoing flexibility.

"The review will consider a range of options to deliver the best outcome for shareholders, a resilient business with a stronger and more robust balance sheet going forward."