Atlas Iron (ASX: AGO) has continued with its diversification strategy to mitigate its exposure to iron ore’s low pricing environment by adding manganese exports to its iron ore and lithium shipping mix.
The company clinched an agreement with private company Horseshoe Manganese to take charge of up to 100,000 tonnes of manganese lump from the Horseshoe’s Murchison mine site.
Atlas plans to purchase the ore as it reaches the north Pilbara and ship it from its Utah Point facilities in conjunction with its iron ore.
According to Atlas, its logistics chain can incorporate the manganese lump product for a lower expense without impacting its current and planned mining and shipping operations with iron ore, as well as its upcoming lithium exports.
Atlas managing director Cliff Lawrenson said the deal showed Atlas’ ability to work with other companies in the region by offering them the use of its existing infrastructure.
“This manganese opportunity compliments the strong additional cash flow we will be soon be generating from our new lithium operations, again, without material capital investment thanks to our existing logistics infrastructure,” Mr Lawrenson added.
Diversifying into lithium
Earlier this month, Atlas edged into the lithium space after securing an agreement to export Pilbara Minerals’ (ASX: PLS) Pilgangoora lithium as direct shipping ore.
As part of the agreement, Atlas will purchase Pilgangoora lithium directly from the mine gate at a fixed price including a one off US$3 million mine gate commitment fee.
Atlas will then transport the ore and crush it at its Mt Dove plant before shipping it through its Utah Point port facilities to offtake partner Sinosteel Australia.
It is anticipated Atlas will export up to 1.5 million tonnes per annum of the ore over a 15-month period. The company expects to make up to A$20 per tonne of ore shipped after its payments to Pilbara Minerals and its own operating costs.
With the manganese and lithium export arrangements due to kick in around the same time, Atlas is anticipating adding some much-needed cash to its reserves after experiencing very low pricing for its iron ore operations in the second half of last year, which saw the company reporting an after tax net loss of A$21 million for the period.
“As part of our product diversification strategy, we will continue to look for opportunities which allow us to utilise our existing skills base and infrastructure,” Mr Lawrenson said.
Shares in Atlas rose 4% in early morning trade to A$0.026.