Atlas to benefit from Pilbara Minerals’ Pilgangoora lithium following export agreement with Sinosteel

Atlas Iron (ASX: AGO) has edged further into the lithium space after signing an agreement to export Pilbara Minerals’ (ASX: PLS) Pilgangoora lithium as direct shipping ore to Sinosteel Australia.

Acting as the middle-man, the agreement allows Atlas to purchase the ore from Pilbara Minerals and export up to 1.5 million tonnes of lithium DSO to Sinosteel over 15-months, with the first shipment planned for the next quarter.

The lithium DSO will be sold at a fixed price, with Atlas expecting to come away with up to A$20 per tonne after payments to Pilbara Minerals, including a US$3 million mine gate commitment fee, and its own operating costs.

As part of the agreement with Pilbara Minerals, Atlas will take charge of the ore from the Pilgangoora mine and be responsible for its transport logistics. Atlas will process the ore at its Mt Dove crushing hub and ship the DSO lithium product through its Utah Point facilities.

The lithium DSO will be processed and transported in conjunction with Atlas’ own iron ore operations.

Exporting the lithium DSO will add some much-needed cash to Atlas’ coffers, after experiencing low pricing for its iron ore exports.

Atlas reported a statutory after tax net loss for half year period ending December 2017 of A$21 million.

This was attributed to the heavily discounted lower grade iron ore price which commanded around A$62.2 per dry metric tonne, with full cash costs taking a chunk of A$56.7 per wet metric tonne.

To turn this around, Atlas has boosted it lump product production which pulls in a higher price and added the lithium DSO to its mix.

“We are increasingly confident that this strategy will enable to reduce the price discounts applied to our fines produces while at the same time continuing to enjoy robust margins on our lump product,” Atlas managing director Cliff Lawrenson said.

In addition to its current operations, Atlas has numerous iron ore projects in Western Australia’s Pilbara region with total mineral resources of almost 1.15 billion tonnes grading 56.2% iron.

Shares in Atlas remained unchanged at A$0.024 in early morning trade.