08
Mar

Atlas Iron adds some weight to Quest portfolio

Atlas IronDuring the December quarter, Atlas Iron was added to the Quest portfolios. Atlas is based in Perth with iron ore  deposits in the north east Pilbara region of Western Australia. Iron ore production is expected to be 5.5 million tonnes direct shipping ore in 2012 with aspirations of 15 million tonnes in 2015.

The Atlas share price has retreated from a lofty $4.20 in July 2011 to our entry price of below $3 in December. At this price our valuation suggests a worthwhile gain if the company can build production as planned over the next three years.

The Atlas story saw initial production from the Pardoo mine only 40 km from Port Headland before the purchase of Wodgina in 2008. Wodgina saw ore on ships within weeks that created a cash flow to fund further expansion. In 2010 Atlas took over  Aurox Resources and in  2011 took over both Giralia Resources and  Ferraus Limited which expanded the company footprint eastwards.The company now has 1 billion tonnes of Pilbara resource, substantial Port headland wharf capacity and strong cash flows. Cash is currently $380 million with no debt. Plans to develop additional mines and establish expanded routes to port, be they by road or rail, hold the key to the company’s goal of doubling output over the next three years.