With Atlas Iron Limited (ASX: AGO) succumbing to the rapid fall in spot iron ore prices and voluntarily suspending its shares, eyes are now turning to who's next.
Now Atlas wasn't the first Australian iron ore miner to cave in – but it's the biggest and highest-profile company so far. Western Desert Resources Ltd (ASX: WDR) and Termite Resources – 51% owned by IMX Resources Ltd (ASX: IXR) both collapsed last year. IMX survived, and is now focusing on its other projects.
BC Iron Limited (ASX: BCI) appears next on the list of higher profile companies that may need to take drastic action to survive. Already the company is receiving royalty relief from the West Australian state government. At the end of December 2014, BC Iron had gross debts of $42.9 million, although it also had $110 million in cash. Unlike Atlas, which had $327 million in outstanding debt, against $169 million in cash, leaving the company virtually in the hands of its lenders. That, and its partnership with Fortescue Metals Group Limited (ASX: FMG) in the Nullagine Joint Venture, suggests BC Iron is less at risk than many investors perhaps think.
Gindalbie Metals Ltd (ASX: GBG) could also be another higher profile miner in the steamroller's path, but a joint venture with China's AnSteel in the Karara Iron Ore Project may save it from becoming another casualty. Grange Resources Limited's (ASX: GRR) higher grade product – which receives a premium price – and negligible debt may help it survive, although the company was forced to write down the value of its Savage River mine by $200 million last year.
Mount Gibson Iron Limited (ASX: MGX) appears to be the least likely miner to be forced into drastic action – thanks to a $354 million cash balance at the end of December 2014 and just $8 million in loans.
Arrium Limited (ASX: ARI) and Mineral Resources Limited (ASX: MIN) could also be considered high risk, although they have additional businesses, which could potentially support them if they were forced to shut down iron ore production. (Note: Arrium has already placed one of its mines on care and maintenance.)
Perhaps the stocks most in danger of being crushed are those not yet in production. Cape Lambert Resources Ltd (ASX: CFE), Flinders Mines Limited (ASX: FMS), Northern Iron Limited (ASX: NFE), Iron Road Limited (ASX: IRD), Equatorial Resources Limited (ASX: EQX) and Red Hill Iron Limited (ASX: RHI) are but a few companies listed on the ASX with interests in developing iron ore projects both in Australia and offshore, notably in Africa.
