What happened? Towards the end of trade on Friday, ASX-listed iron ore miner Atlas Iron Limited (ASX: AGO) was hit with a 'please explain' letter from the ASX following a surge in its share price on massive trading volumes.
Why? The ASX likes to stay on top of strange fluctuations in share prices and/or trading volumes of companies listed on the ASX. Here are the ASX's comments:
"We note the change in the price of AGO's securities from a close of $0.025 on 15 December 2016 to an intraday high of $0.0315 at the time of writing today Friday 16 December 2016. We also note the significant increase in the volume of AGO's securities traded today."
Indeed Atlas's shares have recorded a massive 45% jump in the last month as the iron ore price has strengthened and the Australian Dollar has weakened.
Atlas' answer to the ASX's query? We have no idea sir.
What now? Normally no further action is required, however with the iron ore price jumping to US$81.50 a tonne, according to the Metal Bulletin management and investors are happy.
The problem is that Atlas' share price is a long way away from the $3 it was sitting at 5 years ago and it remains a relatively high-cost producer of iron ore. This was recognised last year when the company reported a statutory loss of $159 million, but analysts are hopeful that the much higher iron ore price we've seen this financial year may push the company back to a profit in 2016-17.
Foolish takeaway
Sadly Atlas still looks a long way away from paying a decent dividend and remains a fragile producer at lower prices compared to peers like Fortescue Metals Group Limited (ASX: FMG) and BHP Billiton Limited (ASX: BHP).
