Is this officially the start of the end for all iron ore miners?
Today, both Qube Holdings Ltd (ASX: QUB) and Maca Limited (ASX: MLD) were forced to issue announcements to the ASX, following a decision last week by junior West Australian iron ore miner, Atlas Iron Limited (ASX: AGO), to undertake a comprehensive review of its operations.
Qube, likely to be the least impacted by Atlas' decision to suspend all mining operations in the Pilbara, said its Utah Point facility in WA had handled approximately 16 million tonnes of iron ore this financial year. Of this, Altas' production accounted for roughly 64%.
Maca, a mining services business which has been generating between $4 million and $5 million a month for its mining and crushing operations at Atlas' Abydos mine, today downgraded its full year profit guidance.
BGC Contracting and Minerals Resources Limited's (ASX: MIN) subsidiary, CSI, are also believed to have had their services to Atlas suspended.
Then there's McAleese Ltd (ASX: MCS), the services business that has seen its stock fall 90% since its IPO around 18 months ago. Its stock has been suspended from official ASX quotation as it awaits the outcome of Atlas' review.
At 31 December 2014, Altas Iron had over $300 million in debt. Senior debts will rank higher than shareholders' equity in the event of liquidation.
Is it time to get out of iron ore?
The iron ore price is plunging as huge miners like BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Brazil's Vale, pump millions of tonnes of seaborne ore in China, which is forecast to demand less of the steel-making ingredient in the years ahead.
Miners such as BC Iron Limited (ASX: BCI), Fortescue Metals Group Limited (ASX: FMG) and Arrium Ltd (ASX: ARI) could come under significant selling pressure if the spot price keeps falling.
Worse yet, if any of these companies end up going bust they'll likely take huge mining services contracts to the grave.
Buyer beware.
